Commercial Development Outlook: Industrial vacancy rates on the rise

Jul 24, 2020

Jacksonville’s industrial, office and retail markets are experiencing the effects of the COVID-19 pandemic that led to shutdowns, capacity restrictions and other effects. Some sectors fared better than others. Here is what CBRE, Colliers International, Cushman & Wakefield,

JLL, NAI Hallmark and Newmark Phoenix Realty Group are saying about the market as of the second quarter of 2020.

Vacancy rates rise as speculative space hits the market

Industrial vacancy rates generally rose during the second quarter as more space opened in the market.

“It should be emphasized that this increase directly correlates to the roughly 2.5 million square feet of vacant speculative industrial space that came to market during the quarter,” said CBRE.

The largest new leases came in the metro area’s dominant industrial markets of North and West Jacksonville.

Among those, Samsonite leased about 530,000 square feet at 1 Imeson Park Blvd. to take occupancy in November, and Lowe’s Companies Inc. took 104,000 square feet at Freebird Commerce Center, both in North Jacksonville.

In Westside, RGH Enterprises Inc. leased almost 186,000 square feet at Becknell’s property in Westlake Industrial Park; Biagi Brothers took 112,000 square feet at 2001 N. Ellis Road; and Home Depot leased 61,045 square feet at Westside Industrial Park.

Rental rates were flat to rising, ranging from $5 to almost $7 a square foot, compared with year-end 2019 rates of $4.73 to $5.60.

Cushman & Wakefield said the rise in rental rates was driven by gains in the distribution-warehouse sector, with North Jacksonville posting the highest jump in rents on new space “priced at the top of the market.”

“Industrial leasing activity in Jacksonville showed encouraging signs throughout the second quarter of 2020 with average asking rates actually climbing as more high quality product hit the market,” said JLL.

“As consumers are forced to rapidly adopt online retail and grocery shopping platforms, demand for last mile delivery facilities, cold storage and e-commerce distribution centers is projected to continue growing, especially in the post-pandemic world,” it said.

Location is one reason that Jacksonville is positioned for more industrial opportunities.

“Jacksonville has a distinct advantage in the industrial market compared to its peers to the south as the market is positioned along the coast and provides ease of access to vital interstates in all directions, including Interstates 95 and 10,” said a CoStar report licensed to Newmark Phoenix Realty Group.

The industry itself is another reason.

“The industrial asset class has proven to be stable in these uncertain times and will continue to be the most resilient in the coming quarter,” said Colliers International.