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Setting More Records
By Sean Roth
Real Estate Editor
It sounds like the same old song: The real estate market is at record levels. But it remains true. Real estate o primarily development, brokerage and property appreciation o has been one of the driving forces of the Sarasota-Manatee economy for at least five years.
Brokers, developers, builders, construction companies, longtime property-owners and other ancillary real estate businesspeople have added generously to their bottom line, with concerns limited mostly to changes in government regulation and pricing.
Thereis no doubt 2004 was an unusual year: hurricane worries delayed home closings during the lead-up to near misses by Charley, Frances, Ivan and Jeanne.
Still, all the data available through the end of October reflects a market that set new records. New residential development still outpaced commercial development by almost 12 times. Single-family starts for the two-county area totaled 8,252, while commercial building permits were at 694. Multifamily development starts through October were at 265.
With another great year almost over, real estate professionals are looking forward to the new year. They say there doesnit appear to be any hurdles that might derail the steady upward climb.
iAny slowdown? Iim not seeing it,i says Tim Litchet, Sarasotais director of building, zoning and code enforcement. iEveryone keeps talking about a slowdown in the condo market, and we keep asking, but we arenit hearing that from (any developers). We are looking at additional staffing. But even so dealing with all the filings, itis a pretty Herculean effort.i
Brokerage offices in the market reported a record number of transactions and sales. iIn i04, we passed our gross revenue for all of 2003 in May,i says Carl Wise, president of Sarasota-based commercial brokerage Preferred Commercial Inc. iThat was even before we added any other people. We finished very well this year. But every year since we opened up in 1999 we have recorded an increase in revenue. We arenit really expecting that to change.i
David Eckel, president and broker/owner of Manateeis largest real estate firm, Wagner Realty, says his firm experienced at least a 30% increase in sales volume over 2003. iWe found extreme strength in all areas of the market from both residential and commercial,i Eckel says. iWe have seen lots of increases in land sales. It has just really come across the board. As far as i05, we feel that we are in a very strong position to have another record year.i
Wagner Realty, with its large rental business, reported an uptick in that sector, as well.
iWith all the hurricanes there was a worry that the tourism was going to be rough,i Eckel says, ibut we sure didnit see it. We already have bookings through most of 2005. Our bookings for 2005 are already looking stronger than 2004. Overall business has been good we feel throughout the whole Tampa Bay region.i
One of the biggest changes planned for Wagner in the New Year is a strong push to extend Wagner into the downtown Sarasota market.
iWe are already doing more business in Sarasota,i he says. iWe are working on two major residential projects. We are presently reviewing our opportunities for new offices (particularly in the downtown area).i The firm now manages a Sarasota office on University Parkway.
Even younger firms, such as the almost 2-year-old Bosshardt Realty Services Inc., did well. iThis year we did $40 million [gross sales],i says Dave Minton, owner and Realtor of Bosshardt Realty. iI would like to think we could double that next year. O With the closings we already have scheduled we are meeting and exceeding our goals for February. We have just got some momentum going.i
Bosshardt plans to add another six or seven associates this year.
Overall office absorption in the two-county market has increased, especially in Sarasota County. In 2004, almost 300,000 square feet of office space was added to the Sarasota County market and yet office vacancies declined across the board from the same period a year ago. In December of e03, the overall vacancy rate was 10.31% and the I-75 Fruitville South rate was 12.67%. In 2004, the total rate declined to 7.26% and the I-75 South (now called I-75 Gateway South to Clark) vacancy rate was cut in half to 6.54%.
No historical data was available on last yearis office vacancy rate in Manatee County, but Realtors watching the market have reported a decline.
iThey had larger vacancies to start, but itis coming around, particularly in downtown Bradenton,i says John Swart, president of Lakewood Ranch Realty, which has a virtual lock on the Lakewood Ranch commercial real estate market. He says Lakewood Ranchis high office vacancy rate 17.71% in Manatee County is deceiving; the 113,120 vacancy is over-inflated by one large building, the 101,312-square-foot former ADT building.
iIt (2004) was just phenomenal,i Swart says.
