(Carl Cronan is editor of Real EstateFlorida.)
JACKSONVILLE, FL-Deutsche Bank AG's plans to expand its local operations may provide a welcomed boost to the city's office market, which faces rising vacancy and negative absorption at midyear. The German financial giant celebrated the upcoming expansion with elected city leaders Wednesday evening at its offices at 5022 Gate Parkway.
Deutsche Bank reportedly plans to invest at least $12 million into renovating its current 51,000-sf facility and adding 125,000 sf. The new center will house operational and support teams for Deutsche Bank's Investment Banking Operations group, which will initially employ 400 and grow to 1,000 over the next three years, according to an announcement by Mayor John Peyton.
The Jacksonville City Council has approved more than $884,000 worth of incentives for Deutsche Bank, which also seeks nearly $4 million in state incentives. The bank expects to generate an annual payroll of at least $49 million, says John Lafond, managing director of Deutsche Bank's Jacksonville operations.
The expansion is good news for Jacksonville's office market, which has seen its vacancy rate jump to nearly 15% through the second quarter, according to CB Richard Ellis research. Asking rents have remained somewhat steady, averaging $18.48 per sf.
"Rental rates are increasing, thus proving that core properties are still achieving higher net incomes," Traci Jenks, senior associate, stated in a CBRE MarketView report. She noted that additional sublease space continues to appear in the market, adding to a typical summertime slowdown in activity.
Net absorption during the second quarter came to a negative 34,000 sf, with occupancy decreases in the Southpoint, Deerwood Park and Baymeadows districts offsetting gains in Downtown Jacksonville and the South Interstate 95 corridor, CBRE reports. Meanwhile, a total of 322,900 sf of new office construction is under way, particularly in suburban submarkets.
CBRE states that the global credit shortage for commercial real estate is adversely impacting investment sales volume within Jacksonville's office market, though expansion of JaxPort and industrial market growth are expected to have a positive effect on office leasing and sales activity in 2009. The MarketView report also notes that area unemployment is 5.1% at midyear, slightly below Florida and national rates.
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