The first three months of 2014 were solid, if not spectacular, for several commercial real estate brokers. But statistics show a widespread recovery remains elusive.
The team of a dozen commercial real estate agents at Coldwell Banker under Janet Robinson has taken to a baseball strategy to navigate the current market: No big home runs, but lots of singles mixed with a few doubles.
That strategy, says Robinson, led to $30 million in closed transactions in the first quarter. “The majority of our deals are under $2 million,” says Robinson, “but we've had some great success lately.”
Another Sarasota-Manatee brokerage with a small army of rainmakers, Sperry Van Ness Commercial Advisory Group, also posted a stellar first quarter. The office, with 17 agents, recorded $43 million in closed transactions in the first three months, good for third best among more than 175 Sperry Van Ness locations nationwide.
Other brokers boast about fresh deals, renewed interest and bubbly optimism. Yet a slew of first quarter data paints a gloomier picture than the anecdotal evidence.
“I've seen this a bunch of times and this is unlike any recovery I've seen in the past,” says Roger Hettema, a commercial real estate property appraiser with Hettema Saba Valuation Advisory Services. Hettema spoke at a recent real estate trends conference hosted by the Risk Management Association's Sarasota-Manatee chapter. “I think we will be in this mode for at least another year or two.”
Office space leads the slow-to-recover landscape. One nugget that especially stands out: The average time, in months, that space sits on the market is at five-year highs in Sarasota, at 20.1 months, and Manatee, at 25.1 months, according to CoStar and Coldwell Banker Commercial. That backlog is one of several factors that squeeze lease rates.
Another metric, vacancy rates, also shows the delay in a full-blown recovery. Vacancy rates for office spaces 10,000 square feet and larger, for example, are well into double digits in multiple submarkets in Sarasota and Manatee counties. Venice leads the way, with a 36.4% vacancy rate through the first quarter, while North Port is stuck at 34.7%, according to Sarasota County Economic Development Corp. data. Downtown Sarasota has an 11.7% vacancy rate, while in downtown Bradenton the rate jumps to 29.28%. Two submarkets go against the double-digit trend: Lakewood Ranch, with a 7.06% office vacancy rate and the University Parkway area, at 7.54%.
One final morsel of not-so-good office space news: The first quarter average gross rent per square foot for office space of all sizes is below the five-year average in each county, states a Coldwell Banker Commercial report. In Sarasota the average rent was $18.42 per square foot, down from a five-year average of $19.37. The average rent in Manatee was $16.71 per square foot, down from the five-year average of $16.99.
Retail and industrial space in the Sarasota-Manatee market fared better than office space in the first quarter, at least from a statistical perspective. For instance, rent per square foot was up, slightly, for retail properties in Sarasota County over the five-year average and the corresponding vacancy rate is 6.4%, down from 7.5%, according to Coldwell Banker. In Manatee County industrial properties posted a first quarter increase in rent per square foot over the five-year average.
That kind of data gives brokers like Robinson more hope. And her regularly buzzing phone amplifies the optimism. “There is a tremendous amount of activity,” says Robinson. “This year will be twice as good as last year.”
Follow Mark Gordon on Twitter @markigordon