Our writers offer a dozen bold predictions about the Gulf Coast economy for 2012.
When it comes to forecasting, few are willing to reach into the future and say what they think will happen. Nobody wants to be proven wrong. We understand. As a newspaper, being correct is kind of our thing.
But for this issue, the Business Review's staff decided to be bold. We decided to look at the biggest issues facing business and prognosticate what 2012 has in store for our region, our state and even our nation. Now we realize some are more plausible than others; some will be right on, and some will be mere seeds planted this year to grow in the future. Some might be duds. But we also realize business is about taking risks. And being wrong is sometimes just the price of being bold.
1. Half of the community banks based on the Gulf Coast will disappear.
Even after the devastating real estate recession of the last few years, there are still 55 banks headquartered on the Gulf Coast between Tampa and Naples.
That's a testament to the survival skills of our region's community bankers. But despite their best efforts, we predict that half of these banks will disappear through acquisition, mergers and government closures.
Rising regulatory costs, thin margins, lingering bad real estate loans and the scarceness of capital all will contribute to this shrinking of the banking landscape in our region.
Bankers acknowledge that the regulatory burdens requiring bigger capital cushions and compliance with all kinds of legislative mandates will hamper any financial institutions with less than $1 billion in assets. As of September, only four banks on the Gulf Coast exceeded that threshold: Raymond James Bank, Superior Bank, USAmeribank and The Bank of Tampa.
Meanwhile, the government isn't likely to allow any new bank to form, especially if it's a relatively small community bank. In a speech to money managers in Naples recently, Florida Office of Financial Regulation Commissioner Tom Grady recalled a recent comment by a Federal Reserve official indicating that banks today need $750 million in assets to be profitable.
Of the 55 banks headquartered on the Gulf Coast, only 27 were profitable through September 2011, according to data from the Federal Deposit Insurance Corp.
With capital scarce, the good banks will merge with strong competitors, weaker ones will be acquired for less than their book value and regulators will shut down the struggling ones.
2. The monthly unemployment rate in Florida will drop from 10% to less than 8%.
First the good news: Monthly unemployment figures have made a slow, steady decline over the last year. A 0.4% drop here, a 0.2% drop there.
The decreases culminated in a significant benchmark in November, when the state had a 10% unemployment rate for the month, according to the U.S. Bureau of Labor Statistics. That's down almost two percentage points from November 2010, the BLS reports, when the monthly unemployment rate was 11.9%.
That's proof that a drop like that, while difficult, isn't impossible.
More proof: Florida's November unemployment rate was the second-largest decline on an annualized basis in the country, behind only New Mexico. That state reported an unemployment rate of 6.5%, down from 8.6%, a drop of 2.1 percentage points.
Still, for Florida to get to 8% unemployment in any month in 2012, a lot has to go right in a lot of different places, say several Gulf Coast employment experts. The housing market needs to rebound sharply, for one; ditto for consumer confidence. The agriculture industry also needs to improve considerably, so more Florida farms can sell more goods, and in turn, hire more people.
Finally, the state's most populous hubs, from Miami to Tampa to Jacksonville, will all have to stage solid, widespread economic rebounds to achieve such stellar job growth.
3. The Tampa Bay Rays will move to Hillsborough County.
The country watched as Evan Longoria's walk-off home run sent the Tampa Bay Rays into the 2011 post season. But where were Rays fans? Despite hosting the New York Yankees in a crucial divisional matchup, Tropicana Field remained roughly 25% empty.
As consistent contenders in the American League East division, the Tampa Bay Rays aren't the laughing stock of baseball anymore. But their stadium, Tropicana Field, still inspires chuckles from baseball analysts. Yet the battle between St. Petersburg Mayor Bill Foster and the Rays ownership about a new stadium wages on.
The conflict over the Trop has been like a chess game; each move has been slow and calculated. For example, the city of St. Pete hired a bankruptcy lawyer while drafting the contract, a strategy to counter the team using bankruptcy as a means to escape its agreement.
But Tampa Mayor Bob Buckhorn has the power to change that game, by officially proposing a location in downtown Tampa for a new Rays stadium.
