Jacksonville’s office market is as healthy as it has been since the late 1990s according to a new report from Colliers International. Availability and vacancy rates are near all-time lows, downtime is back to pre-recession levels, and rental rates continue to increase at a 3.5 to 4 percent annual rate.

Despite generally strong fundamentals, construction remains limited as prevailing market rents remain far below levels that would support new development. Average market rent in Jacksonville today is approaching $20/square foot overall, with better-quality product seeing rents in the $25 range. For reference, average market rent for office space in the United States currently stands close to $33.

The relative tightness of the market, combined with the age of the existing inventory, has created a scenario where large users with stringent requirements based on 21st century construction norms have little choice but to pursue build-to-suit options with rental price tags well above current market rates. VanTrust’s newly constructed Town Center One and Town Center Two in the Southside submarket are effectively build-to-suit arrangements hosting Web.com and Availity. Hines is underway on a build-to-suit for McKesson at its Southside Quarter project, and Ryan Companies was recently awarded the development of JEA’s new headquarters in Downtown’s Northbank.

On the capital markets front, the largest transaction of the quarter was VyStar’s purchase of 100 W Bay St. for $5 million or $70/square foot. This transaction was brokered by Colliers International and brings VyStar’s total investment downtown to $64 million across more than 450,000 square feet.