Q4 market reports: Jax industrial sector short on space; demand high
Jacksonville’s major brokerages found the industrial sector to be a high-demand area, albeit with little space available in the fourth quarter of 2022. Reports from CBRE, Colliers, Cushman & Wakefield and JLL each had the city’s industrial vacancy rate between 2.
1 and 3.2%. Each report noted a comedown from the fluctuations of 2021, though fundamentals in 2022 appeared healthy. CBRE’s report said low vacancy, increased demand and strong population growth helped the sector in 2022. New cold storage demand, along with the automotive, retail, wholesale and the food and beverage industry drove the Jacksonville industrial market. The report said approximately 7.8 million square feet of speculative industrial projects are under construction. Jacksonville recorded over 880,000 square feet of positive net absorption during 2022’s Q4 2022 and 3.9 million square feet during the entire year. CBRE said the current vacancy rate is 3.4%, though commitments by tenants occupying space in Q1 of 2023 will lead to a vacancy rate 2.1%. Colliers’ outlook for Q4 said rents are stabilizing for tenants at $9.08 a square foot. With net absorption hitting 604,000 square feet in Q4, the brokerage said vacancy rate was 2.3%. The report said 8.8 million square feet of industrial is currently under construction. The report said leasing velocity has decreased from 2021 levels but remains strong. Industrial space is hard to come by and rife with competition, though a key factor in 2023 is national economic policy. “The national macroeconomic picture has changed how some occupiers are approaching expansion plans as many adopt a wait and see attitude,” the report said. “But if the Federal Reserve can slow inflation and avoid a hard landing, we believe many of these occupiers will move forward with expansions and leasing velocity will remain strong.” Cushman & Wakefield’s analysis showed overall asking rents for industrial space increasing by 8.5% from Q3 and 17.4% year-over-year to end 2022 at $6.65 per square foot for a triple net lease. Leasing activity for 2022 totaled 6 million square feet, which fell by 6% year-over-year from 2021. Northside Jacksonville accounted for 57% of total activity throughout the year, the report said. In 2022’s Q4, more than 709,000 square feet of positive net absorption occurred, of the 3.4 million square feet of absorbed space over the year, a 23% drop from 2021. “Demand continued to outpace supply, limiting deal opportunities as the market tightened further,” the report said. With a 2.7% vacancy rate and more than 4 million square feet of space absorbed in 2022, Jacksonville’s industrial market remained healthy, JLL reported. Rents rebounded in 2022 with a record $6.42 per square foot for a triple net lease. That made for an 18.2% increase year-over-year. The firm's Q4 vacancy rate was 2.7% Industrial completions were just under 3 million square feet for 2022, JLL's report said, with more than 1.1 million square feet delivered in Q4. “Limited availabilities in existing buildings has resulted in strong leasing activity in new product,” JLL’s report said. “Of the new space delivered , less than 10% remains available to lease.”
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