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The Elephant in the Room


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  • | 6:05 a.m. October 19, 2012
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Almost any conversation about forecasting 2013 with a Gulf Coast business owner or executive invariably brings up the national election.

And everyone agrees on this point: We need to get past Nov. 6 so we can go on with the economic recovery.

Consider entrepreneurs such as Steve Marino, the founder and president of Home-Tech in Fort Myers, an appliance-repair company. He doesn't plan any major moves until he knows who will be in power in Washington, D.C.

“If we don't have a change in administration ... I see 2013 as a pretty dismal year,” says Marino, who is scouting locations to expand but is reluctant to move ahead. “There really are two ways to go.”

Restaurateur Craig Peden, president of Rib City chain of 29 barbecue restaurants, says he's holding off on opening another four restaurants until he's satisfied with the results of the election. Health care could turn into a greater expense next year than in 2012, he says.

Commercial real estate broker Barry Seidel in Sarasota says entrepreneurs are anxious about the outcome of the election. “The election will be a big decider,” he says. Seidel says business has picked up, but there's anxiety, too. “We're getting a lot of calls and we're busy, but no one's happy,” he says.

“A lot of business owners don't want to expand until they know what their taxes are going to be or what their health care costs,” says Ron Wheeler, CEO of The Sembler Co. in St. Petersburg. “What's holding everything back is that we don't have strong employment growth.”

To be sure, a lot of the Gulf Coast companies that survived the recession now have the means to expand even if the will isn't there.

“A lot of it is us psyching ourselves out,” says Joe Gammons, president of Office Furniture & Design Concepts, who supplies furniture, flooring and handyman services to commercial customers. “All the business people I'm talking to say their businesses are healthy and in a position to expand,” he says.

“For me, I don't think it matters who wins,” says Joe Buckheit, president of MediaBrains and AgingCare.com in Naples. “We need to get past it and people need to start operating their businesses. People are understaffed and waiting to hire.”

Some say high-profile global crises are part of the operating landscape today. “I don't know how you plan for this global uncertainty,” says Lee Arnold, chairman and CEO of Colliers International Tampa Bay, Central & Southwest Florida. “This is the world in which we will operate. That's just how we're going to do business going forward and we'll become accustomed to it.”

Most agree that the Gulf Coast seems to be on the cusp of broader recovery in 2013. “We've received more inquiries in the last three months than the last three years,” says Tony Ceresoli II, president of advertising agency Ad Partners in Tampa. He's planning to add another three to four employees to his company's 18-person staff next year because he says his clients' advertising budgets are back to pre-recession levels.

Real estate driver
Real estate is the economic engine of the Gulf Coast, and it's a leading indicator of things to come.

Homebuilder Taylor Morrison plans to nearly double the number of communities in which it builds in 2013. The company currently builds in 17 communities from Tampa to Naples. Steve Kempton, president of Taylor Morrison West Florida, says he's expecting about 20% growth in new-home sales next year.

“Collier County is doing very well right now from a sales standpoint,” says Kempton. “Up in Tampa, we're seeing move-up families starting to buy again.”

The availability of new and existing homes has shrunk from Tampa to Naples and demand is rising. “The big talk among Realtors is that inventory is really down and they're concerned,” says Anthony Solomon, executive vice president and owner of Ronto Group, a Naples-based residential real estate development company.

An increase in residential construction will spur job growth. “Everybody I'm talking to, from builders to contractors and trades, are all running at maximum now with the crews they have,” says Solomon. “People want to just see another few months of activity before they make a commitment to hire.”

On the commercial real estate development side, Sembler says new grocery- anchored developments are on the drawing boards. “Our pipeline of new deals in Florida is more vibrant than it's been in the last four years,” says Sembler's Wheeler.

In addition to grocery centers, Wheeler says the company continues to develop sites for retailers such as Walgreens and Wawa convenience stores. “What we will probably not do is mixed-use or lifestyle deals or high-priced urban infill deals,” he says.

