2019 Economic Outlook
Downtown redevelopment remains a priority in Northeast Florida
Jacksonville’s Office Market ...
Entering 2019, class A office vacancies remained at historic lows in Jacksonville, even with the addition of 200,000 square feet of class A space in 2018, according to a report from commercial real estate firm Cushman & Wakefield. The firm predicts “solid growth for the overall market” with the tight supply of class A space driving higher demand for class B space this year.
Class A rents have risen an average of 5.4% annually over a three-year period to $22.95 a square foot. Overall, the increases were driven by demand for buildings on the north and south banks of the St. Johns River in the city’s central business district, according to the report. “Office market fundamentals should maintain current trends with further improvement in rental rates on lower availabilities.”
The report, authored by C&W Research Director Chris Owen, noted that the Jacksonville market had added 21,600 jobs in the past year, an annual growth rate of 3.1%.
“Office-using employment, including professional and business services as well as financial activities, grew faster in the metro than statewide over the year. Jacksonville and all of Northeast Florida has remained a magnet for firms looking for an experienced workforce in one of the lower cost markets in the Southeast,” Owen wrote.
Jacksonville / Duval County Issues ...
- Downtown: In April 2017, the Jacksonville Downtown Investment Authority picked Jaguars owner Shad Khan’s Iguana Investments as master developer of two city-owned, riverfront properties near TIAA Bank Field — the Shipyards and Metropolitan Park. A year later, Khan’s investment company announced that it also will redevelop a large stadium parking lot, called Lot J, into a sports-themed entertainment complex. Khan’s plans for the Shipyards and Met Park include a convention center and hotel, as well as apartments, condos and office space.
Obstacles remain, including an elevated road that runs parallel to Met Park, connecting the Hart Bridge to downtown. Iguana Investments believes tearing down the elevated ramp is key to creating a seamless development between the stadium and riverfront. While the city has identified another site for an access ramp to the bridge, it must find a way to pay for the $50-million project.
- Transportation: For years, Jacksonville’s Skyway monorail has been derided as a white elephant — “it goes nowhere; it has low ridership outside of special events; it seems to serve little purpose,” the Jacksonville Business Journal wrote in 2016. Now, the city wants to replace the Skyway’s monorail cars with a new system of self-driving shuttle buses. Plans call for repurposing the Skyway’s infrastructure and building off-ramps to allow autonomous shuttles to run along the monorail route and throughout downtown, with links to TIAA Bank Field and historic neighborhoods. “It will help create an innovation corridor downtown, which will help attract” a talented workforce, says Jax Chamber President Daniel Davis.
- Schools: The graduation rate for Duval County public high schools has been steadily rising for the past few years, reaching 80.8% in 2017, but that’s still lower than the statewide graduation rate of 82.3%. In July, Diana Greene became Duval’s new school superintendent after three years as the top educator in Manatee County, where she focused, among other things, on boosting low-performing schools.
Gainesville / Alachua County Issues ...
- Utility Rates: Ten years ago, city-owned Gainesville Regional Utilities made a heavy bet on biomass, signing a 30-year, $2.1-billion supply contract with a biomass power plant in north Gainesville. But the deal proved costly as a U.S. boom in natural gas production drove down energy prices nationwide. In 2017, the city commission voted to spend about $750 million to get out of the contract and buy the biomass plant.
While some characterized the buyout as the city’s best option in a tough situation, others argued that it showed the need for change in GRU oversight. Last year, state lawmakers placed a referendum on the November ballot seeking to take control of the utility away from the city commission and give it to an independent governance board. Ultimately, Gainesville voters rejected the measure, but the city’s utility will continue to face pressure — especially from those who say electric rates are too high. Last summer, GRU customers, on average, had the sixth-highest residential bill in the state, according to the Florida Municipal Electric Association. GRU’s commercial rates were the highest in Florida.
St. Johns County Issues ...
- Affordable Housing: The fair market rent for a modest, two-bedroom apartment in St. Johns County is $946 — $282 more a month than what the average renter could afford (using the definition of affordability as rent that is 30% or less of income). According to the National Low Income Housing Coalition, a worker in the county would have to make at least $18.21 an hour to afford even a modest apartment. By comparison, the average renter makes just $12.76 an hour. St. Johns County Continuum of Care, a group focused on ending homelessness, is now looking to stimulate affordable housing development. Last August, it proposed that the county launch a pilot program to lower barriers to affordable housing, such as reducing impact fees and regulations. County commissioners are to take up a detailed proposal this year. “We’re a good place to live, so people like to move here,” says Isabelle Rodriguez Renault, president and CEO of the St. Johns County Chamber of Commerce. “Demand is high, and housing prices are going higher. Finding a two-bedroom apartment for less than $1,400 can be a challenge.”
- Beach Renourishment: After two straight years of damaging hurricanes (Matthew and Irma), coastal erosion has become a top concern for residents and government officials in St. Johns County — which has 41 miles of coastline. Last fall, the county commission voted 3-2 to have staff members draft an ordinance that would increase the local hotel bed tax from 4% to 5% to help pay for beach renourishment. The tax increase will need a supermajority of four commission votes to pass, however.