Industrial Vacancy Rate, Rents Ratchet Up Due to New Deliveries in Jacksonville Region

JACKSONVILLE, FL—As ribbon cuttings continue on new industrial construction projects in Jacksonville, Colliers International says you can expect vacancy rates and asking rents to continue to climb.

The brokerage firm in its latest industrial market report for Northeast Florida states that in the third quarter the industrial vacancy rate increased approximately 150 basis points to 4.1% from the low recorded in late 2018.

The vacancy rate for flex space at the end of the third quarter stood at 5.2%, while the vacancy for warehouse space came in at 4.0%.

Meanwhile, the average overall market rent for the region stood at $6.50-a-square-foot, a 1% increase versus last quarter, and a 6.2% increase versus the same period last year. The marked increase in rents is due in large part to what Colliers states in the report is organic growth driven the tight market conditions and the addition of new supply with market-leading rents.

Most of the new construction delivered of late has been focused on large users seeking 100,000 or more square feet. “There has been very little development geared toward users seeking 50,000 or fewer square feet, and the pace of activity remains frantic in that range, so developers are starting to consider demising buildings to suit smaller users,” Colliers states.

Industrial properties continue to generate more interest from investors than just about any other property type as investment management groups are increasingly rebalancing their portfolios in favor of industrial, Colliers says. However, at present there are few sellers, “at least not at reasonable prices,” which has resulted in a tremendous amount of capital inflow to the sector. The only problem is that there are few sellers—at least not at reasonable prices.

The only significant transaction to close in the third quarter was iStar’s sale of its Preferred Freezer Portfolio, totaling seven assets across seven states. Included in that sale was the 170,000 square foot cold storage facility located at 1708 Beaver St. The property sold for an estimated $35 million, or $212-per-square-foot.

“In the final months of 2019, we anticipate vacancy rates will continue to move upward as more new construction delivers,” Colliers notes in its third quarter report. “The market will likely remain relatively tight, which could drive continued rent growth. On the sales front, we expect to see continued, albeit slowing, price appreciation driven by the lack of availability on the market and tremendous capital appetite.”

The brokerage firm concludes its analysis by noting, “If there is one caveat to our forecast, it is related to the ongoing trade dispute with China. Should negotiators reach a favorable compromise on trade, the resulting decline in uncertainty should drive renewed leasing interest.”