June Office Vacancy Report (Sarasota County)

Vacancies inched up once again. We have about another percentage point of empty office space than we did a few months ago with the I-75/Fruitville, south to Clark corridor seeing a negative 40,651SF of absorption this year. Ouch!

Down and dirty numbers:

Countywide: 18.82%
University Parkway: 18%
Downtown: 13%
I-75/Fruitville S to Clark: 23%
Venice: 22%
North Port still sucking wind at: 35%
Suburban and South Trail: 26%

Commercial Real Estate Problems are Behind Us, Say Experts

Experts speaking at this year's Commercial Real Estate Market Forecast had some interesting observations, not least of which is that the worst of the commercial real estate turmoil is several years behind us already. Interestingly, some believe the residential condo market will not be fully corrected for another twelve years or so. Yes, twelve years.

On the subject of commercial land, I believe things will pick up as soon as lenders get a little more motivated to provide construction loans for projects. First, however, we need some of the inventory to go away and that seems to be happening...slowly. From the Tampa Bay Business Journal.

By Margaret Cashill

Speakers at the 2009 Commercial Real Estate Market Forecast believe local executives are displaying cautious optimism, but said the greatest difficulties in the commercial real estate market are several years behind us.

The Tampa Bay Business Journal hosted the luncheon Thursday afternoon at the A La Carte Event Pavilion in Tampa, in partnership with the National Association of Industrial and Office Properties.

After an introduction from Bridgette Mill, president and publisher, the event featured five commentaries on the topics of investments, land, retail, industrial and office with Dallas Whitaker of Greystone Equity LLC and TBBJ Staff Writer Janet Leiser serving as moderators.

Steve Ekovich, first VP and regional manager of Marcus & Millichap Real Estate Investment Services, spoke of a “recalibration market” following the transition of recent years. He predicted that the inexpensive cost of doing business would benefit local retail, multifamily and office markets.

Bill Eshenbaugh of Eshenbaugh Land Company echoed Ekovich’s sentiment of a recovering market in his discussion of land. Recounting his travels to Pennsylvania, he mentioned a “groundhog” effect in the homeowner’s market following a three-year downturn.

He also predicted that for the condominium market, the cycle would not correct itself until 2020, based on past upturns in 1986 and 1972.

Pat Duffy, president of Colliers Arnold, addressed the subject of retail. Retailers are “cautiously optimistic,” he said. The rising cost of oil has decreased people’s disposable income, which decreases demand for shopping centers.

In speaking about industrial real estate, Ray Sandelli, senior managing director of CB Richard Ellis, said retailers are trying to move closer to populations. For the region, he believes activity will remain slow, flexibility in tenant renewals will increase and distribution centers will gravitate closer to customers.

Larry Richey, senior managing director of Cushman & Wakefield of Florida, Inc., commented on the state of the office market. Since Tampa Bay has lost 16,000 jobs in the last year, the first six months have seen more than 833,000 square feet of negative absorption in the market, he said. The cost to do business in Tampa is reasonable, however, and Richey predicted the cost of living will go down, and leave tenants with more options.

Richey also emphasized that the negative impact of the storm seasons in 2004 and 2005 is fading. The fact that the Bay area has a competitive cost has always helped the region, he said, and is beginning to help again.

Continue Reading...

ICSC Panel = Be Nice To Your Tenants + Some POSITIVE News

Some positive news at ICSC this past week. A report released by the group states that Florida's retail occupancy is much healthier than much of the nation and that the state is poised for very aggressive, positive growth once the broader economy gets healthier. Good to know, but the ICSC panel noted foreclosures will be spiking as loans reset.

Stanley Tate, president of North Miami, Fla.–based Tate Enterprises and an advisor to the Federal Reserve, cautioned landlords to play nice" with their current tenants. "An occupied store is better than an unoccupied one," he said. "Even if it is at half the rent."

Owners of distressed retail properties will need to do some fancy footwork to stay afloat in the coming year as many of their loans come due, speakers said at ICSC's Florida Conference in Orlando, Fla., today. Without enough cash flow to maintain mortgage payments, these owners will need to try and re-negotiate loan terms with lenders and rethink CAM and other operating costs to help troubled tenants keep up with their rent payments.

