Jason Ryals and Nancy Sumner discuss the growth and trends in the current cycle.
Waves of recent retail construction in Jacksonville area could be slowing in 2020
Retail construction, rent and occupancy rates have been steaming full speed ahead in the region in recent years, but that growth could well slow this year, Colliers International Northeast Florida says in its most recent semiannual retail report.
At just 3.9 percent, vacancy rates are historically low, and at $18 per square foot, average rents are nearly 5 percent up from December 2018. Construction activity, meanwhile, while low compared to previous cycles, is still elevated, the researchers state.
The area around the St. Johns Town Center continues to lead the way in activity.
“The Southside unquestionably remains the epicenter of the retail world in North Florida,” said Nancy Sumner, director of retail services for Colliers International Northeast Florida. “The infill location, good access, relatively high surrounding incomes and the mass provided by St. Johns Town Center make the Southside the most sought-after retail location in Jacksonville.”
From a pure retail development perspective, Duval County’s neighbor to the south continues as kingpin in Northeast Florida, added Jason Ryals, executive director for Colliers International Northeast Florida.
“St. Johns County remains the strongest submarket for new retail development, with 428,000 square feet of space under construction this year — nearly double the volume underway in the second most-active submarket, Nassau County, with 240,000 square feet under construction,” he said.
Apart from Phase II of the massive Durbin Park development, and potentially Fuqua Development’s proposed $300 million Village Center at Interstate 295 and Butler Boulevard, few large-scale retail developments are on the books for the region in the next three years, which will spell good news for existing landlords, according to the Colliers report.
Despite solid retailer activity, problematic is a lack of experienced franchisees ready to take risks in new and proven concepts during this higher rent and franchise fee cycle. Retailers in general are becoming more hard-pressed, which can affect occupancy.
“This is particularly true for new construction centers, where rents can reach into the $40 [per square foot] range and beyond to support construction costs,” the researchers stated.
With financing still plentiful, some owners took advantage with large sales in recent months, the largest transactions being Brixmor’s sale of the 195,000-square-foot Shoppes at Southside to CORE Investment Management for $23.3 million or $214 per square foot, the 77,400-square-foot Beach Plaza sale to Ash Properties by LNR Partners for $19.4 million or $131 per square foot, and Katz Properties’ purchase of the 74,400-square-foot Bolton Plaza in Orange Park from Kite Realty Group for $18.1 million or $104 per square foot.
In forecasting 2020, a leveling-out due to growing headwinds appears to be on the horizon, according to Colliers.
“Rent growth has peaked on the retail front. Rental rate growth has been outpacing retail sales growth for more than seven years now, and that cannot continue indefinitely,” Ryals said. “Unless consumer spending growth accelerates, retail sales growth will limit the net operating income growth of landlords. For 2020, we see moderating rent growth, limited large-scale construction and flat occupancy.”
Source | jacksonville.com