What's trending in Tallahassee development: Student housing surge, state worker shift
Tallahassee's commercial real estate market is holding strong in retail with student housing and big projects on the horizon poised to create a long-term impact.
On Monday, the Annual Commercial Real Estate Update, organized by developer NAI TALCOR, offered a snapshot of local, regional and national trends and insight on where development is headed.
Local business institutions continue to spread their vision westward. In Panama City Beach, Tallahassee Memorial HealthCare is building a new medical campus in partnership with Florida State University and The St. Joe Company. It's slated to be an 80,000 square-foot hospital on 87 acres near the intersection of State Highway 79 and Philip Griffitts Sr. Parkway.
In Tallahassee, warehouse space is in demand. The surge in recent years of mattress stores and self-storage properties is cooling off. New coffee shops and ice cream businesses are expected to sprout up. And, demand for retail space, in particular, continues in certain segments of Tallahassee.
For example, Miracle Plaza on Thomasville Road is anchored by Whole Foods and has other tenants, such as J. Crew Factory that's slated to open in late summer and Lululemon, a high-end, yoga-inspired chain, that's expanded its existing space from 1,300 square feet to 4,000 square feet.
"So that tells you that the store has some serious volume," said Debbie Ashlin, a commercial real estate broker at NAI TALCOR. "So now that they're in the 4,000 square foot space, it's an elevated shopping experience for their customers."
Renting retail space at Miracle Plaza can cost between $30 to nearly up to $50 per square foot. Even with the premium price tag, NAI TALCOR Principal Ed Murray said the tenants in the shopping center are thriving and "If we had twice as much space, we could rent it."
NAI TALCOR is the largest locally owned commercial real estate firm in Tallahassee and manages more than 5 million square feet in the North Florida region. In general, Murray said Tallahassee's market is considered healthy and said it's a mix of private and public sector activity that's contributing to steady job growth.
Murray, who moderated the conversation, said there's a considerable amount of confidence in the Florida capital city market.
"Our retail is healthy, office (space) is healthier than you would think," Murray said. "I think it's important to know that all those public projects that are out there to help fuel our economy, you don't get that public infusion if you're in other markets. We get it here."
More than 400 industry experts and community leaders attended the Annual CRE Update. The event drew a number of prominent Tallahassee business and government leaders, including Mayor John Dailey, City Commissioners Curtis Richardson and Jack Porter and County Commissioners Carolyn Cummings, Christian Caban, Rick Minor and Brian Welch and Leon County Schools Superintendent Rocky Hanna.
"We were happy that people came," said Murray, regarding the high turnout. "We want to talk about businesses. We want to talk about job growth. We want to talk about things that drive our market."
It also marked a coming out of sorts for several figures in the FBI’s public corruption investigation that led to bribery convictions of former Mayor and City Commissioner Scott Maddox, his longtime chief of staff and romantic partner, Paige Carter-Smith, and businessman J.T. Burnette.
Maddox and Carter-Smith were spotted together at the event, at one point speaking with Drew Jones of VancoreJones Communications. Adam Corey, co-owner of The Edison restaurant who testified during the federal corruption trial of former Mayor Andrew Gillum last year, also attended. Gillum was cleared of the charges.
In 2021, Maddox was sentenced to five years in federal prison and Carter-Smith to two years. Both have since returned to Tallahassee after their release.
OTHER TAKEAWAYS ON THE TALLAHASSEE MARKET
Office Space: Holding strong downtown, but fewer options in coveted Northeast
Demand for office space nationwide isn't what it used to be following the COVID-19 pandemic, which forced employers to rethink their workforce needs for traditional office space and turn more to remote working.
In Tallahassee, though, NAI TALCOR principal and executive commercial advisor John McNeil said office space is relatively favorable in downtown Tallahassee. The Highpoint Center on College Avenue, for example, is nearly full and has less than 6,000 square feet available for leasing.
The former SunTrust Bank building, 215 S. Monroe St., is home to Carlton Fields, P.A. and others. McNeil said the property has had a higher vacancy than what's typical in Tallahassee's downtown market.
"But the other side of the story is 85% of that rent roll now has either renewed or done a new lease since COVID," he said. "So we feel very good about that asset moving forward."
In northeast Tallahassee, however, the outlook for office space isn't as promising due to available inventory. McNeil said there isn't an abundance of new construction options either.
"We don't have a lot of large floor plates up there. The small stuff, as you can see, is not really quite as as high per square foot as the bigger stuff," he said, referring to a slide with comparisons. "That's really a supply issue ... We have a tremendous amount of tenants that would like to be there."
Downtown development of state property?
Rodney Lewis, a partner at Architects Lewis + Whitlock in Tallahassee, talked about the state's intent to relocate a significant number of its workforce out of several downtown buildings. The move would free up 20 to 25 acres of land that could be developed and contribute to the city's property tax rolls.
His firm was commissioned to do a project study for the Florida Department of Management Services and the Florida Department of Agriculture. Lewis said the idea is to relocate employees.
"They're not leaving Tallahassee. They're not leaving Leon County," Lewis said. "They are going to be repositioned to the Southwood office complex and the Conner Boulevard property over time."
Murray described the state's plans as being "huge" for downtown.
"You could have a planned community come in with mid-rises and high-rises and housing," he said. "You want housing downtown in order to be a healthy downtown. So, hopefully we can get some apartments out of that."
'Gangbusters': Student housing surge continues
Commercial real estate experts described student housing activity nationwide as "going gangbusters," and Tallahassee reflects that interest with several projects in the pipeline.
Several such developments are underway near Gaines Street as FSU's College of Business continues its construction adjacent to the Civic Center.
On or near West Tennessee Street, three proposed or under-construction housing projects are within walking distance of each other in Frenchtown and the fringes of FSU's campus.
Nova, a student housing project on West Virginia Street, is slated to bring 125 units and 620 student beds. The HUB has cleared an entire city block at Tennessee and Macomb streets to make room for a seven-story, building with 366 student units and 1,287 student beds.
Up Campus Student Living LLC plans to build the largest student housing building on Tennessee Street with its 10-story project on 4 acres on the southeast corner of Tennessee and Dewey streets.
In recent years, the highest level of construction activity for student housing took place in 2018 and 2019 and slowed down considerably during the onset of the COVID-19 pandemic. Now, it's ramping back up.
Since 2012, more than 15,000 beds have been built and leased in Tallahassee, said Slaton Murray, a commercial real estate broker at NAI TALCOR. He said the student population between Florida A&M and Florida State universities and Tallahassee Community College dropped by 2,000. In addition, there are 9,000 beds approved or under construction.
"So when you look at that and you're trying to understand what are the main drivers of this sector in this trend, and it's certainly older product that's been in the market," Murray said. "Then you also have rent growth ... You're looking at about close to double digit rent growth annually."
Contact Economic Development Reporter TaMaryn Waters at tlwaters@tallahassee.com and follow @TaMarynWaters on X.
This article originally appeared on Tallahassee Democrat: Tallahassee development, commercial real estate trends explored
