September 30, 2011

In 2006 the City Of Jacksonville, the Jacksonville Regional Chamber Of Commerce and WorkSource embarked on Blueprint for Prosperity, a partnership to improve the Jacksonville community through concentrated efforts in six foundation areas: Economic Development, Quality Of Life, Racial Opportunity & Harmony, Infrastructure and Leadership. Plans like this one along with The Better Jacksonville Plan are examples why Jacksonville continues to be a vibrant city with numerous opportunities. According to recent Bureau and Labor statistics, Jacksonville’s population grew 10.6% from 2001 to 2010 at a level of 813,518. There’s no disputing the global economy is in a recession, but with change comes opportunity.

 

What does Jacksonville have to offer?

 

  • Ideally located where two major interstates meet, I-10 & I-95.
  • First major city for northern commuters heading south via I-95
  • Deep water for container shipping lines
  • Strong former aviation orientated military population base
  • Cecil Field Commerce Center former Navy Base converted to employment center
  • National Football Team Jacksonville Jaquars
  • No State Income Tax
  • Affordable housing
  • Largest city in America in land mass 850+ square miles
  • Chosen as 1 of 48 cities in America to have 4G network capability
  • New National cemetery
  • New courthouse under construction
  • Headquarters to CSX Railroad

 

 

 

The city of Jacksonville is committed in addressing the needs of the city socially, economically and physically. Here are issues recently mentioned in the April 2010 update of The Better Jacksonville Plan-

 

  • Baseball Grounds of Jacksonville
  • Jacksonville Veterans Memorial Arena
  • All Libraries
  • Road Projects
  • •Including both COJ and JTA, construction is complete on 97 projects.
  • Neighborhood Street Resurfacing
  • New Sidewalk Program
  • Preservation Project (BJP-funded property acquisition)
  • Neighborhood Parks Improvements
  • JEA Septic Tank Phase Out – ALL AREAS
  • Jacksonville Equestrian Center and Cecil Recreation Complex
  • Jacksonville Zoo “Range of the Jaguar”

 

I highly recommend reviewing this detail plan @ www.coj.net to see the various locations road construction is planned or ongoing. Another website I recommend is visiting www.jcci.org to view the cities latest quality of life report. Here you’ll see numerous social and economic issues addressed which will be valuable in determining whether to invest in Jacksonville. It is these reports that highlight the commitment made by the government, the business sector and the community to make Jacksonville a great place to live and do business in.

 

Jacksonville comprises of numerous agencies structured to deal and attract new businesses. One leading government agency is known as the “JEDC” Jacksonville Economic Development Council. They are tasked with financial negotiations for companies seeking to relocate to Jacksonville.  Recent accomplishments include-

 

  • Pitney Bowes Hiring of 30 new employees
  • Interline Brands hiring 70 new employees

 

Not only has the JEDC taken over the Downtown development Authority’s role of redeveloping downtown. The JEDC is involved in the redevelopment of Cecil Field’s Commerce Center along with Hillwood Management. Cecil Field with its long runways offers tremendous business opportunities to general aviation contractors. Just recently, the State of Florida completed the Branan/Chaffee road connector to Interstate 10. This allows large vehicles to commute to the ports and western cities. After the closure of Cecil Field a decade ago, the area was redeveloped today to what is known as the “Cecil Field Commerce Center” on the cities Westside. Even though the center has fallen short of the projected 12,000 employed personnel by 2015, according to JEDC about 2,200 people are employed now as of 2010.

 

Another agency is JAXPORT. Currently JAXPORT’s annual economic impact to Jacksonville is 19 billion with 65,000 jobs. The sea ports at Blount Island along with The St. Johns River deep water ports has made it attractive for International container shipping companies like Tokyo based Mitsui O.S.K. located in its $200 million terminal and Hanjin to establish locations in Jacksonville and just last week MITSUI announced a second cargo ship will sail out of Blount Island. Currently Mitsui has set up shop at the new TRAPAC terminal and Korea based Hanjin is slated to follow suit in 2014 with its $208 million dollar terminal. A symposium was held in 2009 by JAXPORT and according to them between these two companies it is estimated 70,000 additional jobs will be created directly and indirectly. Leisure cruising also falls under JAXPORT’s governance, North American cruise lines sees a positive outlook in the year to come. Carnaval Corp. has a 2,000 passenger ship stationed in Jacksonville. JAXPORT is expected to choose a new cruise terminal site this fall. On August 24, 2010 Jacksonville’s hotel occupancy rate rose 6% to 58.7% for the first seven months of the year. With Jacksonville offering cruises from its port to southeastern residents beating the need to travel to south Florida along with a professional football team and growing international business. It comes as no surprise occupancy rates are increasing.

