(Carl Cronan is editor of Real EstateFlorida.)

JACKSONVILLE, FL-Forgive the office market here if it feels a little neglected lately. The industrial sector has been getting quite a bit of press lately relative to expansion of the city's port, and those expansions have overshadowed progress in the local office sector-despite the fact that Jacksonville is home to four of Florida's largest office towers.

"The office sector here has always done well, but the industrial sector has a few more things to tout lately," says Brad Chrischilles, principal of CNL Commercial Real Estate in Jacksonville.

First-quarter office vacancy in the market is around 13%, which is good, but still pales in comparison to the local industrial vacancy rate of 5%, according to CB Richard Ellis. Average leasing rates are a little higher than a year ago, at $19 per sf, while net absorption finished the quarter in positive territory at 26,300 sf, mostly within class A properties in the central business district.

Downtown Jacksonville has a current direct vacancy rate of 16%, with class A vacancy at 11% and class B at 29%, according to CBRE. The direct rate of vacant office space in Jacksonville's suburbs is 12% through the first quarter, with about 1% of sublease space available.

"We are seeing an increase in sublease space and this will affect the vacancy rate in the upcoming quarters," Traci Jenks, CBRE senior associate in Jacksonville, notes in the firm's latest office market report.

However, local office brokers think there may be some favorable ripples from Jacksonville's industrial boom, spurred by the upcoming completion of the 130-acre Mitsui OSK Lines terminal at JaxPort. It also helps that office vacancy, which reached nearly 20% just three years ago, will be held in check by a relative lack of new construction, which has been limited over the last seven years.

"We will see, and have already seen, some ancillary moves from the industrial side," observes Jeff Evans, broker associate with Colliers Dickinson in Jacksonville. He cautions, though, that some corporate decisions on leases and renewals may be delayed until later this year pending the outcome of the November presidential election.

In addition to the development in and around the port, brokers emphasize Jacksonville' location and diversified workforce, along with existing transportation and logistical systems, as creating opportunities for the local office market.

Besides third-party logistics firms needing separate office space to support port-related industrial users, Evans also sees positive leasing trends from Jacksonville's growing health care segment. "On a macro scale, I think there is nowhere to go but up," he says.

The demand is likely to drive up asking rents, which currently range from less than $15 per sf in Arlington to well above $20 per sf in Deerwood Park, according to CBRE figures. The Interstate 95/9A corridor has 12 million sf of office inventory in all classes, nearly twice as much as Downtown Jacksonville.

Office sales were strong in Jacksonville last year, exceeding $300 million, with cap rates in the 7% to 8% range, according to Colliers Dickinson. The year's largest office sale was Harbor Group International's $30-million acquisition of BB&T Tower at 200 W. Forsyth St.

CNL's Chrischilles, whose firm has gained several leasing assignments since opening its Jacksonville office last year, believes the city's current industrial focus should also attract attention from office investors and tenant prospects. "Anything that gives Jacksonville a little more presence on the map and gets companies' attention is helpful," he says.

Instant Insights /

OFFICE:Sector Thrives Apart from JaxPort Focus

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