This year, Lakewood Ranch added a new 128,000-square-foot medical school building for the Lake Erie College of Osteopathic Medicine; an equally large building for Edwards Systems Technology; a 20,000-square-foot ComCenter office; a 12,000-square-foot building for Watson Publications and others. Even more significant projects are in the pipeline for 2005: the 55,000-square-foot headquarters for John Cannon Homes; a second medical office building next to the hospital; a 28,000-square-foot building owned by MGA Financial Services Inc.; and the 50,000-square-foot Magnolia Green three building.
On the retail side, Casto Lifestyle Properties is expected to complete the retail and office portions of the 180,000-square-foot Main Street project by the fourth quarter of 2005. The development, which will feature a six- screen movie theater, is said to be 90% pre-leased. In comparison, Lakewood Ranch added only about 70,000 square feet of retail space in 2004. The $65-million Lakewood Ranch private arena, developed by a joint partnership of DVA Sports LLC and SMR, is scheduled for completion in September or October.
iThis year we only added about 14,000 square feet of industrial space,i Swart says. iNext year we should add closer to 200,000 square feet.i
The main concern real estate professionals cited for the industryis future growth was centered on governmental permit review and impact fees.
iThose are always latent concerns,i Swart says. iOur whole existence is related to traffic concurrency and permits. We are also always concerned about interest rates. We have found that a 1% rise in the rates relates to a 10% drop in business.i
Lengthy development reviews, Swart says, have slowed down the approval of a new housing community by as much as two years from application to construction.
And with the damage from the four hurricanes, builders are also starting to see greater subcontractor demand, which leads to scheduling delays and additional pricing pressures.
City of Sarasota property owners are also starting to get more involved in the rezone implications of the downtown code. High profile property-owners, such as Michael Saunders, are starting to vocalize their worry that the rezone will amount to a downzoning of possible uses. If the train has already left the station and city government rejects changes to the rezone, sources say those complaints could turn into lawsuits.
N.J. Olivieri, president of Horizon Mortgage Corp. in Sarasota, is pessimistic about the longterm outlook. Olivieri, who happily reported real estate sales volume of $175 million for 2004 and a growing per transaction price, is concerned the local real estate market could be headed for a dramatic downturn if national changes reduce the investor capital devoted to residential.
iIim concerned with what Bush is trying to do with the tax laws,i Olivieri says. iIf he reduces the tax on dividends, it could convince a lot of investors to put all their money in companies like GE o good companies o so that they can live off the dividends. It could create a greater push towards the stock market. Greenspan is also a concern with his recent increases in interest rates. I think he lowered them too far and is now having to adjust.i
In Sarasota County, Olivieri also worries that the countyis 2050 plan encourages development by big business at the expense of smaller developers. iThe area needs to be promoting growth from grassroots players,i Olivieri says.
The new high growth areas to watch in 2005 appear to be North Manatee County/Parrish, Osprey and downtown Bradenton. Developers such as Alan Zirkelbach of Zirkelbach Construction Inc., Taylor Woodrow, Ryland Homes, Pulte Home Corp., Winward Homes and others are all planning developments north of the Manatee River.
iThere is more property available there than in Lakewood Ranch,i Zirkelbach says. iIt is also so close to Tampa and St. Pete. There is such a great mixture there of small and large lots.i
Barry Seidel, president of American Property Group of Sarasota Inc. and an Osprey property owner, says commercial and residential land in Osprey has increased drastically.
iCommercial land used to cost about $200,000 an acre or less,i he says. iToday o a month before construction starts on Wal-Mart o that same property is going for $1.5 million. Itis a number of things. Itis what I call the toothpaste effect on south Trail where commercial development in Sarasota only has room to go south. Itis ending up in Osprey and then it will move into Nokomis. I used to beg people to go into Osprey. Now they canit afford to. Sorry, those people that made the jump earlier deserve this.i
As GCBR reported last week, Edward Vogler II, a partner in the Riverwalk development in downtown Bradenton, says that negotiations are looking good for a downtown grocery store. In addition, a lot of eyes are watching the former city hall building, which was demolished earlier this month. Ron Allen, Allen, president of NDC Construction Co. and a partner in the City Hall property, says plans are still being developed for a mixed-used development on that site.
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