Experts share trends in residential, commercial real estate at event
Two real estate experts spoke to a group of business leaders about trends in residential and commercial real estate on Thursday afternoon at a Greater Sarasota Chamber of Commerce event.
Their conclusion: the real estate market has never shown such strength as in the first half of 2021, but a certain weakening is to be expected in the future.
Commercial real estate could see a roller coaster ride in the next 18 months as changes in this sector typically lag behind changes in the residential real estate market.
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That’s not to say the commercial side has been slow as the residential real estate markets saw unprecedented sales, said Jag Grewal, partner at Ian Black Real Estate, based in Sarasota.
Grewal spoke on the commercial real estate market while Craig Cerreta, Managing Broker at Premier Sotheby’s International Realty, shared his expertise on the residential real estate market.
Cerreta said the national housing market is booming.
“It doesn’t matter if you’re in Sarasota or rural Michigan,” he said. “Homes have been selling at an incredible rate.”
He and other national experts have attributed the buying frenzy to the COVID pandemic, which caused home buyers to speed up their decision-making process by several years in some cases.
He said the US housing market was underserved with about 2 million homes.
“It won’t end overnight,” he said of the rise in residential property prices. “The COVID boom and this whole boom has legs.”
Still, he found that he based his predictions on numbers. And some numbers suggest the housing market might turn a corner.
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As of July 1, there were 905 single-family homes in the Sarasota and Manatee counties. As of today there were 1,055 single-family houses for sale.
“We saw an increase in inventory in the first month,” he said. “So July 2021 is your turning point. We will look back and remember July as a turning point. ”
That doesn’t mean the world is collapsing, he warned the audience.
“It may mean that we are going back to a more normal world,” he said.
Grewal has lived in Sarasota for 21 years.
“I’ve lived here in the worst and best of times,” he said. “We are definitely living in the best of times here.”
He said when news of the virus’ commercial sell-offs stalled, but activity picked up after Memorial Day 2020 and has not slowed in any segment of commercial real estate since then.
In fact, despite the slowdown, Ian Black Real Estate fared better in 2020 than it did in 2019.
He said commercial transaction forecasts are expected to increase 20% from 2020 to 2021.
The most active segment of commercial real estate is apartment buildings. He pointed to the Citria housing estate on Clementine Ct. 3017 out. on Fruitville Road.
Typically, a new community will sign 20 to 25 new leases per month after it has been opened to rent. Grewal said the 300-unit housing project hit 100 in the first month.
“We have never seen this growth,” he said.
The second most active segment of commercial real estate is industry. Sarasota and Manatee counties have approximately 50 million square feet of industrial space.
The vacancy rate for industrial space is 1.5%, which means that there is almost no availability.
“If you want to expand into industrial real estate, there is no such thing as a product,” he said.
Rental growth in industry rose 4.7%.
“The low supply is driving that number up,” he said.
Grewal said that it was the first time in his career that he saw several offers for industrial real estate in Sarasota.
He noted that Manatee-based Benderson Development is building 2 million square feet of industrial space, and Amazon and other e-commerce companies have built some industrial warehouses on the last mile in the area.
The office market, which Grewal notes that he was concerned about what would happen to this segment at the start of the pandemic, but he believes the office market has rebounded as “just” absorbed all of the sublet space on the market.
There is approximately 2.5 million square feet of office space in downtown Sarasota and another 2.5 million square feet in the suburban office market.
The vacancy rate for office space in Sarasota is 5%. The vacancy rate at the end of last year was 14%.
So do the price hikes and rental growth mean that the market is part of a bubble?
None of the experts said they believe the current market is about to crash.
“This is not 2007 or 2008,” said Cerreta. “… Our economy is fundamentally solid. Yes, there is a political dynamic and yes, there will be some bumps, but we don’t have situations like this (which lead to the crash of 2008).”