Jacksonville, Florida
The City “Where Florida Begins” Remains a Bright Spot in 2021
by Carole VanSickle Ellis
In 1901, Jacksonville, Florida, earned the dubious title of “home to the third-largest urban fire in the United States” when The Great Fire of 1901 sparked from a kitchen chimney, ignited a fiber factory, and destroyed a full 146 city blocks. The fire wrought about $15 million in damage ($2 billion today). Despite the fact that the fire left more than 8,600 residents homeless and the biggest attraction left in the area was an ostrich park, the southeastern city rebuilt with determination. The following day’s newspapers declared, “A Greater Jacksonville is in Sight,” and a number of prominent architects including Henry John Klutho joined forces to help rebuild. Six months after the fire, the city hosted the Florida State Fair. Fifteen years after the fire, the resultant boom was still going strong.
Today, the self-proclaimed city “where Florida begins” continues in the tradition of turning negative events into positive results, and this is true for its real estate market as well as the broader economy. “The real estate market in Jacksonville remains a bright spot,” wrote Roofstock contributor Jeff Rhode in his 2021 forecast for the city. “The city’s business-friendly and pro-development policies strengthen the economy and create opportunities for both workforce and small-business creation.”
A Prime Position for Recession Resistance and Economic Stability
Sitting just north of the boundary between the Floridian peninsula and Continental North America, Jacksonville, Florida, has long benefited from a prime position in the U.S. import and export trades. Thanks to its two deep-water ports, the Jacksonville Port Authority and the Port of Fernandina, Jacksonville has been able to attract and retain international business from direct servicers to and from Asia, Europe, Africa, South America, and the Caribbean. Although the shipping and logistics sectors are affected by economic volatility, the presence of ports like those in Jacksonville inherently creates recession-resistance in the local economy because American consumers still need access to essential products. The city has long been dedicated to maintaining its competitive edge in this sector, and Jacksonville’s regional economic initiative estimated in 2019 that “for every $1 invested in deepening [the ports], $24 will be returned to the economy.” That year, a single harbor-deepening project created 15,000 new jobs.
Of course, access to deep-water ports is just one geographic advantage in the Jacksonville market. Others include a pleasant, subtropical climate that makes outdoor living an enjoyable option most of the year and no state income taxes. Although Jacksonville has long been considered an emerging tertiary market getting ready to boom, the 2020 COVID-19 pandemic lit the fuse in the local housing market. For many urban dwellers, the relatively “wide, open spaces” in Jacksonville that allow for high square footage and ongoing development make the area nearly irresistible.
“The pandemic has caused mind shifts in what people want in their lifestyle and their home,” observed Melanie Green, communications director for the Northeast Florida Association of Realtors. She noted that many buyers are looking for more room to accommodate remote work and virtual school as well as “a yard and more space for the kids”. Jacksonville’s relative affordability makes it an attractive relocation destination as well; the city’s overall cost of living is lower than both the state of Florida and the national average.
Pro-Business in the Face of Pandemic-Related Challenges
The state of Florida and Jacksonville’s city government both have shown a dedication to keeping the real estate industry running during the pandemic, making the area attractive to investors who want assurances that their projects will continue in the event of another shutdown. While nothing is ever guaranteed, precedent indicates this trend should continue. In 2020, the state’s governor, Ron DeSantis, declared residential and commercial real estate both essential services. The state also declared “construction sites, irrespective of the type of building,” essential. Although not every city in Florida accommodated this classification, Jacksonville did so, keeping its builders, housing providers, and contractors in business throughout the worst of the nationwide shutdown.
This pro-business approach kept Jacksonville’s unemployment rate below the national average for the duration of 2020, and that trend also appears likely to continue in 2021. When unemployment spiked in April of last year after a near-total national economic shutdown, Jacksonville’s rate was 11.2 percent, compared to nearly 15 percent nationwide. By December 2020, unemployment had fallen below five percent, compared to nearly 7 percent nationally.
“Reopening efforts boosted the local labor force as well as hotel occupancy levels,” wrote Yardi Matrix senior associate editor Timea-Erika Papp in the Yardi Matrix Jacksonville Report for Fall 2020. She noted Amazon is also adding jobs in the area, saying that the company’s plans to add another 500 jobs in its $106 million Imeson Park fulfillment center slated to open later this year is “further underpinning the metro’s path to recovery.”
Poised for Growth from Every Angle
Conventional real estate investing wisdom states that if a market has a growing population, positive job growth, and a diversified economy supported by employers in growing industries like I.T., healthcare, and finance, then that market represents a great deal of potential for real estate investors. In Jacksonville, all of these indicators meet the parameters for future market growth.
According to Forbes, Jacksonville currently ranks 22nd for best places for businesses and careers in the United States. The city was ranked 26th in the nation for job growth as well. Expansion Management magazine routinely lists Jacksonville as one of the “Hottest Cities in America” for business expansion and relocation, and BizCosts.com named Jacksonville the third least-expensive city in which to launch a corporate headquarters. WalletHub chimed in, ranking the city 12th in the country on its list of “Best Large Cities to Start a Business” in 2019.
“In Jacksonville, the availability of jobs is set to increase by 42 percent in the next 10 years,” said Marco Santarelli, CEO of Norada Real Estate Investments. “A wise move by investors in the Jacksonville real estate market would be to buy properties now to take advantage of that growth and rising housing need.”
With the population of Jacksonville approaching 1 million and top employers like Baptist Health, Bank of America, the Mayo Clinic, and Amazon all set to expand operations in 2021, Santarelli said he expects more investor participation in the market in the coming year thanks to relative affordability in the area paired with the desirability of the location.
