JACKSON — For the second year in a row, vacancy rates in large tracts of prime office space decreased while absorption and rental rates increased in metro Jackson.
“It’s a very good sign for the commercial real estate industry that the vacancy rates decreased while absorption and rental rates went up at the same time,” said Gary Black, market analyst for Parkway Properties. “With the positive absorption, the vacancy level decreased almost a full percentage point during this time, which is a significant factor.”
From Aug. 1, 1999 to July 31, 2000, the vacancy rate for the metro area decreased from 9.5% to 8.4% while the average rental rate increased from $16.57 to $16.89 per square foot. During the same time period, more than 80,000 square feet of positive absorption was reflected.
“During this past year, the Meadowbrook Office Park was completed and is 100% leased,” Black said. “More importantly, the asking price was $23 per square foot and they were getting $21 or $22 per square foot.”
Every year, Parkway Properties publishes the Jackson Office Guide, a booklet that tracks every class A or B office building over 20,000 square feet in metro Jackson, and calculates absorption rates and various factors affecting the commercial real estate market.
The 2000 version should be ready this month, Black said. “In the past, we’ve included three sub markets — the central business district (CBD), Lakeland Drive and I-55/County Line,” he said. “For this year’s guide, we decided to include I-220/Highland Colony Parkway as a fourth sub market for the study, because it has almost 900,000 square feet available, whereas Lakeland Drive has over 900,000 — already almost the same size.”
Bob Ridgway of Ridgway Realty in Jackson pointed to interesting dynamics in the real estate market, accentuated by tremendous growth along the parkway.
“There’s one brand new 90,000-square-foot spec building on the parkway that’s getting ready to come online with a remarkably low price — $15.95 a square foot in an area where they’re getting $20 to $22 a foot,” he said. “The owner bought the land right, is building the building himself, and doesn’t have to keep up with the market.”
David N. Price, president of dnp Corp. in Jackson, said he and other real estate developers have been amazed by the absorption rate of new office space.
“A few months ago, we were all worried about the amount of new office space coming available, and many people, including us, were concerned we were about to have a severe glut,” Price said. “However, all of a sudden, things snapped, and virtually all of the good space is just about gone … even the not-so-good space is leasing well.”
Four office developments totaling 214,000 square feet are under construction in Jackson, and AmSouth’s taking over of the Deposit Guaranty Bank Plaza downtown might free up 170,000 square feet or more for potential subleasing activity.
“With that, the office vacancy could increase in the near future, maybe even to double digits,” Black said.
Even though Parkway Properties collects data for larger blocks of office buildings, no one tracks information on smaller offices, said Rebecca Johnson of the Mississippi Association of Realtors.
“The question in commercial real estate is — how many small offices have vacancies?” Ridgway said.
Nancy Lane, CCIM, associate broker for Cook Commercial Properties of Jackson, said earlier this year, rates dropped, then kicked back up again.
“I’ve received more calls lately about offices in the 4,000-square-foot range,” said Lane, who handles the brokerage — not management — for several office buildings in Jackson, including The Quarter on Lakeland Drive, where she’s fielding daily calls on an 18,000-square-foot building under construction, with a completion date in November. “However, we’re working to create more retail than office in the new building.”
Several years ago, two local real estate investors wanted to privatize Lefleur Bluff’s State Park to build a community with convention facilities, hotels and speculative office space in 40,000-square-foot blocks — a plan that didn’t pan out, Ridgway said.
“You can either look at it as a downside or upside,” he said. “It would have given people an opportunity to move up, or for other folks to locate in Jackson that didn’t have time for something to be built.”
The unemployment rate is a vital factor in office space absorption rates, Ridgway said. “If unemployment is very low, there’s nobody to employ — not that you’d ever want to encourage unemployment,” he said. “If you go into an area like Rankin County, with a 3% unemployment rate, where you can just about count on that 3% to be unemployable, and I need 100 people, where would they come from? I’d have to hire them from someone else.
“Is office space being absorbed? Yes. Is it being absorbed fairly rapidly? Yes. A lot of it is internal growth,” Ridgway said.
Contact MBJ contributing writer Lynne Wilbanks Jeter at email@example.com or (601) 853-3967.