Hobart H. Joost, Jr., Colliers International Northeast Florida
Consider the facts: the Jacksonville industrial vacancy rate now hovers around 8.5 percent, the lowest in the last five years and down from a high of 11.4 percent in 2010. Rental rates, now in the $3.98 per square foot range for the last two quarters, have stabilized from a high of $4.38 per square foot reported in the first quarter of 2010, according to CoStar.
Because of a finite supply, with an increase in demand for Class B and Class C space, a rent increase may be in the forecast. Add with the lack of choices for large blocks of Class A space, expect more build-to-suit activity, or speculative construction.
In 2014, two speculative industrial projects were announced in Jacksonville. In order to meet a contractual construction deadline within the city of Jacksonville’s master developer agreement, Hillwood Investment Properties launched a 510,000-square-foot cross-dock project at Alliance Florida. Hillwood was chosen as the master developer of Alliance Florida, formerly Cecil Commerce Center, in 2010. The city of Jacksonville was deeded the 4,500 acres at Cecil Commerce Center by the Navy back in 1999. Hillwood’s building was scheduled for an October 2014 completion date, but was leased by GE Oil & Gas, a subsidiary of General Electric, prior to the completion. GE said afterward that Jacksonville’s labor force, its transportation network, the Port of Jacksonville (JAXPORT) and incentives were key in picking a Jacksonville location.
The second speculative project announced this year is a 73,000-square-foot, multi-tenant building under construction within the Port Jax Trade Center on Alta Road in North Jacksonville in close proximity to I-295 and Jetport’s Dames Point Terminal. Jax Green Industrial is developing Port Jax Trade Center.
The building will feature tilt-wall construction, 6,000-square-foot bays, 28-foot clear heights and dock-high loading. It is being built to meet the increase in demand from the smaller tenants, emerging, in part, as a result of the local economic recovery.
Since 2006, a majority of the market’s industrial development activity has taken place along the northwest portion of I-295, Jacksonville’s uncongested outer beltway that connects I-95 in the north and I-10 in the west. I-295 also aids in connecting the Jacksonville Port Authority’s Dames Point Terminal and Blount Island Terminals to this development activity. Over the last decade, JAXPORT has become a major industrial driver within the community. Recently, Wespac Midstream selected Jacksonville and a multi-modal waterfront site for development of the world’s first liquefied natural gas (LNG) marine terminal. This terminal will manufacture LNG to refuel the new LNG shipping fleets under construction and on order.
In an effort to increase product and throughput volumes, JAXPORT and CSX are currently building an Intermodal Container Transfer Facility (ICTF), a $30 million near-dock rail investment, adjacent to the Mitsui Trapac Container Terminal. Because the opening of the $300 million Mitsui-Trapac Container Terminal collided with the global economic downturn in 2009, container volumes were down from the forecast models. In October 2014, JAXPORT reported that Asian market container shipments through the Port of Jacksonville have grown 20 percent year-over-year, and Asian container volumes have grown an average of 28.5 percent annually over the past five years.
Another JAXPORT initiative, the Mile Point fix will also aid in increasing tonnage and cargo volumes. The $37 million Mile Point fix is expected to start construction in 2015. Mile Point is at a curve in the St. Johns River shipping channel, approximately one mile from the Atlantic Ocean. It is at a point where the inland waterway and the river intersect that is dangerous to deep draft vessels during four hours of each tide phase. The Coast Guard has mandated limited passage during peak hours.
Stay tuned for the increase in industrial development and leasing activity.
— By Hobart H. Joost, Jr., SIOR, Principal and Industrial Services Director, Colliers International Northeast Florida. This article originally appeared in the December 2014 issue of Southeast Real Estate Business.