I've been a commercial real estate broker in two metropolitan markets for over thirty years. I've experienced three (3) downturns in the marketplace prior to this one ( 2008-present day is the worse). The phenomenon happening in Jacksonville and many other "second tier cities" is something I've never seen. The downturn of construction in all areas of the commercial market, retail,industrial,office and apartments has lead to a lack of available space for the "user" market. As a result what demand there is, is superseding what is available and therefore in an economy that is anything less than robust with demand greater than supply prices are escalating.
With the housing debacle of the last decade apartment construction has boomed and it has been necessary. The housing market going through record foreclosures, Florida ranks near the top of the foreclosure market, folks are renting apartments and prices are rising both in the price of the rentals and then in the buyer/investor sale price.
The remaining three specialty areas (retail, office, industrial) are seeing incremental increases from the start of 2015 to present day. The Jacksonville office market has seen rental rates rise from 5% to 10% in the softer sub-markets to 10%-25% in the "hotter" sub-markets. Here's the dichotomy of this situation, the economy like the national economy has not improved enough to be commensurate with these increases.
I personally make a living representing tenants and when I begin the process with my clients that are looking for office space they are almost always surprised at two things; the lack of available space in their chosen sub-market and; the price of the space that is available. Next the softer sub-markets are benefiting as tenants look for availability and perceived better prices. But, those softer areas are taking advantage of this turn and those owners are raising their rates and again the tenant is surprised and feels shortchanged. What is being constructed is being financed privately as Commercial Banks refuse to lend on speculative construction.
The retail market is better in that new construction has taken place, as construction follows increasing positive demographic growth. Developers are cautious and are working to avoid overbuilding so the market remains tight and rates continue to rise. The national tenants understand the market the local "moms and pops" do not and "sticker shock" can happen.
Jacksonville's industrial market is largely based on its port and is a major east coast distribution point. As such the situation is similar to the retail market both in new construction and recognition by the tenant base.
The economy continues to sputter but those landlords that have made it through the worse of times are rightfully taking advantage of a marketplace where demand exceeds supply. What's the answer? How about banks lending with stringent requirements so that construction money can be made available and more choice happens. This has to be good for the economy, doesn't it?