Jackson’s Industrial Market Doesn’t Miss a Beat During COVID-19 Pandemic
Like most markets, regardless of sector, Jackson experienced a moment in time when deals were shelved due to the coronavirus pandemic. However, the industrial market in Jackson tells a different story in the early innings of COVID-19.
While most deals were put on hold for several weeks in early April to mid-May, we saw activity pick up with users signing leases, contracting on vacant buildings and resuming due diligence timelines for land purchases, all without any repricing or discount. These trends, while hopefully permanent in nature, are all due to a lack of industrial supply and consistent demand in the Jackson market. If you have quality product in a good area, it will sell or lease, even during a pandemic.
The Jackson industrial market spans around 40 million square feet if you include all specialty and manufacturing properties, as well as true warehouse and flex product. According to CoStar Group, the market’s vacancy rate is hovering around 7 percent, but it feels tighter since there’s a bulk of obsolescent product — either low ceiling heights or being in less desirable areas.
Jackson is considered a minor industrial market and is well-suited for future growth. As Mississippi’s capital city, Jackson is geographically located in the center of the state, allowing it to be a hub for regional distribution and service providers. Also known as the “Crossroads of the South,” Jackson is the midpoint between New Orleans and Memphis on Interstate 55 (three hours one-way), as well as the midpoint between Atlanta and Dallas on Interstate 20 (six hours one-way). These two major interstate arteries cross in Jackson.
Like most metro areas, Jackson has seen a demand by logistics warehousing users. Due to the supply constraints, rent growth is up around 3 percent over the last 12 months, to an average of $5.40 per square foot on a triple-net basis. This rent growth certainly outperforms the historical market averages; however, it is a slowdown from the prior 12-month period.
The most prominent industrial project in our market since Nissan built a plant in the early 2000s is Continental Tire, which has made a major investment on the west side of the metro area in the Clinton submarket. The new plant, which opened in late 2019, spans 840,000 square feet on a 1,000-acre site in Hinds County, 10 miles from Jackson city limits. Continental has committed nearly $1.4 billion and expects to employ 2,500 people at full capacity. This is a substantial investment and impact for the community; however, it is not expected to have the ripple effect that Nissan did in creating supplier demand for industrial space.
Another substantial new to the market player that came to town in 2019 was Fastenal, which made a major investment on the north side of the metro area in Madison County with completion of a 264,000-square-foot distribution center. We expect more users, like Fastenal, to continue the trend of growing Jackson into a market companies consider for additional distribution locations.
From an investment standpoint, Jackson continues to see steady interest from out-of-state buyers with very little supply, as historically less than 5 percent of the existing inventory sells in a given year. Investment activity in 2020 has been slow, mainly due to the coronavirus that created a pause on lending activity from almost all capital sources.
The overall Jackson economy is a diverse one, with the major employers being government, medical and education. Due to Jackson’s tertiary market status, it doesn’t experience huge swings in population or job growth as in primary and secondary markets. Therefore, we are not as drastically impacted by the major upswings or downswings in the national economy.
We are optimistic that this theme will continue even with the dynamics of a pandemic. When a full-scale recovery begins, we anticipate the industrial market in Jackson will be well-positioned to ramp up accordingly.
— By Micah McCullough, vice president, and Alex Wilson, Brokerage Associate, at NAI UCR Properties. This article originally appeared in the July 2020 issue of Southeast Real Estate Business.