Jacksonville Retail Market Finally Makes Broad-Based Recovery from Downturn
While Florida as a whole was able to bounce back from the Great Recession relatively quickly, one market that had been lagging behind in that recovery was Jacksonville. However, a surge of new development and strong population growth has kicked Jacksonville’s retail market back into high gear. Occupancy rates have gone up year-over-year to 91.1 percent and the retail sector currently has 748,000 square feet of new space under construction, according to JLL’s 2016 Florida Retail Report. While this infusion of new space may have a small squeeze on asking rates — currently at $13.24 per square foot — the outlook for Jacksonville’s retail market remains strong.
The St. John’s Town Center has had a transformative effect on the Northeast Florida market over the past decade. The shopping center saw huge success when it first opened its doors in 2005 and was relatively immune to the effects of the downturn. As the economy started to trend upward, the St. Johns area saw even greater shopper traffic and with that came expansion; in fact most of the 748,000 square feet of retail space currently under construction is in the St. Johns area. As St. John’s continues to fuel Jacksonville’s retail market, we are now starting to see that growth expanding out to the city’s other submarkets.
Demand for retail space along Atlantic and Beach Boulevard has increased significantly as many of the storefronts that had been empty for years are now seeing bustling activity. Mandarin and Fruit Cove have been some of the strongest markets in Jacksonville and with incredibly high residential demand that has driven the growth of these areas, retail is now poised to follow in a big way. These neighborhoods have become popular among Millennials and young families, which are coveted demographics for national retailers. River City Marketplace is another project that has had a similar transformative effect on retail on the north side of Jacksonville that St. John’s Town Center had when it first opened.
A market with an occupancy rate below 90 percent is dubbed a tenant’s market while a rate above 94 percent is referred to as a landlord’s market. Jacksonville is categorized as a “balanced market” with a healthy amount of retailer demand and leasing activity. As occupancy increases, there is typically a spike in new development, which is certainly the case in Jacksonville. With so much retail product planned to hit the market over the next 12 months, these next two years will be pivotal for the future of Jacksonville’s retail market.
The market is also expected to see a shift in the types of retailers that will be expanding in the region. While Northeast Florida has traditionally been dominated by big box stores, grocery-anchored strip malls and franchises, shifting population demographics are changing the landscape of Jacksonville’s retail sector as Millennials have been flocking to the region in recent years. The number of residents in their 20s increased by 5 percent from 2009 to 2014, according to The Coastal, and Forbes recently ranked Jacksonville as the second-most popular city in the country for new residents. The driving factors behind this being a booming job market, with unemployment currently at 4.4 percent, and low housing costs.
As Jacksonville’s Millennial population continues to grow there is a heightened demand for more health-focused and active lifestyle retailers such as Whole Foods Market, Trader Joe’s, lululemon athletica, Dick’s Sporting Goods, Soul Cycle and Core Power Yoga. Jacksonville is currently underserved in regards to boutique and unique retail concepts compared to other major metro areas across the country.
However, these niche retailers should be quick to capitalize on the region’s growth and the city will see a transformation from big box stores and fast food chains to boutique retail and high-quality dining, with a number of project that are planned in the San Marco and Southbank neighborhoods that hope to capture this demand.
We will undoubtedly see more mixed-use, retail projects sprouting around Jacksonville as the city continues to experiences some of the strongest market fundamentals in the country. With asking rates in top-performing markets such as St. John’s County having reached pre-recession levels at $16.03 per square-foot, Jacksonville is on a steady upward trajectory that shows no signs of stopping.
— By Justin Greider, Vice President and Agency Lead, JLL. This article originally appeared in the December 2016 issue of Southeast Real Estate Business.