Office weakness remains, but outlook positive: M&M

JACKSONVILLE - Office property fundamentals in Jacksonville began to waver in the second half of 2008, and more acute weakening is expected in the quarters ahead, according to the 2009 National Office Research Report by Marcus & Millichap.

“Despite the near-term operating environment, the extended outlook remains positive,” says David Bradley, sales manager of the Jacksonville office of Marcus & Millichap. “The market’s high quality of life will continue to draw new residents, and a constant flow of military retirees entering the labor pool will enable office-using employers to expand.”

Following are some of the most significant aspects of the Jacksonville Office Research Report:

- In 2009, employers are expected to eliminate 20,000 positions, a 3.2% decline. Last year, 15,200 workers were cut from payrolls. Office-using employment will decrease by 5.8%, or 9,100 jobs, following the loss of 5,800 positions in 2008.

- Only 108,000sf of for-lease stock is scheduled for delivery in 2009, representing a 0.4% expansion of inventory. Last year, 80,000sf was completed.

- Job losses will weaken demand in the quarters ahead, resulting in a 380 basis point climb in the vacancy rate to 21.2%.

- In 2008, vacancy rose 270 basis points. As demand wanes and leasing volume drops, asking rents are expected to fall 5.1% to $17.58 psf, and effective rents are forecast to dip 7.2% to $13.80 psf.

Also included in the report is the firm’s annual National Office Property Index (NOPI), a snapshot analysis that ranks 43 office markets based on a series of 12-month forward-looking supply and demand indicators. Jacksonville moves down four places this year to No. 40.