While construction activity will increase in 2007, development of new space will remain below historical levels and the market is forecast to register its sixth consecutive year of positive absorption, according to the Marcus & Millichap Real Estate Investment Services 2007 National Office Report. "Absorption is forecast to come in at its highest level since 1999, and as a result, office vacancy will decline to 13.8%, the metro's lowest rate since 2000," says Marcus & Millichap Jacksonville office regional manager Steve Ekovich. "Property owners will reduce concessions and introduce significant rent hikes this year."

According to a CB Richard Ellis Q1 office market report, Jacksonville's office market showed little significant change in the average lease rate and the rate of vacant space when compared to one year ago. The overall vacancy rate for office space for the first quarter was 13.8% compared to 13.5% in the first quarter of 2006. Lease rates averaged $16.65 per sf during the first quarter compared to $16.98 per sf a year ago.

Among predictions for 2007 is an anticipated increase of 9,000 jobs, or a 1.4% jump, for the year. This compares with a 2% increase in 2006. Office-using employment is forecast to expand by an additional 3,300 jobs, or 2%. Asking rents are forecast to increase 3.8% in 2007 to $18.16 per sf, while effective rents gain 5% to $15.10 per sf, according to Marcus & Millichap.

The short-term forecast for Jacksonville's office market is for continued improvement in leasing particularly in the key suburban markets. Very few large blocks of contiguous space remain in either A or B class properties. Lease activity continues to trend upward although not as rapidly as it did during 1998-2000. The overall vacancy rate is expected to recede to 11% which approaches the stabilized market vacancy of 10%, according to CB Richard Ellis.

Investors will remain interested in the office market throughout the year with cap rates expected to stabilize in the low- to mid-7% range, according to Marcus & Millichap.

Instant Insights /

Office Market Continues on Positive Track

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