Buckhorn often speaks about the benefits of having the Rays downtown, but publically announcing a Hillsborough location for the Rays to call home could give the team's owners the leverage to broker a way out of St. Pete.
How long can the Rays compete with the bloated salaries of the Yankees and the Red Sox while ranked second-to-last in average attendance? Certainly not for the next 15 years. Especially while serving as a pseudo-farm system for their two divisional rivals.
Mayor Buckhorn says the Rays “can't start dating” until the team escapes its use agreement at the Trop. But offering a stadium site in Tampa could put the Rays back on the market.
4. A casino resort will be built in Fort Myers.
Memo to politicians: Lee County needs jobs.
A development group is proposing to build a $2 billion casino resort at the corner of Interstate 75 and Colonial Boulevard, and we think it has better-than-Vegas odds of becoming reality.
Why would anyone want to chase hundreds of jobs away? Heck, even Lee County Sheriff Mike Scott thinks it's a great idea.
Fact is, there's plenty of gambling already in the state, from the Seminole Indian casino in nearby Immokalee to the casino cruise ship on Fort Myers Beach and the lottery tickets anyone can buy at the corner convenience store.
We'll leave the moral arguments to someone else to debate. What this area needs now is an economic boost, and the resort would be a spark.
The sheer size of the project is impressive: Champion Development is proposing to build 1,500 hotel rooms and 300,000 square feet of conference space on 57 acres off I-75 and Colonial Boulevard.
While we think the casino has a good chance of getting the support via a local petition and a nod from the Legislature, it needs more vocal support from Lee County businesses. To succeed, it needs a local business organization to champion the project.
It would help too if developers hired a local marketing firm to help it navigate municipal politics. Share some ownership of the project with Lee County businesses and the development will be a winner.
5. Marco Rubio will be the running mate for the Republican presidential nominee.
Florida is best known for three things: beaches, retirees and 27 decisive electoral votes.
Those votes will be key targets if the Republican presidential nominee hopes to beat President Barack Obama in the coming election. And with Obama expected to focus his campaign spending on the Sunshine State, which was won by 2% or less in the last two elections, the GOP will need a sound strategy.
We think Marco Rubio will get the call — and answer.
Rubio has repeatedly denied he will join the Republican nominee in 2012. But the appointment of several close Rubio allies to Newt Gingrich's campaign management team in Florida could mean the former House speaker is looking to change Rubio's mind. The primary race looks like it will come down to a battle between Gingrich and Mitt Romney, so an endorsement would certainly help Gingrich win the primary, but not necessarily the state.
There's no denying that Florida Republicans love Marco Rubio. He's charismatic, articulate and intelligent. And the large Hispanic community practically moves in lockstep with Rubio's rhythm.
Despite the controversy surrounding when his parents actually emigrated from Cuba, he is still at the top of several polls on running mate choices for the upcoming election. One survey conducted by Suffolk University found that any Republican nominee would outpoll Obama in Florida; a compelling fact considering that the primary polls look like a game of political whack-a-mole.
If the primary race is as drawn out and bitter as is expected, the winner will emerge with badly sapped campaign funding. Persuading Rubio will be a large task, but by doing so, the Republican nominee would lock up a costly swing state.
6. Residential building permits on the Gulf Coast will rise 50% in 2012.
This will be the comeback year for homebuilders.
After five years of real estate recession, we could see a 50% increase in new-home permits in 2012 along the Gulf Coast.
The strongest recovery will begin in the southern reaches of the Gulf Coast in places such as Naples. As the year unfolds, this trend will move up the coast to the Tampa Bay region.
Granted, the increase comes off of a low base of housing starts. But conditions are ripe for a recovery because supply and demand is closer to equilibrium than it has been in years.
For starters, many smaller homebuilders left the market or went bust in this lengthy recession. Apart from the large publicly traded builders, there has been no money to fuel speculative homebuilding.
Meanwhile, in the last two years, lots in the most desirable locations dwindled as buyers snapped them up at a discount. Inventory of new homes has declined substantially in areas such as Lee and Collier counties.
Builders report that demand has increased. For example, Collier land broker Ross McIntosh recently reported that the top 10 builders in Lee and Collier pulled 92% more permits for single-family homes through the first nine months of 2011 than for all of 2010. Housing tracker Metrostudy says there's only two months' supply of new vacant homes in Lee and Collier residential subdivisions.
