Regional Woes Kick Off
Slowdown in Jacksonville

While houses and condominium prices aren't coming down from the same sizzling highs seen in Miami or Fort Lauderdale, the Jacksonville area's slump in residential real estate is taking a toll on the north Florida economy, and some commercial landlords are beginning to see the effect.

Located on northern Florida's coast, Jacksonville has positioned itself as a lower-cost alternative for business and residents to its glitzier counterparts to the south, but it hasn't escaped their woes. Jacksonville's single-family home prices declined 3% in the fourth quarter from the year-earlier period to $184,600, well below the median price of $358,400 in Miami or $344,000 in Fort Lauderdale. The drop in the pace of Jacksonville-area home sales was more dramatic, slumping 31% and matching the state decline, while condominium sales fell 38%, a rate steeper than that seen throughout the state, according to the Florida Association of Realtors and the University of Florida Research Center.

The fallout in construction, real-estate and mortgage-related industries throughout the region helped to slow the rate of job growth to an annual pace of 1.3% in December from 2.9% a year earlier, according to the Bureau of Labor Statistics. That, in turn, has started to put a crunch on the commercial real-estate market, with consumers spending less on consumer goods and businesses reluctant to take on office space.

Now sales prices could drop further, as retail rents are forecast to fall this year while office rents will flatten. Moreover, apartment rents are predicted to fall slightly from 2009 through 2012, according to PPR. More promising is the warehouse market, which is expected to benefit from expansion at the port. Of the four commercial sectors, warehouse property is the Jacksonville region's only area expected to post rent growth that would outpace an average of 54 major markets in the next five years, according to PPR.

For now, the retail and apartment sectors' health appears the most precarious, partly because developers are still building properties, many without tenants in hand, as they chase the region's above-average growth rate and its population of about 1.3 million residents. The potential glut has some developers holding off. Ben Carter, of Atlanta-based Ben Carter Properties LLC, says he has pushed back the start of construction on a large, open-air retail center near St. Augustine called Esplanade at St. Johns until next year, hoping the completed center will open when the housing market is again "in full swing."

The rental-apartment sector in Jacksonville, however, hasn't tightened as much as some other Florida markets that saw inventories drawn down by developers converting units to condominiums. That has left the apartment sector heading into a weaker economy with a higher vacancy rate than that in all the major Florida markets tracked by PPR, except Orlando and Tampa. The slowdown could delay the city's goal to see about 10,000 residential units built downtown. Jacksonville officials had hoped that more housing would make more people want to play, work and live downtown and would follow on such successes as hosting the 2005 Super Bowl and the decision by Fidelity National Financial Inc., an insurance company, to relocate its headquarters there from California.

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