During a recent luncheon, Joe Hembree, a commercial real estate associate and Realtor at Sarasota-based agency Hembree & Associates, and Drayton Saunders, president of Michael Saunders & Co. in Sarasota, spoke about the real estate trends they’re seeing in Sarasota and how it compares on a statewide and national basis.
The State of the Community Series event July 19, put on by the Greater Sarasota Chamber of Commerce, filled the meeting space at the Carlisle Inn in Sarasota. Highlights from the presentations include:
Homebuyer demand remains strong, Saunders says, despite an extreme shift in activity — and the dramatic rise in mortgage rates, from 3% in the middle of 2022 to 7.15% as of July 2023.
“Basically, you have the shock of a rapidly rising interest rate,” Saunders says. “We have a strong outlook for buyer demand. That’s not just local, it’s national.”
During the pandemic, when homebuyers didn’t have much of a choice regarding which home they bought, it was also a known factor they were going to pay over the asking price, Saunders says.
Those houses, in general, were appreciating at 1-2% per month between late 2020 through about May 2022. Then the homeowners could sell above average.
“So what generally happens is you get ahead of the trend,” he says. “You return to the trend line, but you don’t necessarily do that with a soft landing.”
It’s a crowded market with four generations of homebuyers, but Saunders says it’s healthy. “Some of the highest credit scores are coming in to borrow money,” he adds.
While unusual to have four generations in the buyer pool — Boomers, Gen X, Millennials and Gen Z — Saunders likes what he sees. “To have all four of those generations in the market, that really speaks to the demand side,” he says. “And when there’s demand, solutions tend to follow.”
Another high note is choices are back with inventory settling making its way back into a normal rate. The Sarasota market, he says, is operating on 2.5 months of inventory supply through June. While that's less than the 3.6 months in June 2019, it's markedly better than the 0.6 months in June 2021. "This is good news," he says, "because that buyer pool who had no choice a year ago, now has choices. The narrative of the last 12 months is that we have normalized.”
Those who didn’t sell at the height of the market are now hoping those high prices come back, but really what’s happening is a rebalancing act, Saunders says.
“I have seen more price reductions in the last year than we saw in the last three years in the MLS,” he says. “Those are generally adjusting to the overreach of what we saw in the frenzy to get a home in the pandemic years.”
As a result of COVID-19, and as more people turned to remote work, there’s been a big push to shrink office space or get rid of it altogether. But Hembree believes the sector is making a comeback.
“It resurrected itself,” he says. “Turns out that human interactions are still required for the kinds of goods and services that Americans provide.”
In the Sarasota area, office space is a market worth $5.1 billion, he says. But the biggest takeaway is that the area has the lowest office space vacancy rate in the state, at 4.2%.
Still, office space activity hasn’t been too active.
The last office tower above 50,000 square feet that was built in Sarasota County, Hembree says, was Kane Plaza. The building was finished in 2001.
Hembree has a positive outlook for the future of office space in Sarasota though. “There’s a lot of demand that’s yet to be realized in office space coming to Florida, and Sarasota is not an exception to that,” he says. In turn, he predicts office rents will creep up as it becomes harder to find office space.
For a while, building multifamily units was a hot market to be involved in, Hembree says.
But then the county lost about 750 acres of land and is now having to rebuild that 20-year stockpile of industrial-focused land. What happened?
According to Hembree, multifamily units can squeeze into the light industrial land use category. When the county was building its 2050 community growth plan, residential was included in the industrial category. Now 80% of the industrial land in the county is gone, he says.
“If you go look to try and build a speculative industrial building, you simply can’t find the land to do it,” he says. “We’re going to have to have a community conversation about how we do a better job of embedding places for people to go to work into our growth plan or we’re going to continue having problems with land.”
Apartment rents have come down 3.3%, but it doesn’t tell us a lot, Hembree says because the year before rent prices skyrocketed. “We (have) to have something that curbs that growth in rent or we won’t be able to employ anybody.” Currently, there are 6,601 multifamily units under construction in the Sarasota area.