 

When is comes to the Military Jacksonville has long been known as a military town. At one time Jacksonville had three operating bases, now it has two, but with good growth potential. The Navy is investing $239 million dollars to make Mayport nuclear ready by 2015 and $350 million thereafter. A carrier battle group brings thousands and thousands of military personnel along with their families infusing large amounts of capital to the local economy.

 

With all these new opportunities come infrastructure improvements. Just last week, the Florida Department of Transportation opened a new $48 million dollar flyover ramp in the northern part of Jacksonville on Interstate 95 connecting to southbound State Road 9A. The state estimates 86,000 vehicles per day travel on Interstate 95 between Airport Road to State Road 9A. In time, State Road 9A will be converted to the eastern loop of Interstate 295. This road improvement is in anticipation of the new container shipping companies set to open up shop in the years to come. At the 2009 symposium they mentioned about 18,000 tractor trailers will be commuting East/West on Heckscher Drive due to the lack of rail facilities. On August 26, 2010 The Jacksonville Business Journal reported The Florida Department Of Transportation will receive $600,000 of $11.6 million in grants to help disadvantaged business enterprises compete for federal highway contracts. It also will receive an additional $80,710 of $5.9 million in grants to support transportation-related job training. Finally on road improvements, the I/10-I/95 interchange is in its final phase making commuting easier for travelers.

 

 

How does all this relate to housing? New road construction, new hires all means new housing whether new or existing. In 2009, the median price of a home in Duval County was $128,000. That is not bad when you have the county’s 2009 per capita income at $39,749 according to JCCI’s quality of life report. Jacksonville has long been known as being a more affordable place to live than other major cities in Florida like; Orlando, Tampa and Miami. Unlike Miami where developers overbuilt the condo market, the only craze that took place during the last real estate boom was the conversion of 20,000 apartment units to condos. Yes Jacksonville saw the suburban sprawl resulting in surrounding counties developing into bedroom communities like Clay & St. Johns. Irregardless, Jacksonville still is the county of major employment. In Clay County over 80% of the residents travel outside of the county everyday, yet 91.2% of the workers in Duval County still reside in the city. How has the foreclosure market affect Jacksonville’s housing industry? I say it’s created a tremendous investment opportunity. The 20,000+ apartments converted to condos created a large void in the rental market. You combine that with the events of today where more and more household prefer to rent versus own and the lack on new building permits issued for new apartments. Result it means positive cash flow.

 

In 2005, Jacksonville saw 22,031 homes sold decreasing to 9,342 in 2009. New verbal terminology like “short-sale”, “loan modification”, and “foreclosure” became adopted household phrases. Vice focusing on why is it happening and who’s to blame, I’ll focus on the attitude of the consumer. Consumers have been put in a position to change their quality of life preference when it comes to housing. The table below clearly illustrates the drastic change in price points. You can see in the turn of the century homes priced under $100,000 represented 53% of the market in Duval County. It wasn’t till 2002 when the market shifted to $100,000-$200,000 and as we all know sub-prime lending was born and blossomed in years 2005-2007. The rest is history but I want you to see that the under $100,000 level has recently outperformed all other price ranges indicating this is where your investment strategy needs to focus and don’t overlook the $100,000k-$200,000k range. Consumers scaling back on higher priced homes above $200,000 will seek neighborhoods closely matching the current quality of life. Either way, workforce housing is here to stay, as Jacksonville becomes more of a blue-collar orientated society with aviation and shipping labor.

