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Jacksonville

No Change

2012 Rank: 44

2011 Rank: 44

Employment Trends
Total Nonfarm Jobs (thousands)

30 15 0 -15 -30

Absolute Change

Y-O-Y % Change

6%
Year-over-Year Change

3% 0% -3% -6%

08

09

10

11*

12**

Supply and Demand


4
Units (thousands) Completions Vacancy

estrained construction will assure that modest increases in tenant demand will reduce the vacancy rate in Jacksonville during 2012. Projected completions will come in well below recent trends and limited development activity may persist beyond this year as only 700 units have been permitted since 2010. The decrease in vacancy, meanwhile, will rely less upon the release of pent-up demand, which has largely sustained the recovery thus far, and instead ensue primarily from a resumption of meaningful job growth. Additionally, the metros economy will likely benefit from the return of military personnel from Iraq in 2012 and, over the long term, an increase in the local naval presence. The shift to more employment-driven demand growth in 2012 will accelerate rent growth, primarily in Class A complexes on the south side. The slump in rental construction will enable owners and investors to realize near-term upside by raising occupancy and rents without concern that new units will divert tenant demand. In a market that has experienced periods of significant multifamily development, properties continue to sell at prices less than estimated replacement cost. In addition, a significant spread between cap rates and rates on acquisition financing persists. Those cap rates typically start at 6 percent for newer Class A product, and can range to the low double digits for smaller assets. REO sales have lowered price expectations for many investors, perhaps too significantly in a market where many owners can substantiate improvements in performance over the past year. As the recovery unfolds, buyers will increasingly raise price expectations in order to close deals. Several areas of the metro merit consideration, including the beaches, where there are constraints on adding supply. Properties on the north side of the metro, however, will not likely receive much attention due to high unemployment. 2012 Market Outlook

Hesitant Developers Remain Spectators as Strong Demand Drives Recovery

16% 14%
Vacancy Rate

3 2 1 0

12% 10% 8%

08

09

10

11*

12**

Rent Trends
Asking Rents Year-over-Year Change Effective Rents

4% 2% 0% -2% -4%

2012 NAI Rank: 44, No Change. The nations highest vacancy rate kept Jacksonville at the bottom of this years NAI. Employment Forecast: Total employment this year will grow 2.3 percent, or by 13,300 jobs, the highest annual total in five years. Construction Forecast: Builders will deliver 500 units in 2012, an increase from 100 rentals last year, but substantially less than the average of 2,700 units produced annually from 2007 to 2009. Vacancy Forecast: The vacancy rate will decline 70 basis points this year to 8.8 percent. In 2011, vacancy plunged 150 basis points. Rent Forecast: Lower vacancy and limited competition from new construction will support a 2.5 percent increase in asking rents this year to $804 per month. Effective rents will jump 3.7 percent to end 2012 at $781 per month. Investment Forecast: Class A complexes on the south side will remain primary targets for large investors, while assets near downtown Jacksonville will also elicit strong bids.
Construction: 400 s Vacancy: 70 bps t Effective Rents: 3.7% s

08

09

10

11*

12**

Median Price per Unit (thousands)

Sales Trends
$50 $40 $30 $20 $10

07

08

09

10

11*

* Estimate

** Forecast

Sources: Marcus & Millichap Research Services, CoStar Group, Inc., RCA

Market Forecast
page 24

Employment: 2.3% s

2012 BLACK TEXT VERSION Annual Report

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