Jackson’s Retail Market on Cruise Control as It Drives Into Expansion Phase
It’s safe to say that the Jackson MSA, as a whole, responds slower to national trends than the vast majority of markets in the United States. In regards to the economic recovery, Jackson is about two years behind the national economy post-recession. The retail market is just now moving from the recovery phase and into the expansion phase of its growth cycle, which is evidenced by decreasing vacancy rates and stabilizing lease rates.
A limited amount of new construction has been a main driver for absorption in this area. There is approximately 35 million square feet of retail inventory in the Jackson MSA, with a moderate amount of new construction scheduled to deliver in the next 12 months. The first phase of expansion for the retail market is beginning to occur and is expected to gain in strength over the next 12 to 18 months.
From an investment sales standpoint, Jackson has seen continued interest and stable transaction velocity from local and national retail investors in the last 12 to 24 months. As cap rates have compressed nationally, investors have continued to look to tertiary markets like Jackson in search of higher yields. The current going-in cap rate for acquisitions in the metro area for community retail centers is 8.5 percent, while the national average is 6.8 percent. Cap rates for Jackson neighborhood retail centers is 8.8 percent, with the national average at 7 percent.
Projects Around the MSA
Just north of downtown and fronting Interstate 55 is one of the metro’s most high-profile project in years, The District at Eastover. This $125 million mixed-use redevelopment project is the vision of two local developers and has now become a reality at roughly 80 percent completion.
The District at Eastover currently contains over 200,000 square feet of Class A office space; a Marriot Residence Inn hotel; 250 upscale lofts apartments with street-level retail, including tenants such as Orangetheory Fitness, Freshii and Cantina Laredo; and the recently announced Eastover Market, which is Mississippi’s first food hall.
Another retail corridor that has been a staple in the Jackson market is County Line Road. While it has seen some blows in recent years with national big box retailers moving further north, the corridor is still experiencing some resiliency.
A great indicator for the strength of the corridor lies in the original anchor: Northpark Mall. A development born in 1984, Northpark is currently undergoing major upgrades this year to modernize the mall to the tune of $11.5 million in renovations. Northpark Mall’s owner, Southern California-based Pacific Retail Capital Partners, recently broke ground on the redevelopment.
Moving further into Ridgeland, existing developments such as the Renaissance at Colony Park and The Township continue to see strong activity. Renaissance is moving closer to adding the state’s first Costco, with site work well underway, pending a favorable state Supreme Court ruling. The wholesaler will be the anchor of Phase III. The City of Ridgeland recently approved Phase II of Renaissance, which is scheduled to break ground this month. The second phase will be anchored by a six-screen, boutique dinner theater.
Just north of Ridgeland in Madison, continued expansion on both sides of Interstate 55 is expected. On the east side, opening this spring, will be an Academy Sports + Outdoors and a Hobby Lobby. These two big boxes will anchor Crawford Farms, a 38-acre development just off Main Street/Highway 463. Moving to the west side of the interstate, Baptist Health Systems has continued to sell outparcels at its Madison campus on Highland Colony Parkway. This development is currently under construction with a Marriott hotel, a multi-tenant Starbucks Coffee/CSpire and recently opened local favorite Primos Café.
Last but certainly not least, Rankin County cities are bullish with retail real estate activity and have taken an aggressive approach on developing city-owned property to attract more retail and residents. The City of Flowood is in the middle of constructing a $50 million, 54,000-square-foot conference center and 200-room luxury hotel.
The City of Brandon plans to kick off its first annual concert series this spring in the newly minted 7,000-seat Brandon Amphitheater, which will be the centerpiece of a $30 million investment into Quarry Park. The 250-acre recreational development is expected to house multiple recreational parks and public amenities.
Overall, the fundamentals in the Jackson MSA on all property sectors, not just retail, appear to be healthy and on the rise. We expect to see vacancy rates remain stable with very little speculative construction or overbuilding occurring. In addition, we believe there will be moderate net absorption in conjunction with reasonable rental rate growth for the foreseeable future.
— By Micah McCullough CCIM, SIOR, Vice President and Brokerage Associate; and Harrison Putt, Commercial Advisor of NAI UCR Properties. This article was originally published in the May 2018 issue of Southeast Real Estate Business.