 

Duval County New & Existing Home Sales

YEARHOMES SOLD0-100K100K-200K200K-300K300K+
*As of Aug 2011
200016327866453%600137%10637%5994%
200115441685344%674344%11708%6754%
200217477701040%801446%16269%8265%
200319295653634%928748%220011%12717%
200420432579128%957347%329116%17779%
200522031527024%917142%469521%289313%
200618733399321%642434%493226%338418%
200713191294522%482337%332225%210116%
20088812215224%350540%205123%110413%
20099342326735%385541%150516%7158%
201010214488648%348234%109011%7567%
 2011*6156 331954%181229%5429%4838%

 

 

The market did perform sales increased in 2010 10.8% over 2009. Home sales under 100k saw the biggest gain escalating to 54% of the market versus 48% in 2009. One may ask why is this so? Bank liquidation! The tidal wave of homes returning to the bank placed a tremendous financial strain on Bank’s balance sheets. In 2010, mortgage companies in Duval County, saw over 2,000 new foreclosure documents known as “Lis Pendens” filed every quarter. The wave of consumer lawsuits and government pressure to modify the loans slowed this activity, economists forecast with a continuing weak economy increased filing will return. Regardless, money is still being made. In 2011 a home sold by a bank under $100,000 averaged $36/sqft versus $48/sqft back in 2007 when the foreclosure debacle first began. This is added proof banks are open nowadays to discounted deals. Homes containing 1,000-1,250 heated space saw the biggest drop in market share down 3% to 26%. Homes 1,250 to 2,000 sqft all shared a 1% spike in market share as the table below shows-

 

Single Family Detached

 

Size2010 Market %2011 Market %
500-100016%16%
1000-125029%26%
1250-150027%28%
1500-175014%15%
1750-20007%8%
2000-25004%4%

 

Median home prices took a tumble in 2011 falling to $91,000 down $15,000 from $106,000 in 2010. A weak economy equates to change in quality of life. Remember real estate is governed by socio-economic factors. In prior years we all spoke heavily about population booms, outsourcing jobs to foreign countries and war. Now we talk about homes being upside down, rising unemployment and foreign social affairs. The United States still has 50+ million Americans retiring and seeking lower cost housing, residents also losing their home still need housing and commingling of families is on the rise sharing living expenses, which may explain why larger size homes are doing well in sales.

 

In August 2011, the Florida Times Union ran an article where “Forbes” ranked Jacksonville second best in the nation when it came to rental rates. According to Forbes the city’s average monthly rent is $737 which is far lower than the 2008 rate reported of $852. According to “Realtor.com” 1,037 homes are listed for rent in Jacksonville. The exodus from home ownership to renting will continue to fuel the market until re-sale values are restored. We cannot discount the aging population the paper went on to run another article where the 55+ older crowd were quite a bit more optimistic about multi-family living. Imagine this- a 4-plex fashioned for seniors all sharing one yard for planting, properly lighted with handicap fixtures. It’s cheaper than a nursing home and long term tenancy is possible. In 2010, 207 multi-family dwelling where sold so far in 2011 138 have been closed. According to County Taxrolls- 5,113 multi-family parcels exist or 12,828 units. One statistic worth mentioning to support the rental market is that there are 25,295 full time students enrolled in the top 20 local schools. The exodus of owner occupied dwellers entering the rental market competing for space with current renter’s only spells positive cash flow.

 


Summary

 

We’ve spoken about the positive qualities the Jacksonville has to offer. What’s more important is the potential. We know Jacksonville is strategically positioned to benefit from international trade and military expansion. Road improvements on federal highways can be clearly seen throughout the area. Assets like Cecil Field Commerce Center, a centralized government negotiation venue like the JEDC, deep water ports all invites new companies to consider relocating to Jacksonville. In time, names like MITSUI, Hanjin and again the Navy will govern the media headlines. Workforce housing is the sector of choice as blue-collar employment increases and technology reduces the white-collar force. Move up and luxury housing does exist and have their woes, but start-up to workforce housing is on the rise resulting from consumers moving from the suburbs back to the inner core reducing the cost of refueling their cars and/or consumers reducing their housing expenditure. All in all, Jacksonville’s housing future is good and it can only get better.

 

 

Raymond Rodriguez

Market Consultant

 

 

Sources:
The Jacksonville Business Journal
The Florida Times Union
Public Records
JAXPORT
Better Jacksonville Plan www.coj.net
Blueprint For Prosperity Plan
Department of Bureau and Labor

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