Uncertain times for commercial real estate
The COVID-19 pandemic is uncharted territory and has affected the living and working lives of millions across Florida, including commercial real estate leasing and sales, which slowed significantly in the first quarter of 2020, revealing the unpredictability of the market. This is a unique moment in the commercial real estate market, and I’ve never seen the market shifts we see today, even in my previous position as the owner of a commercial real estate company prior to selling to Realogy, Coldwell Banker, the parent company of Commercial.
According to Coldwell Banker Commercial’s Mid-Year Update 2021, the commercial real estate sector saw increased market activity, revealing continued strength and recovery in self-storage, net-lease and industrial markets, as well as concerns in stationary retail and office leasing and the hospitality markets.
Due to increased demand, wood is up 75% yoy, although it is down 50% from the highs in May. Rising demand has also had an impact on plywood and steel prices. As our trading professionals see developers across the state pausing new construction projects to market with a “wait and see” approach, other real estate developers and investors are buying land for recreational, residential and industrial purposes through brokers at an unprecedented pace.
As the economy continues to recover from an unprecedented year, investors are increasingly turning back into the commercial realm. The redevelopment of existing commercial properties, particularly in Sarasota, has attracted many developers to the city, counties and surrounding areas.
According to data provided by CoStar, Sarasota’s office market significantly outperforms the national index with sales of around $ 260 million since the beginning of the year, representing a year-over-year growth of 11.2%. Similar performance has been seen in Sarasota’s apartment building and condominium market, with sales of approximately $ 718 million since the beginning of the year, up 44% from 2020.
Elliot Rose, a talented Sarasota-based commercial real estate agent at Coldwell Banker Commercial NRT, recently shared with me that “Developer interest in the greater Sarasota area remains robust. Coastal locations suitable for luxury condominium renovation are in high demand, including “bulk purchases” of existing condominium complexes. There is currently strong demand for mixed-use inner-city uses of existing buildings and land near the city for single-family houses in the residential categories. In addition to local and regional interest, there is an abundance of interest from developers from the domestic urban markets, particularly from the Northeast and Midwest. ”
Among the results of the 2021 Mid-Year Update, Coldwell Banker Commercial Brokers also see a rental market with a decline from a previous need by businesses for large office space to demand much smaller space under 10,000 square feet. Companies are increasingly relying on a hybrid business model and trying to save the total cost of renting office space. This desire for smaller office space is coming from a wide variety of businesses including new businesses, laboratories, professional service providers, medical offices, and cryptocurrency traders. This shift in demand could lead landlords to offer incumbent and prospective tenants everything from fully furnished office space to high quality Central Business District (CBD) properties at discount prices.
Despite this huge shift in the demand for office space, there is still a need for office space for businesses to do business. Rick Locchead, a Pensacola-based commercial real estate agent at Coldwell Banker Commercial NRT, said that “While meeting online is a great benefit, there is a challenge in training and developing new talent over time without face-to-face collaboration. With rapid inflation, the cost of this new talent / trainee is increasing. For most companies, collaboration in the office is still more efficient than online. “
As the trends in the Florida commercial real estate market rise and fall across all sectors, it is important to understand these changes and keep your finger on the pulse of the market in order to partake of the economic impact of the commercial real estate sector across our state.
Duff Rubin is the president of Coldwell Banker Realty in Florida.