“In Jacksonville, people are investing with just under $100,000 to buy and revamp a property. This amount is only two-thirds of the national median,” he said. “There is hardly a probability that you’ll lose when you buy property at lower prices than the replacement cost,” he added.
Interestingly, despite Jacksonville’s tight inventory and competitive single-family market, it could represent potential for real estate investors from a more “traditional” angle as well. According to data from ATTOM Data Solutions in its November 2020 U.S. Foreclosure Market Report, Jacksonville posted one of the highest foreclosure rates in the nation during the fall of last year. This number is still relatively low, albeit higher than most other metro areas right now. Local real estate professionals warn that Jacksonville, along with most other U.S. metros, could see an “avalanche” of foreclosures when state and national foreclosure and eviction moratoriums expire.
It is possible that a new population of motivated sellers will emerge in the Jacksonville area in 2021, which could be an opportunity for investors hoping to add to their property portfolios in the area. Given Jacksonville’s rising home values, however, it seems unlikely that the foreclosure avalanche will actually manifest. Jacksonville single-family home values were up more than 5.5 percent at the end of Q3 2020 while inventory was down nearly 42 percent. It is more probable that the housing supply might simply loosen slightly if more homeowners decide to sell in 2021.
“Jacksonville’s housing market is dependent on job growth as opposed to in-migration from retirees and second homeowners. Jacksonville enjoys a diverse employment base….and the forecast for job growth is bright,” said David Cobb, a regional director for South Florida and Jacksonville at housing data provider Zonda. “We expect good things for Jacksonville’s economy and housing market throughout 2021 and over the next several years.”
Sidebar 1:
New Jobs in Jacksonville in 2021
Thanks to municipal policies that incentivize job creation in “targeted industries,” Jacksonville has a history of job growth and creation even during volatile economic times. These incentives often include tax refunds in industries like financial technology, biosciences, and medical-device manufacturing as well as tax advantages and incentives for the developers who handle construction that attracts companies in these industries.
During an economic forecast panel sponsored by the Jacksonville Daily Record, the city’s Office of Economic Development director, Kirk Wendland, observed, “Jacksonville is not in a vacuum facing nationwide economic challenges expected in 2021, but Northeast Florida is positioned better than some U.S. regions as companies in pandemic-resistant sectors like logistics, distribution, and e-commerce continue to invest in local commercial projects.” Wendland went on to note that the area’s “large landowners are forecasting positive future growth…as they go through the permitting cycle.”
During the same panel discussion, Florida State College at Jacksonville president John Avendano cpredicted I.T., health careers, business, and manufacturing jobs would be “the employment fields that will survive the recession for the near future”. He added that his educational institution is responding to the potential for further employment trend changes in 2021 by “offering programs that lead to high-wage jobs” in these areas.
Sidebar 2:
Jacksonville’s Top Employers
Jacksonville is home to a wide variety of employers in sectors ranging from biosciences to manufacturing. Here are The River City’s top 10 employers:
- Baptist Health (10,650)
- Bank of America (7,700)
- Mayo Clinic (6,400)
- Southeastern Grocers (5,700)
- Florida Blue (5,700)
- Ascension St. Vincent’s (5,400)
- University of Florida Health (4,200)
- Fleet Readiness Center Southeast (4,200)
- Amazon (4,000)
- Citi (4,000)
Jacksonville is also home to the headquarters of four Fortune 500 companies:
- CSX Corporation
- Fidelity National Financial
- Fidelity National Information Services
- Southeastern Grocers
3 – BEDROOM SINGLE-FAMILY RENTAL PRICES
The Jacksonville, FL MSA is the 41st largest metro by population in the U.S with nearly 1.56 million residents. Jacksonville has been growing by an average of 28 thousand residents per year.
Current 3-bedroom SFR rental prices average $1,485 for the MSA.
High-rent areas near the coast in the Ponte Vedra and St. Augustine areas average $1,800 and up. The least expensive areas (white/light red) around downtown Jacksonville have rents ranging from $900 to $1,200.
5-YEAR RENTAL PRICE APPRECIATION
SFR rental prices rose 6% year-over-year due to increased demand from relocations to the area. Many suburban areas such as Southwest Jacksonville, Bay Meadows, Southside and the coastal areas are up 7% to 9% in only one year.
In the last five years, three-bedroom SFR average rental increased by 29%, ranking the metro 35th place for five-year rental price appreciation.
Suburbs nearest to downtown had 30% to 40% five-year increases (dark green). The sage green areas have a moderate five-year increase
of 20% to 25%.
RENT-TO-INCOME
As of 2019 census data, the Jacksonville MSA had a median household income of $65,880, ranking 101st amongst the largest 200 metro MSAs.
Three-bedroom SFR rent-vs-income ratio has been rising quickly over the past five years. Yet the current R/I of 29.6% is still more affordable vs the national average of 32%.
Dark-blue areas reflect highest R/I ratios over 35% to 45% in central Jacksonville and St. Augustine areas. Light-blue areas around have affordable rent-to-incomes between 25% to 35%. White colored areas for the east and south areas
of the market have the lowest R/I below 25%.
YIELDS
Median SFR home prices are currently pushing $275,000, gaining 40% in the last five years.
Gross Rental Yields (GRY), excluding expenses, across the top 200 U.S. markets average 8.6%. The weighted average GRY in the Jacksonville MSA has a slightly better overall average yield of 9.8%.
Highest yield areas are generally in the smaller suburban areas, dark purple sections represent yields over 12%. Light purple areas have moderate yields between 8% to 12%. Finally, white shaded areas have yields of less than 8%.
