Ian Black Real Estate partner talks about the future of the Sarasota/Manatee market
Ian Black Real Estate
Steve Horn was working as a land planner and set to pursue a Masters in Business Administration degree in Boston when a chance encounter led him to a year-long apprenticeship with commercial real estate veteran Ian Black, who at the time had just formed an eponymous brokerage in Sarasota. Fourteen years later, Horn is one of six partners at the firm, representing a wide variety of clients across sectors.
How do you see the Sarasota/Manatee commercial real estate landscape overall at the present time?
It’s as good a market now as it’s ever been. I think what’s great about this market, vs. say the one we experienced in 2005 and 2006, is that that was really like a silly season fueled by crazy bank lending. Today, there are real deals with real people executing real ideas, so it’s more tangible today. Overall, Sarasota and Manatee continue to grow from a demographic standpoint, more people are moving here every day. I think it’s going to be interesting to see how asset classes shift over the next five- to 10 years, but generally speaking we’re going to need more industrial space because of the changing fabric of retail. But in terms of housing stock, everything is strong. I see no headwinds at this point.
Why haven’t we seen more office development or even office sales in Sarasota?
In the core of Sarasota, there have been quite a few deals: The BMO Harris Building, the PNC Building, Ringling Square, Northern Trust Building, City Center and Kane Plaza. But what’s interesting is where rents are in Sarasota. Net rents in those buildings is between, say, $14 and $16 a square foot triple net. To build a new building, you’d need rents to be much higher than that to justify the cost. Plus, when the city’s master plan for downtown went into effect in 2001, it was weighted heavily toward residential development. That’s partly why today if you see a new development, it’s a mixed-use project with some office in it. Downtown Sarasota has negative absorption, while out east, in Lakewood Ranch, they have positive net absorption and an incredible pipeline. Just as importantly, office users don’t need as much space anymore; people are working from home more and the nature of business has changed. Look at Bank of America: A decade ago, they took one third of a 13-story, downtown office building in Sarasota. Today, they’re housed in a single small building on Fruitville Road. And added to that Sarasota does not have an influx of businesses coming in.
"Look at Bank of America: A decade ago, they took one third of a 13-story, downtown office building in Sarasota. Today, they’re housed in a single small building on Fruitville Road." — Steve Horn, Ian Black Real Estate
Harrod Properties has done very well with their flex space project in Lakewood Ranch, a deal you worked on. So why hasn’t more industrial space been developed in Sarasota and Manatee counties?
I think there are a couple of reasons, namely the availability of land and the cost of land. That’s No. 1. The Lakewood Ranch situation was unique, because Schroeder-Manatee Ranch sold Harrod a piece of land for much less than they could have, because they wanted that use, a use that was underrepresented in the community. I was involved in the land sale to Harrod, and the land sale to Benderson Development for the SRQ Tech Park, another industrial project, and the reason they worked so well was because of price. Industrial landlords here are getting $7 to 8.50 per square foot triple net for new space, with all the modern amenities, and that’s all a function of land costs. And with Harrod, you can get an economy of scale doing 700,000 square feet of space. You can’t do that if you’re building 20,000 square feet. We don’t have land priced for those kind of projects. It’s significant problem in the state of Florida. In places like Miami and Jacksonville, they’re running out of decent industrial land.
You’re involved in a land deal for a potential new hotel downtown. Does Sarasota need another new hotel? There are already more than 1,000 new keys either recently completed or under development.
I think Sarasota has done a great job of creating and building a certain level of hotel. We’ve built several three-star, maybe three-and-a-half star hotels, like the Hampton Inn, the aloft, we’ve got that covered. The Ritz-Carlton is the only true four-star in our market. Is there room for something that could be at the Ritz level? Absolutely. There’s a reason the Ritz-Carlton recently sold for $172 million. No one can look at Sarasota and say it’s not really a high-end market, given the visitors and the wealth here. So if the Ritz-Carlton is the only game in town for that type of traveler, I think there’s probably room for another hotelier to come in and offer that kind of service.
What do you see in terms of Sarasota’s commercial real estate future? Crystal ball 2028 for us.
I think the future is very bright for Sarasota. We’re becoming more of a unified community, and growth has been good everywhere. Downtown Venice and Bradenton and Sarasota are amazing now. And the tax base is continuing to increase and that provides an opportunity to further add amenities. The Bay process, I think, will be so important and such an integral part of Sarasota’s future, because it could transform the bayfront so that there’s nothing like it along the West Coast of Florida. To have a Central Park-like setting would be tremendous. I don’t see any stumbling blocks for us. Hopefully we’ll have less hurricanes, and while we’ll have our ups and downs globally, Southwest Florida I see as being a little bit in a protective bubble more than the rest of the country. But the roadmap is laid out for us to keep improving.