Jacksonville’s industrial market continues to improve as encouraging fundamentals are in place that are prompting developers to commit to building spec warehouse again. The lack of new construction over the last eight years, the expected reduction in regulations and taxes by the new administration in Washington and the commitment to upgrades in the local infrastructure will drive growth in our market. A 5.3 percent vacancy rate for warehouses and distribution space is also a major factor.
With 126 million square feet of existing warehouse space spread over 860 square miles, our market has room to grow. Recent announcements of major expansions coming to Jacksonville include Amazon, General Electric and UPS. Amazon will occupy 2.5 million square feet in North Jacksonville and will have the largest impact on employment in the history of the city. General Electric is leasing 500,000 square feet in Hillwood’s Cecil Commerce Center. Situated on Jacksonville’s Westside adjacent to Pattillo’s Westside Industrial Park, UPS is adding 260,000 square feet to its existing 560,000-square-foot facility. When completed in the fall of 2019, the 820,000-square-foot facility will be able to process more than 80,000 packages per hour.
Jeff Evans, Colliers International
Jacksonville is a tier-two market nationally and typically has a few large-scale investment sales. The market is changing and the velocity of industrial warehouse investment sales has increased over the past two to three years. Bi Lo recently did a sale-leaseback on its 1 million-square-foot facility in Jacksonville’s Westside submarket. The property includes office, warehouse, freezer and refrigeration space and a truck maintenance facility.
The General Electric facility, also situated on the Westside, was sold to a New York-based REIT prior to the building’s completion. Recent activity in Jacksonville’s major industrial parks, including Trade Port, Alta Lakes and Imeson, are further evidence investors are taking a serious look at the region.
Another positive for the Northeast Florida warehouse market is that developers have begun the construction of spec warehouse space. At Cecil Commerce Center, Hillwood has 1 million square feet under construction, and Pattillo has completed 237,000 square feet at Westside Industrial Park. Bill Spinner, the developer of Port Jax Industrial Park, has 110,000 square feet of spec warehouse coming out of the ground in the next 18 months on Alta Drive near I-295.
The low vacancy rate and the lack of new construction have pushed market rents, which has encouraged developers to build spec warehouse space. The increase in the price of construction materials has driven rents for new construction from $4.25 to $4.50 per square foot triple-net, compared to second-generation space that can be leased in the $3.25 to $3.75 range. There is still some push back in the market to pay more than $4 per square foot plus expenses, so the decrease in inventory of existing space will continue to increase rents organically.
Another major force in the market is the port terminal operator, Jacksonville Port Authority (JaxPort). JaxPort operates the Dames Point, the Blount Island and the Talleyrand port facilities. JaxPort recently developed the Intermodal Container Transfer Facility (ICTF) at a cost of $30 million. The ICTF at Dames Point serves The Trapac Container Terminal and the Blount Island Marine Terminal and allows the direct transfer of containers between vessels and trains, speeding up the shipment process. The state of Florida is investing another $10 million in roadway improvements to improve access in and out of Blount Island.
In addition, JaxPort is making improvements to the shipping channel in the St. Johns River. This includes deepening the channel to 50 feet for Post-Panamax ships and completing the Mile Point project so vessels can enter and exit the port 24 hours a day. The sum of this effort is that JaxPort and the city of Jacksonville are planning for future growth and living up to the title as “America’s Logistics Center.”
With an improving economy and the port, Jacksonville is uniquely positioned to continue to make inroads into the growth and development of its industrial market.
— By Jeff Evans, Brokerage Associate | Northeast Florida, Colliers International. This article originally appeared in the December 2016 issue of Southeast Real Estate Business.