Tenant Demand at an All-Time High for Prime Retail Space in Jacksonville

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Jacksonville boasts the fourth-largest metro population and the largest city proper population in the state of Florida. It is the 14th most populous city in the United States, and with a breadth of approximately 841 square miles, it is the largest city in the contiguous United States by area. The county seat of Duval County, Jacksonville touts a population of approximately 900,000 people (2012 estimate) with a median household income of $50,701 and a median age of 31.4. The unemployment rate is presently on a downward trend decreasing 80 basis points from August to September 2014 to 5.8 percent, which was significantly lower than the previous year’s rate of 6.6 percent and Florida’s 6.1 percent.

Jacksonville’s retail market remains strong despite the lack of available space in the mature Class A submarkets such as Town Center, Rivercity Marketplace, Mandarin, Orange Park, West Beaches and Beaches. National retailers and restaurants remain active seeking deals throughout Duval County, yet are still hesitant to consider Class B and C submarkets given their selective national site strategies. As most of the highly desirable spaces has been absorbed, there is more demand for new space than any time in recent memory. Although several redevelopments and expansions have been completed since 2012 including St. Johns Town Center, River City Marketplace, Atlantic North and South Beach Regional, Class A space continues to be a premium.

St. Johns Town Center continues to be known as Jacksonville’s retail mecca with its almost 1.8 million square feet of nationally recognized brands and a cultural relevance that pushes beyond shopping carts to anchor an entire area now recognized as Jacksonville’s “Town Center.” Owned and managed in part by Simon Property Group, the super-regional, open-air lifestyle center recently celebrated the completion of its 157,000-square foot Phase III anchored by a 124,000-square foot Nordstrom, as well as Arhaus Furniture, Disney Store, Boston Proper, Free People, Model Citizen, Natural Life, Swim n’ Sport and Yankee Candle.

The strength of the Town Center submarket was tested this summer when cap rates hit historic lows. The project’s original co-developer Ben Carter Properties sold its 50 percent stake in the 99 percent-leased St. Johns Town Center to Deutsche Asset & Wealth Management for $375 million. Prior to that, Hines Global REIT Inc. purchased The Markets at Town Center, a 315,000-square foot retail center adjacent to St. Johns Town Center, from Atlanta-based Arris Realty Partners LLC for $135 million. Given the market’s prominence and the continued pent-up demand for quality space, additional Town Center shadow development is expected within the next 24 to 36 months.

Although there was only one new grocery-anchored development delivered in 2014, as new specialty grocers enter the area that number will inevitably rise. Earth Fare and Trader Joe’s have each made their entries into the market. Earth Fare opened its doors at Atlantic North Shopping Center in Jacksonville’s West Beaches trade area. Trader Joe’s brought its alternative, value-grocery concept to Jacksonville Beach at South Beach Regional shopping center.

Regency Centers and Fuqua Development LP partnered to bring the only new, grocery-anchored development to Jacksonville this year. The partnership developed Brooklyn Station on Riverside, an urban retail development just west of downtown Jacksonville in the trendy Riverside corridor. High-end specialty grocer The Fresh Market anchors the 50,000-square foot development that also features shop and restaurant space. The urban infill development brings a much-needed specialty grocer to the urban core now that two upscale multifamily projects are currently under development adjacent to the center. The properties, totaling 600 units, are expected to open in 2015.

New-to-market concepts are infusing the restaurant sector with new energy as well. Corner Bakery Café, BurgerFi, PDQ, Blaze Pizza and Taco Cabana now offer Jacksonville new dining alternatives. Meanwhile, popular fast casual and fast food brands such as Chipotle, Panera Bread, Starbucks, Dunkin’ Donuts, Zoës Kitchen, Pollo Tropical, Zaxby’s, McDonalds and Wendy’s continue to add units and change the way we eat and drink throughout the market.

The banking sector also added to Jacksonville’s retail activity with JP Morgan Chase & Co. opening the most units in the market over the past 12 to 24 months. The banking and finance leader marked its entry into the market with 12 retail branches along with over 25 freestanding ATMs.

Retail follows rooftops. If this is still true, Jacksonville’s retail market will undoubtedly remain strong as a full pipeline of single-family and multifamily residential development is completed. Likewise, loosening lending requirements and pent-up retail demand will inevitably continue to drive new retail development.

— By Tom Mundy, Tenant Rep Specialist, The Shopping Center Group LLC. This article originally appeared in the December 2014 issue of Southeast Real Estate Business.