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EO-Sara/Mana: A 'Mild' Correction
By Sean Roth
Real Estate Editor
It's unanimous: 2006 will not match 2005.
Talk to anyone in the housing industry in Sarasota and Manatee counties, and they'll tell you the growth rate for housing starts in 2006 is not expected to match the pace of 2005.
But it still will be a good year.
Housing executives say the hyper real estate growth over the past four years was was unsustainable. So look at 2006 as a transition to a more realistic level. Population growth remains steady. Tourism figures are healthy. Unemployment is below 3%. The U.S. economy continues to grow. There is little to dampen the outlook.
Job growth
Looking back, 2005 was a year in which the Sarasota-Bradenton-Venice Metropolitan Statistical Area (MSA) gained 10,900 nonagricultural jobs through November, an increase of 3.6% compared to a year ago. The biggest job growth gains came in employment services, typically the region's professional employment organizations (PEOs), which added 5,700 jobs (8.9%); trade, transportation and utilities, up 2,300 jobs (4.5%); and retail, which grew by 1,800 jobs, or 4.5%.
Alternatively, only four sectors lost jobs. General merchandise stores, information, banking and federal government employment each lost 100 jobs.
According to preliminary labor statistics for November, Manatee and Sarasota counties lowered their unemployment rates by one percentage point from a year ago. Manatee County dropped to 2.9%, and Sarasota County fell to 2.8%. That one point drop was also felt statewide where the average for the seasonally adjusted unemployment rate fell from 4.7% to 3.6%.
"There was some ebb and flow of companies last year," says Kathy Baylis, president of the Economic Development Corp. of Sarasota County, "but most of the moves we saw were from Sarasota to Manatee and the reverse. There was very little loss overall. The economy is still very strong; we are seeing a lot of employers who have indicated plans to hire additional staff in 2006."
Tourism: new records
Overall tourism increased in 2005 for both counties. Manatee County's tourist tax revenue increased 18.9%, or by $700,000, to $4.4 million. Sarasota County added about $900,000 in tourist-tax revenue, a 13.9% increase, to $7.5 million for the year.
"Overall, we've had a very good year, particularly with the level of red tide," says Virginia Haley executive director for the Sarasota Convention and Visitors Bureau. "We've been breaking records every month in bed tax collections. Then they put the breaks on in August and September."
In addition to the usual back-to-school fall-off in tourism in August and September, Haley also attributed it to in-state media coverage of red tide and hurricane threats, which adversely affected the Labor Day holiday.
Housing: the engine
Real estate maintained its primary economic engine status for the year. Permits and new construction for both homes and commercial construction continued setting records. American METRO/STUDY Corp., a housing market research firm that tracks housing starts in new subdivisions, reported that housing starts in the two-county area increased 20% from 2004 to 2005.
According to The Construction Guide, a Sarasota-based construction market research company, multifamily housing starts - condominiums and apartments - led the region with a 54% increase, or a jump of 116 more units through Sept. 30 compared to a year ago. Total multifamily starts numbered 330. Single-family starts increased in the two-county market 10.5%, from 7,328 to 8,098 in 2005. At the same time, commercial starts were up 17.3%, 102 starts, for 2005..
Single-family starts increased in the two-county market 10.5%, from 7,328 to 8,098 in 2005. At the same time, commercial starts were up 17.3%, 102 starts, for 2005.
While 2006 is expected to be another strong year in aggregate numbers of housing starts, American METRO/STUDY is forecasting a 3% decline in housing starts in 2006 from their level in 2005 in Manatee County and a 7% decline in Sarasota County.
"For 2005, the stars were aligned in perfect order," says Pat Neal, owner of Neal Communities/Neal Custom Homes. "There were lots of retirees, a good economy, low interest rates and the real estate boom. We are forecasting just a very mild correction. For 2006, we are expecting a good year but not as stellar as 2005. That was one of the most unique years of my career."
Bambi Spahr, executive vice president for the Home Builders Association of Manatee County, agrees. "Most people are predicting a slow down, but it's still going to be a pretty good year." Spahr says. "Some of this goes to the escalating price point. It also has something to do with the lack of availability of land to build new homes. That is definitely going to constrain the number of homes that can be built."
Says Larry Anderson, executive vice president of the association: "Most of the builders are at near capacity right now and so people have to wait for their houses to be built," Anderson says. "Materials issues are also affecting much of the time sequence."
Still, Anderson notes, "What these business already have booked will take them through the first six months of the year. Even if they had no other business, it would be a very busy year."
Tight labor
Two pronounced challenges in Manatee-Sarasota's economy are the tight labor pool and increasing high-cost of worker housing. Neither statistic changed for the better in 2005.