More than $1 trillion worth of U.S. commercial properties will undergo foreclosure in the coming year as owners default on their loans, predicted Stanley Tate, president of North Miami, Fla.–based Tate Enterprises and an advisor to the Federal Reserve. "It's just beginning to start. Those who are heavily leveraged are going to have a very difficult time," Tate said. He pointed out that the FDIC has hired 500 new regulators to help shut down 85 banks within the next 30 days. As more and more subprime borrowers default on loans, "there are very serious problems in the banking industry," he said.

Not all of that foreclosed commercial property will be retail, but Tate expects a significant portion to be small open-air centers tenanted by mom-and-pop shops. Such tenants have been hit hard by inflation and are having trouble keeping up with rent payments, he said. And landlords can no longer count on securing new debt to stay afloat. "In the past few years, every deal was bailed out by more easy money," said John Kozyak, a commercial bankruptcy lawyer with the Coral Gables, Fla.–based firm of Kozyak, Tropin, Throckmorton. "Now, with a lot of loans coming due next year, the easy money has run out."

Troubled owners should not put off trying to renegotiate loans until the last minute, Kozyak said. "The main thing is to get to your lender early and with accurate information," he said. "Lenders are demanding more information in the current economy and they're not tolerating the sneaking around that's been going on in the past 18 months."

To avoid write-offs, lenders are willing to be flexible and work with distressed borrowers, particularly insurance companies and publicly traded lenders who might be more willing to play ball as their quarter is drawing to its close, said Raul Valdez-Fauli, president and CEO of Coral Gables, Fla.–based CNL Bank. "Banks are dusting off forebearance agreements, which include the extension of amortization periods and even reduction of mortgage payments for several months if a borrower can prove that an impending increase in cash flow is on the horizon,"
Valdez-Fauli said.

Landlords should do their part to help troubled tenants make rent and keep cash flow up, said Craig Sher, executive chairman of St. Petersburg, Fla.–based The Sembler Co. "Developers will have to reduce CAM expenses penny by penny, and try to save money on insurance. We've attacked every appraiser," he said. "Save tenants money on the expense side so they can afford to pay rent."

Tate recommended that landlords approach troubled mom-and-pop tenants now to renegotiate rents and lease terms. "An occupied store is better than an unoccupied one," he said. "Even if it is at half the rent."

Copyright 2008, International Council of Shopping Centers

What a Mess

It's happened before: a 1031 intermediary shuts its doors and takes investors' cash along with. The worst part about these kinds of failures is that the IRS does not care that you lost your money. Obviously, without the proceeds cash to complete the 1031, you're pretty much SOL. It's still your responsibility to pay those (thought to be) deferred taxes. No one's really sure how much money has been lost...the largest 1031 loss so far was the implosion of The 1031 Tax Group LLC in 2007 with $130-million in 1031 funds missing. The latest catastrophe is that of Vesta Strategies. See below.

Former clients of Vesta Strategies LLC have been livid that the facilitator of tax-deferred real-estate transactions shut its doors last month without returning several million dollars of their money. Now California authorities are getting involved.

The district attorney's office in Santa Clara County last week searched four properties associated with Vesta, including two Vesta offices and the homes of its former chief executive, Robert Estupinian, and former operations chief, Peter Ye. The investigators seized 60 boxes of Vesta documents, according to Santa Clara Deputy District Attorney Mike Fitzsimmons.

"I'm getting calls from all over the country from investors who gave their money to Vesta," Mr. Fitzsimmons says. "We're going to...coordinate our efforts as appropriate with other agencies."

Mr. Estupinian, who left Vesta last November, said Tuesday that he is cooperating with the DA's office. Mr. Ye didn't return messages seeking comment. John Terzakis, a Chicago businessman and majority owner of Vesta, on Tuesday mailed settlement offers to several Vesta clients, his spokesman said. Mr. Terzakis and Mr. Estupinian have sued each other in federal court, each accusing the other of embezzling from Vesta.

As a so-called qualified intermediary, Vesta held money for investors who had sold a property and intended to use the proceeds to purchase another. Under section 1031 of the Internal Revenue Code, investors doing such like-kind transactions can defer paying certain taxes on the deals if they adhere to criteria such as parking the money in the interim with a disinterested intermediary. From WSJ.

Report: Real estate agents willing to cut commission

When it comes to residential real estate these days, it seems everything is subject to negotiation.

