Can Downtown Survive?

[Captain Zissou]

I...the analyst would be fired if it was grossly inaccurate.

Sort of like when the analysts at S&P or Moody's were "fired" for rating Mortgage Backed Securities as AAA when they were really worthless pieces of shit?

Are people paying the Cushman analyst more than a million dollars to say downtown has a 25% vacancy rate..... I doubt it.

[ChriswUfGator]

Chris;
Yes, This would be a false representation, but only if the vacancy rate is in fact from 2 years past as you believe.  

I agree that public sector office space should not be included, which would increase the vacancy rate.  I also think single tenant buildings like CSX or FNF should be removed, or at least explained.

Until a private sector vacancy number and a timeline for the analysis can be determined, I don't think there's really much to argue on.  Tufsu has an accurate number, but nobody knows what it is made up of.  

Well if that number is accurate, then wouldn't it stand to reason that the actual present-day occupancy figures published by that very same source for one of its own holdings in that same area would also be accurate?

It's just an interesting counterpoint, to have the very same corporation claiming on one hand in a press release that the vacancy rates in a given area are 25%, when they obviously know full well that their own building in that very same location has a 90% vacancy rate. Just seems a bit unusual to the casual observer...

[vicupstate]

I have followed vacancy rates to one degree or another in numerous cities for many years, including Jax.  Based on what I know from that, I believe these comments to be true, but I don't get paid to do this either:

1) Public sector buildings:  If a government building is OWNED by the government it is not included in these occupancy/vacancy stats.  If a government is LEASING space in a privately owned building then it IS included.  So, most of the government offices are not factored into these figures.

2) If a building is not in lease-able condition (i.e. Laura trio) it is not included in the inventory.  

3) Vacancy in single digits is considered healthy and will lead to rising lease rates and indicate a strong demand and vibracy in said area. Vacancy over 10% is okay but not great.  Vacancy over 15% is 'getting high' and will dampen new construction and prevent rising lease rates. Vacancy over 20% is a sure sign of either a recession or a distressed area or both.  Vacancy over 25% is considered quite high and is seen as a cause for alarm among the Chamber/political set.

4) Much more space may be LEASED than actually OCCUPIED. Commercial leases can often be 5, 10 or more years. As long as the space is leased, the owner is getting rent (good for them). However only OCUCPIED space is putting people on the street, buying lunches and making copies at Kinkos.      

5) The analysis that a brokerage firm does includes ALL leaseable space, include the space listed with  OTHER firms.  One building with a very high vacancy is not unusual, but is most often an indication  of a very recent tenent exit or the building has just been completed.  A high vacancy in MULTIPLE  multi-tenant buildings (like Atlantic Place) could indicate a deteriation in the market.  

Any way you slice it, the vacancy rate on the Northbank is quite high, and needs to be addressed, starting with the city negotiating to keep both Modis and Life of the South downtown, just as Delaney did with Stein Mart years ago.  Second, it needs to be determined what is causing the problem of companies leaving and other companies passing over DT. Third, do something about #2.        

[Captain Zissou]

Chris, the two numbers can both be true.  

Disclaimer: This is hypothetical.

Modis (800,000 sf)+BOA(800,000 sf)+AT&T (940,000 sf)+ Wachovia NB (300,000 sf)= 2,840,000 sf

25% of that equals 710,000 square feet of vacancy.  It's easy to see where a 100,000ft building could be 90% vacant if there were a couple buildings that had better than 75% occupancy.

An addendum:  The 90k of available space in Atlantic place could have all been sub-lease, who knows..  My company just moved into 12k of space that was 'available, but not vacant.  We're subleasing.

[ChriswUfGator]

Cushman is not the dominant mgmt company downtown... so saying that they have a building that is 90% available and then saying 'well there's no way 26% vacancy rate is correct, all downtown must be 90% vacant then' is as far stretched as far streched can be, lol.

That's not the argument here, and never was. Nobody ever argued a 90% vacancy rate.

The point was simply that Tufsu's statistics on these parking-policy debates often turn out to be Potemkin Villages.

I personally believe the vacancy rate downtown, excluding single-tenant buildings, federal and city buildings, and all the other crap that is no doubt being lumped in there to produce tha 20% figure, is realisitically around 40% and worsening.

[finehoe]

How much they're being paid is irrelevant.  The point is, people whose livelihood depends on appeasing a certain clientele are not going to tell that clientele things they don't want to hear.

[fieldafm]

Ok, so if Fidelity, Everbank, BCBS, Prudential, and Aetna are say 350k square feet total and are say 90% leased... but a bunch of smaller buildings surrounding them totalling 150k square feet are 30% leased... that total data set has an occupancy rate of 72%.  Just because there are some completely empty buildings sitting around doesnt mean the entire data set is somehow innacurate when looking at top line numbers.

I very much agree with you that there is SIGNIFICANT underutilization in DT office space... but you can't infer Cushman is somehow lieing, thats a little disingenious.

[ChriswUfGator]

Chris, the two numbers can both be true.  

Disclaimer: This is hypothetical.

Modis (800,000 sf)+BOA(800,000 sf)+AT&T (940,000 sf)+ Wachovia NB (300,000 sf)= 2,840,000 sf

25% of that equals 710,000 square feet of vacancy.  It's easy to see where a 100,000ft building could be 90% vacant if there were a couple buildings that had better than 75% occupancy.

That's the problem, though. None of those have the occupancy to come up with aggregate numbers that would support the 22% vacancy rate being claimed. Simply go into any of those buildings and poke around...

