Jackson’s Central Business District office market is starting 2012 much as it did 2011 with slightly more than a quarter of available space empty.
That’s the good news. The CBD wouldn’t be keeping its current occupancy levels had expected lease renewals not come through, commercial real estate professionals say.
Parkway Properties’ 120-building fourth-quarter office market survey shows the downtown market of about 3.2 million square feet ended last year’s final quarter in what has become typical fashion for it: Net absorption of 6,224 square feet, vacancy of 26.77 percent and asking rents averaging $17.32 a square foot.
The survey found the metro Jackson market’s big winner to be the I-55-County Line Road corridor, a submarket of about 1.8 million square feet that had 28,669 square-foot net absorption and the second highest asking rents behind the I-220-Highland Colony submarket at $17.94 a square foot.
“That’s a good example of a driver,” said Matt Forsyth, leasing manager for Parkway.
Rates on office properties along the I-55 stretch north of Jackson have stayed steady and are bolstered somewhat by the Meadowbrook Office Park, where rates run in the $25.75 a square-foot range, Forsyth said
The I-220-Highland Colony corridor kept the highest lease rates at $20.70 but had a vacancy rate, 16.24 percent, kept high by the continued 80,000 square-foot vacancy at 200 Renaissance at Colony Park. “But overall the market has done pretty well” along the I-220-Highland Colony corridor, Forsyth added.
The submarket had a good bit of leasing activity in 2011, with the C Spire expansion of about 6,000 square feet and Johnson Controls taking of about 10,000 square feet and new space taken by Iron View Capital, he said.
The amenity base is getting stronger along that corridor and most likely will continue to do so, Forsyth said. “I see that market doing well over the long term.”
Lakeland Drive, the smallest of the metro submarkets at about 1.34 million square feet, has been steady in its occupancies, ending the year at 15.34 percent vacancy, the Parkway survey shows. “Rental rates are pretty competitive there” with the metro market’s lowest average rate at $16.71 a square foot, Forsyth said. “You do not have a lot of class A on Lakeland Drive but it’s a good location. It’s got a good amenity base with Dogwood out there.”
Back in the Central Business District, some observers question the validity of what has become a sustained vacancy rate of a little more than 25 percent. Ted Duckworth, principal of downtown’s Duckworth Realty, said in an interview several weeks ago that the CBD would have a significantly lower office vacancy rate by removing from surveys buildings once used for office but now vacant and awaiting residential conversion.
“These buildings are functionally obsolete as office buildings,” he said. “If you take those buildings out of the mix, you take 300,000 square feet of the market.
“I think the competitive vacancy we’re dealing with is in 15 percent to 17, 18 percent” range, said Duckworth, though he noted the actual count could be as high as 20 percent.
A further decline in the occupancy rate will come once the state converts the Landmark Center to the headquarters for the Mississippi Department of Revenue. That conversion, recommended in a study commissioned by former Gov. Haley Barbour, is awaiting a green light from the Legislature.
Ben Allen, president of CBD promotional agency Downtown Jackson Partners, fretted several weeks ago that without renewals of leases set to expire, the CBD office space vacancies could rise to 40 percent.
Forsyth does not expect that to happen, at least if other landlords have the success Parkway has had recently in resigning tenants. “We renewed virtually all of the leases that were coming up,” he said.
Those renewals came to about 65,000 square feet, Forsyth added.
Overall, ‘you have got some good news stories for downtown,” the leasing agent said, citing the arrival of new state office users and the likelihood more will come and the expansion of law and accounting firms.
“Measured by people looking for space and the sheer activity we have seen, the downtown market seems to be picking up a bit.”
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