PGT Industries Inc., the custom-window and door manufacturer, has been paying what it believes are competitive wages and benefits, but it's having trouble finding employees.
"On any given day we have open spots that we are looking to fill," says Herman Moore, executive vice president for PGT. "We've hung a banner on the front of the building looking for workers. We are hiring people constantly. We even offer employees a bonus if they bring us new employees who stay with the company for a certain period."
Nonetheless, the tight labor supply influenced PGT enough to open a North Carolina manufacturing plant.
Roads
Another large obstacle to future growth is the counties' need for road improvements and the question of how to pay for them. About $5 billion worth of needed improvements were identified in the draft 2030 Needs Plan Report for the Sarasota/Manatee Metropolitan Planning Organization, particularly to handle new development east of Interstate 75, at Interstate 275 and I-75 and in South Sarasota County and major downtown redevelopment in both counties.
A draft financial resources report produced by Kimley-Horn and Associates Inc. says that the two-county market has $2 billion of transportation funding available through 2030 from federal, state and local fuel taxes, various Federal trust funds, license fees, local transportation impact fees and other sources. Excluding money that the FDOT and the local governments has already committed to other projects, the MPO only has $1 billion over the 25 years of the analysis to spend on its transportation needs.
"The impact won't come next year, but it will in the following years," says Nancy Engel, executive director of Manatee County Economic Development Council. "This is a serious challenge that the business community and elected officials need to be engage with."
Elected officials are already looking at a potential answer in Manatee County. The county commission and county administrator are planning a charrette to discuss adopting a five-cent gas tax.
National effects
Another concern percolating is that the region's economy may be vulnerable to a nationwide economic slowdown. Economic forecast company Fishkind & Associates predicted in its Tampa Bay Forecast summary released in September that the entire Tampa Bay economy will slow in the second half of the year following a larger nationwide slowdown driven by higher interest rates and energy prices.
Fishkind predicts that in 2007 the economy will worsen even further, driven by the same national trends and weakness in tourism and business meetings. Further Fishkind suggests that the condominium market is likely overbuilt and that condo conversion projects will face the greatest risk in the residential market.
"Next year is worrisome [for tourism]," Haley says. "I'm hearing from the industry that the winter bookings are OK but flat. Season continues to shrink; people used to book three months in advance. Now it's one month. There is an overall lack of leisure time in the country, and people continue to work even through when they're quote, unquote retired."
Still, those interviewed are feeling mostly positive about 2006.
"We have been growing year after year for the past 25 years," Moore says. "We have been setting records every year, and in '06 we expect that trend to continue."
Haley says that business meetings appear to be solid so far.
"John Deere was here this year and looks to be coming back this fall," she says. "I am very encouraged about meetings and conferences next summer. We are also getting good business from the U.K. and Ireland. Most of the sports groups are still going to come and come in strong."
Further there seems to be a renewed interest from developers in building hotels.
"I am definitely getting a lot more calls from investment companies up and down the east coast," Haley says. "There's a lot more interest in just the last six months."
For home builders and construction companies, there is a hope that 2006 could also be the end to the precipitous price jumps and shortages in materials. Industry sources say at least cement appears to be more plentiful for the future.
F. Fred Pezeshkan, president and CEO of Naples-based Kraft Construction Co. Inc., one of the biggest construction companies in the region, says his company has little sales vulnerabilities for at least the next three years.
Says Pezeshkan: "The past three years have been very steady and getting stronger every year. Two-thousand six looks to be an even stronger year yet. We haven't seen any indication of a slowdown even with all of the increases in interest rates."
Another high point for 2005 and the future is the growth in technology companies in the region. Rich Swier, managing partner of Startup Florida, an early-stage investment fund for high-tech companies, says Highwall Technologies and Real Digital Media, are doubling revenue and should be profitable in 2006.
"Just our companies alone have created 20 to 30 new jobs," Swier says. "There are always two or three positions that are open. We have a run rate of over $1 million. And we're continuing to grow. We're launching two companies now and are planning to invest in four more. Things have been pretty positive. We are starting to see a little tech boom. Building a larger base just takes time."
Swier attributed a lot of the technology growth to the more metropolitan development in the downtown the efforts of Sarasota County and the new two-county technology forum 82 Degrees Tech.
