As the managing director of one of the region’s largest commercial real estate firms, I am frequently asked why Downtown isn’t more vibrant.
The simple answer is demand.
We currently lack the demand drivers necessary to generate transformative projects that will make Downtown thrive.
The top demand driver in commercial real estate is employment… and lots of it.
Data from Colliers International shows that between 1997 and 2019, markets with the greatest change in employment growth also experienced the most commercial development. That’s not a coincidence.
Warren Buffett likens life to a snowball; economic development is same. Small wins lead to medium-sized wins, which lead to big wins. We just witnessed this theory in action with Amazon’s distribution centers in Jacksonville. As a result, inquiries for large blocks of industrial space picked up. It’s time we create similar momentum on the corporate office side.
As wins pile up, the city will become more vibrant, quietly but surely shedding its small-town image for something more cosmopolitan, with a greater variety of options for employees, improved labor availability, an increased tax base, etc. And the snowball rolls on…
There are several game-changing commercial real estate projects under construction or on the drawing boards in Downtown: Lot J/Shipyards, Berkman II, The District, Laura Street Trio and the Jacksonville Landing.
The developers of these projects have secured (or will seek) incentives to make their projects viable. These packages are often tied to projected tax revenue increases. While valuable, these incentives don’t fundamentally rebalance the supply/demand equation. Rather, they help offset costs so developers can build what would otherwise be impossible, given prevailing market rental rates. The higher rents needed to justify market-rate construction reflect a robust sales volume (i.e., demand) that does not quite exist today.
However, using real estate specific incentives indiscriminately can have unintended consequences. Nobody wants a completed development with political goodwill and lackluster market buy-in.
Development that is pushed too soon can result in a lukewarm reception, which kills momentum and stifles future development interest. But when used wisely, incentives can support redevelopment of blighted or tainted areas that might otherwise be looked over.
The best way to fundamentally transform Jacksonville’s job market (and real estate sector) is to invest in those who invest in people – the corporations that generate the value by which jobs are created, homes are built, and skylines (or riverfronts) are shaped. JaxUSA Partnership is Jacksonville’s ambassador to the outside world, and they do a fantastic job marketing us to outside companies.
If we want Downtown to grow, we need to give corporations an incentive to create jobs and deliver long-term value. Win the small ones first and start the snowball rolling. Let the free market decide which sites should be developed first. And watch Downtown’s commercial real estate landscape slowly, but surely, come to life.
To read more about downtown's possibilities, go to his blog here.
Christian Oldenburg is the managing director and market leader for Colliers International Northeast Florida.
Source: Jacksonville Business Journal