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Lee Arnold, founder and CEO of Clearwater-based Colliers Arnold, is cautiously positive about the commercial real estate market in 2012. The 60-year-old graduate of the University of South Florida has 35 years of experience working in commercial real estate.
Q: Looking into 2012, which sectors are the winners and losers of commercial real estate?
A: Yes. Black eyed peas or corn -- either one.
We continue to see growth in all elements of healthcare support. Our healthcare group is being asked to put together solutions for various healthcare platforms throughout our community, which includes everything from build-to-suit to land leases to combining radiology, oncology and other healthcare specialties. As health care continues to modify its delivery platform there will be good work in that for 2012.
We will see more construction of apartments with the absorption rates we're seeing right now. The absorption in completed class A and class B products is very good; they're running at about 12% stabilized. I'm seeing closings in multi-family land.
Q: Geographically speaking, are there any areas you believe will be stronger than others in 2012?
A: Our urban core activity continues to accelerate; that's in part because of the recognition of time and fuel costs. We expect fuel prices to increase over the next five years. I believe that the fuel increases will dramatically change the behavioral patterns of consumption.
There's going to be more focus toward the urban areas and you'll see more youthful enjoyment of downtown Tampa, downtown St. Petersburg and Clearwater. The major cities will take on a much more of a classic urban feel because people don't want to travel. They don't want to be in a house that will take them 45 minutes to get to work and 45 minutes to get home.
Q: Do you think 2012 be a tenants' market or an owners' market?
A: People who look at real estate simply in terms of bricks and mortar miss the big picture. I would say if you have the capital and the patience to go look for the right asset this is very good time to buy as long as you take the time to understand the business that you're buying. If you bought a $5 million property then you bought a $5 million business and you need to know how to operate it.
I think if you're a tenant that it's a good time to lock up your lease because we're absorbing space in many sectors. The shadow space, which doesn't get really good tracking, is getting absorbed. Now is the time to lock up your lease or at least make leasing decisions for a three-year time frame.
If you have debt this might be a very good time to borrow and put the debt on the property if owner occupied to protect yourself.
If you have great equity in your property this would be a very good time to sell your property, take that equity out and put it in your business and lease it back.
As I go through the sectors I start to think in terms of both sides. I can make an argument that 2012 will be good for both sides.
But, you lose the Euro and all bets are off. Ask me after the Euro.
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