In the Tampa Bay region, an area more dependent on job creation than retirees and second-home buyers, employment is improving. Employers created a net 26,900 new jobs over the one-year period ended in November in the Tampa-St. Petersburg-Clearwater area. Next year could be even stronger.
The sweet smell of sawdust is in the air.
7. The Panama Canal might not be the economic engine people expect for the Gulf Coast.
There is a palpable buzz that surrounds the impact on the Gulf Coast of the massive Panama Canal expansion project.
The topic has been a focus of several economic development panels in the region. It also has been a topic discussed in highly optimistic terms among local bankers, commercial real estate brokers and developers — groups that yearn for good economic news these days. And, finally, Port Manatee and Tampa Port Authority officials have talked up the potential of the project for several years.
Nonetheless, going from chatter to champion will be a formidable task.
For starters, the expansion has to actually do what Panama officials say it will. The project, to at least double the canal's shipping capabilities by 2014 by providing space for more and larger ships, was initially conceived in 2006. But port expansion projects are notoriously complex, and the complicated political structure of Panama hasn't simplified anything.
Second, Florida hasn't traditionally been a state that moves goods out of its ports in large quantities. So it's possible some ships might bypass Tampa and Manatee for other destinations. Shipping companies, in general, seek ports where their ships can unload efficiently and leave with full loads for other destinations.
One final challenge stems from that quandary: competition. Several other ports in the country, from the Port Authority of New York and New Jersey to the Port of Miami as well as ports in Georgia and South Carolina, want in on the action.
The ports of Tampa and Manatee, to be sure, can compete handily with those ports and many other shipping destinations. But meeting the high expectations of the Panama Canal expansion will indeed be a tough task.
8. Connie Mack will beat Bill Nelson in the U.S. Senate race Nov. 6.
Republicans have tried to pin the weak tag on U.S. Sen. Bill Nelson for more than a year. Anti-Nelson factions cite the two-term senator's votes for stimulus packages, bailouts and the health care overhaul for proof that his hold on the seat is wobbly.
National political pundit Charlie Cook even called Nelson “extremely, extremely vulnerable” during a July interview on MSNBC. Cook, though, in the same interview, wondered if a Republican could capitalize on the potential opportunity.
A four-term congressman from Fort Myers, Connie Mack has the best chance to seize it. He announced his candidacy Nov. 28. To get to Nelson, Mack needs to win the Florida Republican primary Aug. 14, in which he will likely run against Adam Hasner, Craig Miller, George LeMieux and Mike McAllister.
A win there would set up a Mack vs. Nelson showdown. The odds, so far, aren't heavy on Mack's side. Public Policy Polling, a left-leaning research firm, had Nelson ahead of Mack 46-35 in an early December poll. A November poll from Quinnipiac, meanwhile, had Nelson edging Mack 42-40.
Still, polls taken in Florida 11 months before a statewide election have an air of worthlessness, given the state's diverse demographics. That gives Mack time to build his case, a move that will culminate with a victory over Nelson.
9. Supreme Court will strike down ObamaCare, resulting in a booming Florida health care industry.
As the state leading 26 others in the fight against federal health care overhaul legislation, Florida has a lot to gain or lose when the U.S. Supreme Court hears the case in March. We not only predict the court will strike down the law as unconstitutional, but its doing so will lead to a health care boom in the state as the uncertainty surrounding the industry subsides.
Despite President Barack Obama's appointment of Sonia Sotomayer in 2009, the U.S. Supreme Court still holds a conservative majority — at least in terms of appointment. Two justices were appointed under Ronald Reagan, two under George H.W. Bush and one under George W. Bush.
And looking back on decisions involving deep ideological divides — like gun control and abortion — Chief Justice John Roberts sides with conservative views more often. The mandate that forces an individual to purchase insurance is certainly a cause conservatives oppose.
The uncertainty surrounding the legislation's effects has health care providers wary about expansion. If the court strikes down Obamacare, physicians will have fewer worries about cuts in reimbursement rates and have a clearer view of future income streams.
