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John Harshman formed Harshman & Co. in downtown Sarasota in 1989, seven years after beginning his commercial real estate career. Today, the full-service brokerage firm provides leasing, sales and consulting services throughout Sarasota and Manatee counties -- though it continues to focus on downtown Sarasota. A member of the Sarasota-Manatee Association of Realtors' Commercial Investment Division for more than three decades, Harshman in 1998 was named the group's “Commercial Broker of the Year.”
What's the overall state of downtown Sarasota's commercial real estate market?
The market is anxiously awaiting the new residences and visitors who will be arriving when new residential rentals, condominiums and hotels under construction are completed — because all three of those sectors bring people downtown, people who will, in turn, visit shops and restaurants and arts ventures. Retail isn't doing as well as it was two years ago, but it's not doing poorly, and there's not an overabundance of vacancy. Office is another matter. Vacancy for Class A space downtown is at 12.5% now, and that's not good. It's hovered between 12% and 14% the past three to four years, and that's been indicative of a market where not a lot of jobs have been created and there've been significant changes in sectors like financing and law, which once used large amounts of space but have shrunk their requirements through increased efficiency and use of technology. But clearly, downtown residential and hospitality have been the most active sectors.
Downtown's retail sector has improved considerably since 2000. Do you expect that to continue?
Absolutely. New full- and part-time residents and hotel visitors will help support both existing retail and restaurants and push demand for new retail and restaurants. Downtown's demographics are very positive and only getting better.
Sarasota's office vacancy rate remains in double digits, but large contiguous blocks of space are difficult to find. Will this trend spur new development anytime soon?
Sarasota's office users predominantly occupy 10,000 square feet or less. It's very dramatic then when a user requiring 25,000 square feet or more looks around the market. That's why Michael Saunders & Co.'s lease for 15,000 square feet-plus at the Ellis Building downtown is a good deal for the building's landlord. As such, I don't see any new office development occurring downtown for the foreseeable future. Vacancy rates are just too high and rental rates are just too low to support it.
A pair of new hotels are under construction in downtown Sarasota and several others have been proposed — though none are near the area's beaches. Why the shift?
There's considerable market demand for off-beach hotel rooms nationwide because typically they're near restaurants, retail and cultural and other amenities. That's why the Ritz-Carlton is full, the Hyatt Regency is full, and the Hotel Indigo is full. People like being downtown. And, hotel developers are finding increasingly, I think, that the values for beachfront land are just too expensive for them — condominium developers can always afford to pay more for land.
What's the difference between commercial sales today vs. those in 2007?
The biggest difference today is most commercial site purchases are made by cash buyers. Now, that doesn't mean that debt isn't being employed once development or construction starts, but for land deals, buyers are purchasing mainly with cash. I also don't see anything that's going to change that in the near term, even if interest rates remain historically low.
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