HOW POPULATION GROWTH COMPARES
2004 2005 2006 2007 2008
Charlotte 156,985 160,454 163,965 167,498 170,984
Change 3,469 3,511 3,533 3,486
Percent Change 2.2% 2.2% 2.1% 2.1%
Collier 306,186 318,560 331,075 343,718 356,298
Change 12,374 12,515 12,643 12,580
Percent Change 4% 3.9% 3.8% 3.6%
Hillsborough 1,108,435 1,131,582 1,155,134 1,179.064 1,202,697
Change 23,147 23,552 23,930 23,633
Percent Change 2% 2% 2% 2%
Lee 521,253 537,180 553,357 569,818 586,146
Change 15,927 16,177 16,461 16,328
Percent Change 3% 3% 3% 2.8%
Manatee 295,242 302,002 308.854 315,780 322,645
Change 6,760 6,852 6,926 6,865
Percent change 2.3% 2.3% 2.2% 2.2%
Pinellas 946,640 949,760 956,027 962,523 968,744
Change 3,120 6,267 6,496 6,227
Percent Change 0.3% 0.6% 0.6% 0.6%
Sarasota 358,307 364,954 371,964 378,528 385,287
Change 6,647 7,010 6,564 6,759
Percent change 1.9% 1.9% 1.8% 1.8%
Florida 17,516,732 17,912,715 18,324,451 18,737,889 19,139,994
Change 395,983 411,736 413,438 402,105
Percent change 2.3% 2.3% 2.3% 2.1%
Source: Florida Office of Economic Demographics & Research
A COMPARISON OF JOB GROWTH BY INDUSTRY
The table shows the change in employment by sector for Sarasota and Manatee counties.
Change From
Nov. 2005 Nov. 2004 Oct.-Nov. '05 Nov. '04-'05
Nonagricultural Employment 318,600 307,700 3,100 1.0% 10,900 3.5%
Total Private 290,300 280,100 2,800 1.0% 10,200 3.6%
Goods Producing 41,700 40,400 200 0.5% 1,300 3.2%
Mining, Construction 24,000 22,800 -100 -0.4% 1,200 5.3%
Manufacturing 17,700 17,600 300 1.7% 100 0.6%
Service Providing 276,900 267,300 2,900 1.1% 9,600 3.6%
Private Service Providing 248,600 239,700 2,600 1.1% 8,900 3.7%
Trade, Trans., Utilities 53,000 50,700 1,200 2.3% 2,300 4.5%
Wholesale Trade 7,900 7,500 0 0.0% 400 5.3%
Retail Trade 41,400 39,600 1,200 3.0% 1,800 4.5%
Food and Beverage Stores 9,300 8,700 300 3.3% 600 6.9%
General Merchandise Stores 6,100 6,200 400 7.0% -100 -1.6%
Information 4,200 4,300 0 0.0% -100 -2.3%
Financial Activities 15,100 14,900 100 0.7% 200 1.3%
Deposit/Credit Intermediation 3,100 3,200 0 0.0% -100 -3.1%
Professional/Business Services 95,400 90,600 100 0.1% 4,800 5.3%
Employment Services 69,900 64,200 100 0.1% 5,700 8.9%
Education, Health Services 39,400 38,600 400 1.0% 800 2.1%
Hospitals 9,900 9,800 0 0.0% 100 1.0%
Leisure and Hospitality 29,600 29,000 700 2.4% 600 2.1%
Other Services 11,900 11,600 100 0.8% 300 2.6%
Total Government 28,300 27,600 300 1.1% 700 2.5%
Federal 1,900 2,000 0 0.0% -100 -5.0%
State 2,800 2,700 0 0.0% 100 3.7%
Local 23,600 22,900 300 1.3% 700 3.1%
Note: Employment estimates have been rounded to the nearest hundred. Sum of detail may not equal totals due to rounding or the exclusion of certain industries from publication. All data are subject to revision due to late reporting of participants and the annual benchmarking process. Source: Florida Agency for Workforce Innovation
Source: MyFlorida.com
WHERE THE CONSTRUCTION IS
The figures below are the permitted building starts by number, type and area through Sept. 30
SF R/A Duplex MF Pool Com Total
Bradenton 25 14 * 6 24 36 105
Bradenton Beach * 2 1 * 3 * 6
City of Sarasota 75 97 * * 59 100 331
Holmes Beach * * 1 * 1 * 2
Longboat Key 10 101 3 14 * 128
Manatee 3,317 223 8 104 1,502 142 5,296
North Port 2,924 51 116 159 694 69 4,013
Palmetto 127 9 * 1 19 19 175
Sarasota County 1,327 275 130 45 814 306 2,897
Venice 293 35 12 153 20 513
Total 8,098 807 256 330 3283 692 13,466
SF = single-family, R/A = remodel/additions, MF = multifamily.
Source: The Construction Guide
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