More certainty on behalf of health care providers translates to more confidence to invest in an industry that will continue to see no shortage of demand, which makes it primed for economic growth.
10. The Heartland Parkway will be resurrected.
Remember the Heartland Parkway?
When Jeb Bush was governor of Florida, the state's Department of Transportation presented a plan to develop future corridors to better connect the state. One of these was the Heartland Parkway, a major road that would cut through the center of the state from Lee and Collier counties north to Lakeland and Orlando.
But in a blow to economic development, Gov. Charlie Crist shelved that ambitious plan during his administration. The recession didn't help, either.
Now, there's talk again of dusting off the future corridors plan and reexamining the Heartland Parkway. We think it's going to get serious consideration because of the state's eagerness for jobs.
What's more, relatively few landholders control the path through central Florida, and the road would cut through territory that is controlled by well-connected politicians in Tallahassee, both factors that would make it easier to accomplish.
But clearly, building a 110-mile road would be an expensive proposition. In the meantime, U.S. 27 could become the Heartland Parkway, expanded to handle truck traffic through the center of the state.
Landholders Lykes Bros. and A. Duda & Sons are already planning for this with a 4,700-acre development in Moore Haven called Americas Gateway Logistics Center. Located between Fort Myers and Palm Beach in the center of the state, the massive center would link South Florida's ports and airports on both coasts by road and rail.
Because of Florida's unique position as the first stop for ships traveling through the widened Panama Canal, goods could be shipped to and from areas east of the Mississippi through the center of Florida and routed through logistics centers such as the one proposed in Moore Haven.
11. Tampa International Airport will increase international traffic by 13%.
Joe Lopano, CEO of Tampa International Airport, brought bold ideas to the airport in his first year at the position. He wanted more international flights and a new marketing approach aimed at branding Tampa Bay. With the addition of flights to two cities in Cuba, one to Switzerland and a $30 million redesign of the main terminal starting, we're inclined to follow his prediction of a 13.6% increase in international traffic for 2012.
The financial turmoil in Europe will complicate things, however, even despite Pasco County's efforts to lure European tourists to the region with a $3,818 Nudist Travel Development Grant.
The traffic uptick is expected to come from flights connecting South American markets, specifically the economically booming Brazil, and the Caribbean.
The Hillsborough County Aviation Authority approved a 2012 fiscal year budget that nearly doubled the amount of the marketing fund, which will be used to draw in new flights. In total, that's about $700,000 worth to push this prediction toward reality.
12. The commercial real estate office market will reach a vacancy level of 10%.
Although commercial real estate agents might think a 10% vacancy level for office space sounds like a pipe dream, pockets of the market are already showing healthy vacancies and net absorption, which means it's not entirely unthinkable.
Current reports of office vacancy rates show downtown Sarasota at 13%, Lakewood Ranch at 12.3%, Westshore at 16.3%, Naples at 11.8% and Lehigh Acres at 13.1%.
Those are healthy levels, where absorption will slowly but surely reduce the office inventory.
Another move in the direction of 10% is the recovery in the rest of the commercial real estate market. Continued improvement in both retail and industrial leases and sales will ultimately translate into businesses needing for more office space for administrative tasks related to them.
At the same time, office activity is already up from where it was last year. Brokers report that buyer and tenant inquires have climbed considerably from the gloomy past three years, and marketing of products and projects is on the upswing.
Don't forget the opportunity effect. Buyer can acquire space, in a lot of cases for the lowest prices in 20 years. This is translating into cheap rent, a major attraction to existing small and new businesses. That low-priced office market will also get some exposure toward the second half of the year with the Republican National Convention in August.
The key to this prediction is new jobs. Absorption and relocations will have no effect without job growth within the area.
“What you don't need is for Kirk Pinkerton to move a few blocks,” says Lee DeLieto Sr. of Michael Saunders & Co. “What you need is Kirk Pinkerton from Arizona.”
Business owners also need more confidence in business conditions. The upcoming election season, clarifications of federal tax and regulations and improvement to the lending landscape may help buoy that confidence.
The most likely sign of the market returning to health will be continued sales volume and price and/rent stabilization.
The article has been updated to correct John Roberts as chief justice of the U.S. Supreme Court.