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JACKSONVILLE, FL-This sprawling 759 square-mile city, boasting the largest metropolitan area in the nation, is experiencing solid office and industrial market growth and shouldn’t be redlined as an overbuilt hub, says Ladson F. Montgomery, president of Grubb & Ellis/Phoenix Realty Group.

The Federal Deposit Insurance Corp. recently added Jacksonville to its semi-annual list of overbuilt commercial real estate cities.

“In the case of our city, the FDIC only examined the number of construction permits issued,” Montgomery tells GlobeSt.com. “What the FDIC did not take into consideration, however, is that much of this new space is pre-leased.”

The broker concedes “speculation is entering our market, but for now, Jacksonville real estate is overall healthy.”Third-quarter Grubb & Ellis/Phoenix Realty statistics show a Downtown office vacancy factor of 6.9%, down from 7.6% in the second quarter, and 12.2% in the suburbs. The five submarkets total 12 million sf.

Vacancies in the 68.3 million-sf industrial sector stand at 5.1%, lower than the national 6.5% level.

But Downtown faces an embarrassing lack of new construction and a growing demand for space, the brokerage’s report states.

On the hotel side, however, the 966-room Adams Mark property on the waterfront is nearing completion at an estimated hard construction cost of $120 million.

“The finished product will be a significant asset to Downtown” and could trigger new office construction, Montgomery says. So could the new Federal courthouse being completed. “Activity begets activity and the more buildings constructed, the more viable the area becomes,” the broker says.

The suburbs, however, show a different picture. A total 695,000 sf of office product is currently under construction with an additional 470,000 sf of planned class A waiting to break ground within the next 12 months.

“Even though a significant block of this space will be preleased prior to completion, especially Koger’s Collier Building, we expect vacancy rates to begin trending upward through the first quarter of 2001,” Montgomery tells GlobeSt.com.

The result will be tenants “benefiting from greater supply and flatter lease rates,” the broker says.

In the industrial category, Montgomery attributes the low 5.1% vacancy factor to “the area’s skilled labor base; its position as a major port; and its excellent access to highways and railroads.”

Rents are $3.25 per sf triple net in the overall industrial market. Research and development flex space is at $7.50 per sf triple net.

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