[ChriswUfGator]

Ok, so if Fidelity, Everbank, BCBS, Prudential, and Aetna are say 350k square feet total and are say 90% leased... but a bunch of smaller buildings surrounding them totalling 150k square feet are 30% leased... that total data set has an occupancy rate of 72%.  Just because there are some completely empty buildings sitting around doesnt mean the entire data set is somehow innacurate when looking at top line numbers.

I very much agree with you that there is SIGNIFICANT underutilization in DT office space... but you can't infer Cushman is somehow lieing, thats a little disingenious.

We know how math works...thanks.

The problem is that these stats are including things they shouldn't, like government facilities and single-tenant buildings, which have no bearing on the market for commercial space.

[fieldafm]

The point is, people whose livelihood depends on appeasing a certain clientele are not going to tell that clientele things they don't want to hear.

God I wish that were true, lol
I tell clients things they dont want to hear all the time.

I do get your point.  But, all I'm saying is... it makes no sense arguing about the top line numbers.  You have to dive into the details to get a better picture.

Like Vicup stated, Laura Trio wouldnt count... so again underutilization of actual building stock is blatantly obvious, but what matters to a property mgmt co or commerical broker is 'am I getting paid on my building?' and the top line figures reflect that.

[Captain Zissou]

How much they're being paid is irrelevant.  The point is, people whose livelihood depends on appeasing a certain clientele are not going to tell that clientele things they don't want to hear.

There is no comparison between the two.  Especially in Jacksonville. High vacancy downtown means sell an investor on the Southside for 'bond properties' or DT for 'value add. Sell a tenant on DT for cheap rent, and southside if they want to be in the hot area.  Low vacancy DT means sell an investor on DT and a tenant on either DT for prestige or southside for value....  The analyst doesn't have much stake in the game.  It's just a sales aid for the broker and free publicity for the firm if a news source uses the figures.  

There are other areas where I would say a real estate analyst would have incentive to fudge numbers, but not here.

[fieldafm]

Ok, so if Fidelity, Everbank, BCBS, Prudential, and Aetna are say 350k square feet total and are say 90% leased... but a bunch of smaller buildings surrounding them totalling 150k square feet are 30% leased... that total data set has an occupancy rate of 72%.  Just because there are some completely empty buildings sitting around doesnt mean the entire data set is somehow innacurate when looking at top line numbers.

I very much agree with you that there is SIGNIFICANT underutilization in DT office space... but you can't infer Cushman is somehow lieing, thats a little disingenious.

We know how math works...thanks.

The problem is that these stats are including things they shouldn't, like government facilities and single-tenant buildings, which have no bearing on the market for commercial space.

But, many buildings downtown aren't single tennant.  Take Prudential or BCBS for example.  Poll someone in Jacksonville and ask if they are single tennant buildings and 9 out of 10 will tell you they are.

I have to get back to work... look, Im against the current parking policies downtown and for downtown development and all that jazz... but spending all day long arguing about a top line figure is so unproductive.  I really hope I get the opportunity to look at the detailed market report in the morning.

[ChriswUfGator]

I have followed vacancy rates to one degree or another in numerous cities for many years, including Jax.  Based on what I know from that, I believe these comments to be true, but I don't get paid to do this either:

1) Public sector buildings:  If a government building is OWNED by the government it is not included in these occupancy/vacancy stats.  If a government is LEASING space in a privately owned building then it IS included.  So, most of the government offices are not factored into these figures.

2) If a building is not in lease-able condition (i.e. Laura trio) it is not included in the inventory.  

3) Vacancy in single digits is considered healthy and will lead to rising lease rates and indicate a strong demand and vibracy in said area. Vacancy over 10% is okay but not great.  Vacancy over 15% is 'getting high' and will dampen new construction and prevent rising lease rates. Vacancy over 20% is a sure sign of either a recession or a distressed area or both.  Vacancy over 25% is considered quite high and is seen as a cause for alarm among the Chamber/political set.

4) Much more space may be LEASED than actually OCCUPIED. Commercial leases can often be 5, 10 or more years. As long as the space is leased, the owner is getting rent (good for them). However only OCUCPIED space is putting people on the street, buying lunches and making copies at Kinkos.      

5) The analysis that a brokerage firm does includes ALL leaseable space, include the space listed with  OTHER firms.  One building with a very high vacancy is not unusual, but is most often an indication  of a very recent tenent exit or the building has just been completed.  A high vacancy in MULTIPLE  multi-tenant buildings (like Atlantic Place) could indicate a deteriation in the market.  

Any way you slice it, the vacancy rate on the Northbank is quite high, and needs to be addressed, starting with the city negotiating to keep both Modis and Life of the South downtown, just as Delaney did with Stein Mart years ago.  Second, it needs to be determined what is causing the problem of companies leaving and other companies passing over DT. Third, do something about #2.        

That's how it's supposed to work...

Unfortunately I think a lot of us have come to suspect that the figures concerning our particular market might be massaged to paint a rosier picture than exists in reality. There is simply no way to reconcile the ghost town that is the Northbank with the figures being thrown around here, which are claiming 75%-80% occupancy. That's preposterous.

[cityimrov]

What's the market rate for class A Office Space in downtown?  How about in JTB or Deerwood? 

[fieldafm]

The discussion is about the number of people working downtown.



Which is ridiculous because the amount of leased space downtown would only be relevant to a discussion about employment if there were a standarad amount of employees per square foot, which there isnt.

There isnt a way to determine what the lowest number of employees is based on the information.

That is absolutely the point.