Northern Markets Flourish in the Sunshine State
During the past decade, north Florida's sunny cities have invested both energy and money in revitalization efforts. City and community support helped rejuvenate Ocala, located in the north-central region of the Panhandle. Community-raised money was used to construct the Ocala/Marion County Veterans Memorial Park, and city funds helped renovate the 77-year-old Union Station train depot, among other downtown redevelopment projects.
Similarly, Jacksonville recently implemented the Better Jacksonville Plan, which will improve the city's physical facilities infrastructure, add public amenities such as libraries and a sports and entertainment complex, and pump $2.2 billion into the local economy during the next 10 years, says Ray H. Moore, CCIM, of Foram Management and Leasing. A residential influx into the downtown area is “widely expected to be the impetus of a resurgence in the core area,” he says.
A large military industry, especially the U.S. Navy, also contributes to the region's economic stability. Pensacola, in particular, benefits from this presence; the Naval Air Station Pensacola, NAS Whiting Field, Corry Station, and National Museum of Naval Aviation helped the city earn the nickname “Cradle of Naval Aviation.”
Retail Roars “The north Florida retail market has been highly productive over the last quarter,” says Stanton W. Hudmon, CCIM, of Trammell Crow Co. in Jacksonville. Several retail centers recently have opened, with many others underway, including Fleming Plaza in Clay County and Cobblestone Village and St. Johns Town Center in St. Johns County.
Retail lease rates in north Florida increased steadily through last year, approaching $30 per square foot triple net, yet most rates range from $14 psf to $20 psf triple net, Hudmon says. Grocery-anchored centers continue to be hot properties “as new communities emerge in north Florida and the population grows,” he concludes.
The Ocala retail market “has always been overbuilt ... We are now seeing an infill and the market is looking better than it has in some time,” says Richard L. Vairo, CCIM, SIOR, of RCV Properties. The 85 percent occupancy rate and lease rates are up from recent years, with tenants such as Broyhill Furniture, Wal-Mart, Stein Mart, and Best Buy moving into the area. Vairo believes Ocala's retail market will continue to grow at about 4 percent to 6 percent annually.
Pensacola's strong tourism and military industries “help to level out the strong dips in the overall economy,” and also contribute to a solid retail market, says Robin Verge, CCIM, of NAI Halford. Lease rates are at an “all-time high,” and new construction has increased, with Wal-Mart, Walgreen Co., Target Corp., and Albertsons investing in new development. Also, “Downtown Pensacola has been very active in acquiring new, smaller boutique retail shops and galleries and is becoming quite upscale. This is a huge change from 10 years ago,” Verge says.
Multifamily Heats Up In Jacksonville, “multifamily product is becoming the new first-time homebuyer equity base,” contributing to an increased occupancy rate of 93 percent, says Norman W. Gregory, CCIM, of CCIN Real Estate Services. Both apartment and condominium buildings are experiencing “substantial activity,” and the residential land development market is strong as well, he says.
Several multifamily projects are under construction in the central business district and the Southside Jacksonville submarkets. The city's continued population and employment growth will affect the multifamily market positively, and “hot areas continue to be in employment centers and downtown infill submarkets,” Gregory says. “Products with substantial amenities will emerge as the population continues to age.”
Industrial Stabilizes Jacksonville's distribution market owes its brisk activity to the city's interstate, railroad, and port access, says James F. Morgan, CCIM, of Sperry Van Ness/ Investec Services. BJ's Wholesale Club and Toyota Motor Corp. plan to open distribution centers in the area, according to Wayne Sanderson, CCIM, CPM, of Easton, Sanderson & Co.
Heavy new development -- more than 1 million square feet of flex and multitenant space currently under construction -- has lowered Jacksonville's industrial occupancy to 91 percent; however, Sanderson foresees construction declining and occupancy “creeping back up over the next six to 18 months.” Sales prices have increased due to current low interest rates and “aggressive lending by the banks,” he says. Multitenant properties with a 10 percent return or greater are popular with investors, he continues.
In the future, “Jacksonville will see continued growth and regional and national multimodal distribution activity,” Morgan says. The hot property type will be small, multitenant warehouses, Sanderson adds.
Office Slow but Steady Activity in the Jacksonville office market recently slowed but is expected to pick up due to “a very strong chamber of commerce and several national real estate brokerage companies that generate a good flow of business, even when the economy is down,” Moore says. Occupancy rates range from 82 percent to 86 percent, which is a “significant decrease from the 86 percent to 91 percent rates of two years ago,” he says.
Investors are purchasing “the staples: low- to mid-rise office buildings, although the downtown sales market has been extremely soft lately,” he says. Lease rates have decreased slightly, but tenant concessions have increased. “Landlords are reluctant to lower rates due to the subsequent devaluation of their assets but are making up the difference in higher tenant improvement allowances,” Moore explains.
In the future, the Jacksonville office market will “surpass expectations,” with the downtown, Southside, Orange Park, and airport submarkets the main focal points, Moore says.
Maine offers a diversified economic base, including tourism, fishing, insurance, shipbuilding, and high technology, says Thomas W. Moulton, CCIM, SIOR, of NAI the Dunham Group in Portland. The state's most popular tourist destination, Acadia National Park, attracts more than 4.5 million visitors each year, making it one of the most visited national parks in the country.
Due to its proximity to Acadia, the Bar Harbor market is strong, according to Jeffrey A. Wooster, CCIM, GRI, of Lynam Real Estate Agency. The occupancy rate is approximately 90 percent to 95 percent, and lease rates are stable. Most new development is “rehabilitations of tired existing spaces,” he says.
Bangor's occupancy is 96 percent, “up considerably over the past few years,” with less than 50,000 square feet currently vacant, says John M. Vogell, CCIM, of Dawson Commercial Brokers. Both lease rates and sales prices increased during the same period, and lease rates now average $4 per square foot triple net for high-ceiling warehouses. Lease rates will continue to increase as long as occupancy rates remain high, and hot properties will be those with high ceilings and loading docks, Vogell says.
Although “finding reasonably priced buildings to buy is difficult,” investor demand is strong in Portland, Moulton says. Speculative building has stopped, yet one build-to-suit development, Enterprise Business Park, is under construction in Scarborough. “Medical uses will continue to be prevalent, and the call center industry continues to flourish and grow due to Maine's strong communications infrastructure,” he says.