That includes the real estate broker's cut on the deal, according to a report issued Monday by Consumer Reports. Based on a recent survey of home sellers, 46 percent of people trying to sell their homes through agents tried to negotiate a lower commission rate. Of those home sellers, 71 percent succeeded in getting the real estate agent to take less.

Haggling, the nonprofit Consumers Union publication noted, didn't mean home sellers were getting less from their agents or were less satisfied with the outcome. Sellers who paid commission rates of 3 percent or lower were just as satisfied with their broker's performance as those who paid 6 percent or more, the report noted.

Despite the nationwide slump in residential real estate sales, 86 percent of Consumer Reports' readers who put their homes on the market made a sale, while only 8 percent gave up and took their homes off the market.

Agents with large brokerage firms scored just as well as independent brokers when it came to customer satisfaction, but the magazine recommends home sellers base their choice of agents on factors that include personal recommendations.

The magazine recommends home sellers price their homes realistically, and drop their asking price between 4 percent to 6 percent if they don't receive an offer within four to six weeks.

The Washington (D.C.) Business Journal is a sister publication of The Business Journal Serving Greater Milwaukee.

Giant Homebuilder WCI Files Chapter 11

Okay, let me get this straight: Carl Ichan offers WCI $22 a share, roughly $1-billion US, back in April of 2007. And WCI tells him basically to "get lost" at the time. Today, with WCI facing the possibility of defaulting on $1.8-billion in debt and the NYSE halting trading at 9:31 this morning at 66 cents a share, the company filed for bankruptcy in Delaware. It's one thing to fail but it's another to fail so spectacularly in view of everyone.

Full story here (South FL Business Journal)

Sarasota, Manatee Office Market Demand Down

This was a national story. Interestingly enough, my newest lease deal (which went to Juvenile Diabetes btw) is mentioned in paragraph 2.

Sarasota, Manatee office market demand down
Tampa Bay Business Journal

It's a good time for businesses to rent Class A office space in Sarasota or Manatee counties: Rents are down and vacancy rates are up.

That means extra incentives are being offered to would-be tenants. One Lakewood Ranch building owner recently enticed a new tenant with 12 months free rent.

The second-quarter overall Class A vacancy rate rose to 17 percent, up from 13.7 percent the previous quarter, a report by Colliers Arnold Commercial Real Estate Services says.

That vacancy spike resulted in lower rental rates for Class A space. The average asking rate was $24.22 a square foot, down from $26.32 in the first quarter.

The overall office market, however, fared better. Overall asking rental rates remained steady at $22.17 a square foot. About 9.4 percent of the 16.3 million-square-foot office market was vacant.

Click here for the story on TBBJ.

The Problem With Lakewood Ranch

What would I advise those looking for office space in Lakewood Ranch? Get it while you can.

Rents have sunk to incredible new lows in this upscale commercial enclave just east of I-75. The situation has grown so desperate, in fact, that I just finished up a lease where the owners offered one entire year of free rent to a new tenant. Upfront. Although this was a bit of an anomaly, I see similar things in store for this beleaguered area if things don't improve relatively soon. In the end, we ended up leasing the space to a national non-profit organization and they offered to pay rent for the entire term. To underscore the significance of this, when I stood up and pitched the unit at the Commercial Investment Division's (CID) monthly broker meeting in June, there were audible gasps from other brokers in attendance. What's more, I was fielding at least two calls per week from other agents who wanted it "out of the way." Although I wasn't there, I'm told the existence of this property was of particular note at the last Manatee EDC vacancy meeting.

So this is what happens when you have a perfect storm of a crummy economy, rising commodity prices, overbuilt office space and high pass-through expenses. People shopping for office space in Lakewood are well educated as to the vacancy situation out there and use that knowledge to their advantage. Owners of these vacant properties are hamstrung, at least for now until enough of it gets absorbed that rents can start swinging back in the other direction. There is some very nice Class-A office space available in Lakewood for $11 and $12 per foot currently. Do I think those are fair prices reflective of the product being offered? Not really, but the owners of these buildings have to do what they have to do in these challenging times. Better to have someone paying some rent, plus expenses. than it sitting vacant bleeding money month after month. I do feel that base rents are as close to bottom as they're going to get, but I'm just one guy with an opinion.