In anticipation of increased business activity, Arnold says his company has hired 20 brokers this year. “There's a lot of private equity groups that have been put together to buy property in Florida,” he says. “There is more demand than there is product.”

Investors are seeking out opportunities because they believe they can lease empty buildings with new tenants and boost rental rates, says Arnold. “There's plenty of upside,” he says.

The strongest property type right now is retail, and Arnold says his top broker operates in that field. “Who would think retail is as strong as it is?” he says.

In Sarasota, Maurice Opstal, president and managing partner of Stellar Development, says he's building a 35,000-square-foot shopping center in Lakewood Ranch that already has a dozen tenants signed. “We've seen clients dusting off ideas and blueprints that they may have had on the shelf for a while,” he says.

Still, Opstal says the most opportunities now are in Miami, where investors from Latin America are eager to buy commercial real estate for safety. “Folks aren't waiting to be 100% leased anymore,” Opstal says. “We haven't seen that for a long time.”

Jerry Wallace, president of J.L. Wallace, a residential and commercial contractor in Fort Myers, says he's expecting 5% to 15% growth in commercial construction in 2013. “It will primarily be because of the private sector,” he says, noting public-sector spending is falling as tax revenues shrink. Value-oriented dollar stores, gas stations and bank branches are among the new buildings he expects to build next year.

Gammons, whose company supplies office furniture and flooring to businesses on the Gulf Coast, says finance, real estate and insurance companies are expanding. He's budgeting for a 10% increase in sales in 2013. “We're fairly cautious in how we're budgeting, but we think there's pent-up demand out there,” he says.

For example, Gammons supplied the furniture to father-son entrepreneurs David and Brett Diamond for their Venture X in Naples, a co-working space they recently opened for entrepreneurs. The 8,000-square-foot space in the upscale Mercato shopping center has open desks with fast, secure Internet access with amenities such as gourmet coffee. Venture X could turn into the hub that helps launch successful startups.

Planning for growth
Regardless of their political views, most executives have taken recent growth in their firms as evidence that business is likely to improve next year.

One clue that conditions are improving: increases in trash collection. Larry Berg, senior district manager for trash hauler Waste Management in Naples, says residential bulk waste rose 9% for the first nine months of 2012 compared with the same period in 2011.

Residential bulk waste includes sofas, refrigerators and other large household appliances. Berg says the increase in this kind of trash indicates more people are renovating their homes, and it's a sign of improving consumer confidence and an increase in real estate transactions. Berg says his colleagues in the Tampa Bay region have reported gains also.

Consumers are spending more on items ranging from massages to travel. Gordon Kaufman, the managing partner of Massage Envy, recently opened a fourth location in Cape Coral, one of the hardest-hit areas of the coast for home foreclosures. Kaufman says he and his partners are spending $500,000 to build the new location. “We have two more locations in mind, but I don't want to let the cat out of the bag because we have competitors,” he says.

Darla O'Brien, the owner of Designer Fitness in Sarasota, has designed an iPad application that costs $13.99 to reach more customers and help existing ones maintain their fitness. “My personal goal is that I want to spend more time on the broader market,” she says. “I want to reach more people.”

O'Brien tripled the size of her fitness studio during the downturn, a counterintuitive move that paid off. “It was the best thing I ever did,” she says.

Wilma Boyd, president and CEO of Preferred Travel in Naples, says she expects 15% to 20% growth in sales because of larger corporate and leisure travel budgets. “Our corporate sales have really picked up,” says Boyd.

Boyd says many companies decided to handle their own travel arrangements during the downturn, but they're now turning to Preferred Travel because they're getting too busy to manage travel arrangements themselves. “They're returning to the travel counselor,” she says.

To get a more complete picture of what the coming year may hold for different industries, the Business Review asked 15 business leaders about their forecasts for their business. Read their responses on pages 8-13.

 

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