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Local commercial real estate agent Carl Wise will resort to the four Ps to lease or sell one of his newest listings, an empty 28,000-square-foot industrial manufacturing facility.
The Ps: place an ad; place it in the MLS; place a sign in front; and, finally, pray.
Wise, of course, is joking — mostly.
But gallows humor is comfort food these days in commercial real estate. That's especially true for the industrial/warehouse market in the Sarasota-Bradenton region. The niche market, Wise and several other local brokers say, is at the point where it's cheaper to buy an existing building than lease space in many cases. That's a shift from where the market has been in the past five years.
“We've seen things trending that way,” says Kevin Robbins, a broker with Sarasota-based Harry E. Robbins Associates. “That's become more and more apparent this year.”
Wise's listing undergoing the four Ps treatment is a case in point to display the altered equilibrium between buying and leasing, and the challenges that come with it.
The listing is one of three buildings that make up the 80,000-square-foot Cygnet Center on 63rd Avenue East in Manatee County, a few miles from the Sarasota-Bradenton International Airport. C.L. Swanson Corp., a family-run enterprise in vending and commercial dining, owns the center. The firm, also based in the complex, has other real estate holdings nationwide, including properties in Arkansas, Colorado and Wisconsin.
Creonix, a $12 million cable wire and circuit board manufacturer with military and defense clients, was the building's previous tenant. Creonix and its predecessor businesses occupied the space since 1986, but the firm left in October. Schaumburg, Ill.-based Sparton Electronic Devices, a subsidiary of publicly traded Sparton Corp., bought Creonix in June and moved it to an existing facility in Brooksville, in Hernando County. Nearly 70 employees in Manatee County lost their jobs in the acquisition. (See box, above.)
C.L. Swanson, meanwhile, lost a valued tenant when Creonix left. Two other Cygnet Center tenants, moreover, Atlas Solutions, a wireless telecommunications firm, and Wsm Distributing Co., a boat and marine products firm, have departed the center in the past year. Both Atlas, which had leased about 9,500 square feet, and Wsm, which occupied 4,800 square feet, bought nearby buildings — more proof of the buy-versus-lease trend. Those defections, combined with Creonix, leave the Cygnet Center 45% vacant.
Wise targets around $6 a square foot for the Creonix space, though the lease price and terms are flexible. That price is about the average asking lease rate for local industrial buildings, say several local brokers, though rates vary widely based on location and building features.
Another factor that could squeeze down the price is excess inventory. An exact vacancy rate for the area right around the Creonix building, however, is hard to track because the region is included in Tampa in research reports.
Wise, pointing to some positives of the situation, says the Creonix building is centrally located, fully air conditioned and has an updated electrical system. C.L. Swanson Corp. Chairman Chuck Swanson adds that his firm has spent at least $750,000 in the last decade on renovations and maintenance on the property, built in 1986. That includes what's now a double-fortified roof.
“This opportunity is different and unique,” Wise says. “It's bigger than little, but not huge. It's divisible, and can be taken in bite-size pieces.”
One other potential hindrance to Wise's assignment is the impact of the SRQ Tech Park, a 233,000-square-foot distribution and delivery facility under construction a few miles away. The developers behind that project, University Park-based Benderson Development, one of the largest privately owned real estate firms in the country, targets tenants that need large loading docks and 28-foot ceilings.
Wise won't necessarily market to the same potential tenants for the Creonix space, but more industrial space on the market certainly factors in to the overall strategy, including pricing. Swanson, though, says the Benderson project is good news in one sense, in that success breeds success.
“Benderson is building theirs, and they have a lot more money than we do and are a lot smarter than us,” Swanson says. “So they must know something.”
Stay or Go
An empty 28,000-square-foot manufacturing facility in Manatee County puts a spotlight on the tribulations inherent in using government money to lure businesses to stay local, hire more people or move to the area.
Consider: A little more than two years after Creonix, a cable wire and circuit board manufacturer, received $111,000 in performance-based incentives from Manatee County, the company is no longer here. Creonix moved 100 miles north last month, to Brooksville, after Schaumburg, Ill.-based Sparton Electronic Devices bought it. Nearly 70 local employees lost their jobs when Creonix, with $12 million in annual sales, moved.
Yet on a by-the-book basis, Creonix did everything it was required to do for the incentives, Manatee County Economic Development Program Manager Karen Stewart says. The company, says Stewart, retained 104 jobs and spent $600,000 in renovations on the building in 2010 and 2011. It also created 34 jobs at an average wage of $31,200, Stewart says, which is the local industry average.
The job retentions and renovations were stipulations in the contract. But there are no claw back provisions, says Stewart, if a company moves after it completes performance-based incentive requirements.
Creonix received the $111,000 over three months in early 2011. It didn't invoice the county, Stewart says, for any jobs created in 2012, forfeiting $10,000.
Stewart says the county's return on the subsidies for a two-year period was $873,600 in direct wages and $158,806 in increased property taxes. Still, Stewart concedes Creonix's quick departure isn't an ideal economic development situation. “Of course we want all our companies that are here to stay here,” she says, “but we're glad they were able to contribute to our economy.”
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