Original Blog By Front Street Director Seth Lane
The growth and recovery we are all witnessing in the Gainesville real estate market is gaining traction. Long vacant shopping centers and retail big boxes are seeing signs of life from tenants like Lucky's Market and Rooms to Go Outlet. New mixed-use projects are coming out of the ground like Celebration Pointe and Social 28. With this sustained activity, which is at a higher level than we have seen in some time, I am looking forward to the impact on our local office market.
I recently did research for a client who asked a simple question "how big is Gainesville's office market?" What I discovered during my analysis were three numbers which shed light on a section of our market that is ready for positive change. These three numbers are 5,477,659; 39.3; and $12.58.
According to CoStar data, there are 5,477,659 square feet of non-owner occupied office space in our market; the average age of this space: 39.3 years; and the average rental rate: $12.58.
What this data reveals is an aging (or old) office supply that is being leased for rates that do not support new construction. As our economy continues to improve, I foresee two trends. First, I anticipate that office space on the higher end of the quality spectrum will be absorbed. Second, I believe that new supply will emerge and these new properties will see significant demand.
The age and condition of our office supply can yield the illusion that demand doesn't exist. The demand does exist! However, the demand is for newer, high-quality space in well located areas.
Take Innovation Square for example. When Trimark properties renovated several office buildings, taking a dated facility and converting them into the state-of-the-art products, the absorption was almost immediate.
As our market continues on the track of improvement, look for opportunities to meet the growing demand. The need for new or well renovated office space in strategic locations will certainly make up a large portion of that demand. I predict rates will climb for properties that are positioned correctly.