The other issue here is that, with such cheap rents, landlords run the added risk of attracting and renting out their spaces to less than credit-worthy tenants. Cheap rent oftentimes attracts the shaky, less than stellar renter. The potential problems these bargain basement tenants introduce could end up being worse than allowing the place to stay vacant a little longer. Tenants who shop solely on price alone are not always the most desirable. Be careful.

How long do I think this situation will last? Probably another year or so before we start seeing some turn around out there. I would advise tenants who are on the fence about leasing space in Lakewood that the big price cuts have probably already been made. I'd also advise them they should get what they can now because the cheap rent ain't gonna last forever.

Blackberry Curve and some apps

Went from a clunker Treo 650 > BB 8703e > Curve. Verizon gave me a great deal on this with a 4gb Micro SD card and Seido holster. HUGE improvement from the 8703e. I've had clients picking on me for the fact I had an old phone that looked like it was 10 years old and large enough to be considered a weapon.

It was this or a 3G iPhone...lack of copy/paste on the iPhone sealed the deal. I'm not exactly sold on the lack of a keyboard, either. Even some dyed-in-the-wool Apple fans like Leo LaPorte went back to the Blackberry.

The other thing I'm enjoying is eTrade's Blackberry only application called eTrade Mobile. You may have seen the humorous commercials about this service. Ran pretty well on my old 8703 and seems just as stable on the Curve. Streams quotes and allows trades. Like the baby said. :)



I will agree the Blackberry platform does need a real browser like the iPhone. The Internet is where the iPhone shines.

Retail and Office Delinquencies Shoot Up

From CoStar:

Increased volatility in the office and retail sectors have led to a two basis point increase in U.S. CMBS delinquencies, according to the latest Fitch Ratings loan delinquency index. While overall delinquencies increased only mildly for the fifth consecutive month, the retail and office sectors led the index with net increases of $70.5 million and $62.2 million, respectively.

Despite relatively stable performance to date, Fitch remains concerned about the retail sector.

"An increase in retail bankruptcies and a continued decline in consumer disposable income are evident, though they have yet to impact retail performance," said Susan Merrick, managing director of Fitch. "High energy and commodity prices, rising unemployment, housing market weakness, and lower credit availability continue to negatively impact retail sales and are expected to dampen retail sector growth going forward. Recent store closings, including continued bankruptcy filings of tenants such as specialty retailer Linens 'n Things and discount-apparel retailer Steve & Barry's, will impact retail performance."

Retail loan delinquencies increased 25.7%...Click here for the rest of the article.

Colonial Bank Purchases New Branch in Osprey

28 July, 2008 - Colonial Bank N.A. (NYSE: CNB), has purchased an approximately 2,900 square foot condo at 24 East Bay Street, Unit 11, Building A-3, Osprey, Florida from Bay Street Partners, LLC for $1,455,725. Colonial's new branch, which includes two drive through lanes is expected to open sometime in 2009. Anthony V. Migliore and Paul Klick of Coldwell Banker Commercial NRT represented Colonial Bank and Ray Rodriquez of Florida Rays Realty represented the seller.

"This just underscores the fact that there is positive news with regard to banks expanding in this economy," says Migliore who represented Colonial Bank. "This is a strategically important site for my client."

The Colonial BancGroup, Inc., is a $27 billion financial services company headquartered in Montgomery, Ala. Its common stock is traded on the New York Stock Exchange under the symbol CNB. They are both a Fortune 400 Platinum Company as well as a Fortune Global 1000 company. Colonial currently has more than 340 banking offices in Alabama, Florida, Georgia, Nevada and Texas.

Colonial Bank: http://www.colonialbank.com
Coldwell Banker Commercial NRT: http://www.cbcworldwide.com

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Proscenium A Go Go

The Herald's reporting the city has given the go-ahead to the massive Proscenium project on 41 downtown.

From the article:

"In adopting plans for a Hospitality Regional Activity Center and a "proportional fair share agreement" for the planned $1 billion real estate development, commissioners opted for jobs and tax revenue over fears of congestion.

Proscenium, with office space and shops, more than 200 upscale condominiums and an 800-seat theater, is expected to generate roughly $2.8 million a year in property taxes and house more than 1,000 workers -- though many will likely come from existing office users -- when completed in 2011."

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