Commercial real estate doing better locally
Published: Thursday, September 19, 2013 at 6:01 a.m.
Last Modified: Wednesday, September 18, 2013 at 5:59 p.m.
Miami-based WL Installers found a warehouse in Gainesville that is closer to the company's customers in the northern half of the state, allowing the company to save on shipping costs while paying a lot less for the real estate.
Commerical real estate activity
Breakdown of commercial real estate deals in Alachua County, January-June 2013
1. Office leasing – 28%
2. Ag and timber land sales – 22%
3. Retail leasing – 17%
4. Industrial leasing – 13%
5. Office sales – 11%
6. Industrial sales – 9%
Jan.-June 2013 change from Jan.-June 2012
Office listings 244 -5.1%
Vacant office space 758,206 sf -5.3%
Avg. gross lease/sf $14.12 9.4%
Avg. days on market 408 days -8.8%
Retail listings 199 -2.9%
Vacant space 852,249 sf 10.5%
Avg. net lease/sf $16.02 0.1%
Avg. days on market 704 days 22.6%
Source: Coldwell Banker Commercial M.M. Parrish Realtors
"What I spent, for $360,000, I would have spent well over a million (in Miami), probably a million-five," owner William LaRoque said.
WL Installers, which supplies and installs racks, conveyors and other warehouse equipment nationwide, bought a 23,000-square-foot warehouse at 3500 Waldo Road early this year, one of 14 industrial sales in Alachua County so far this year compared with four in all of 2012, according to a survey of commercial real estate by Coldwell Banker Commercial M.M. Parrish Realtors.
"Fourteen sales is still horrendous, but from where it used to be, it's fantastic," survey author Beau Beery said.
It's also a sign that the economic recovery in Gainesville has touched one of the last stops on the real estate "life cycle," as Beery put it.
More jobs fuels more home sales and the need for more offices; retailers locate near offices and homes, followed by the need for industrial space from retailers, trades and other vendors to store inventory or, for example, to run an HVAC business. Developers also are buying land in anticipation of future commercial and residential development.
Commercial real estate is recovering month by month, albeit slowly, with slight increases in sales, leases and prices, Beery reports, as expanding businesses are leasing offices, national and franchise restaurants are busy looking for space, wealthy investors are buying agricultural land for long-term investments, and industrial sales are back from the dead as buyers and renters take advantage of low prices and low interest rates.
"The big picture is everything's improving," Beery said. "I think it's consumer confidence. People are feeling better."
Real estate professionals are concerned, however, that rising interest rates could slow the recovery and they question the ability of the Gainesville market to absorb the amount of new retail space proposed in several large developments such as the Butler Plaza expansion and Celebration Pointe.
A University of Florida survey of 145 real estate analysts released Sept. 11 showed that the investment outlook for all types of real estate declined for the first time in two years as interest rates have risen 1.4 percent over the past six months in response to overtures from the Fed that it might slow or stop its monthly $85 billion bond purchases. On Wednesday, the Fed announced that it will maintain the pace of its bond purchases because it thinks the economy still needs the support.
Interest rates still are relatively low, so the ongoing recovery will depend on whether interest rates continue to rise at that steep trajectory, said Tim Becker, director of the UF Bergstrom Center for Real Estate Studies in the Warrington College of Business Administration.
"It's really how much is it going to go up over the next six months," Becker said.
For the first six months of the year, office leasing was the hottest segment in Alachua County, with 36 leases accounting for 62 percent of commercial real estate deals, according to the Coldwell Banker survey.
Those included several expanding or new medical offices, attorneys, insurance and financial services companies and biotech companies, Beery said.
Of the available office space, 13,387 square feet was absorbed, leaving 758,206 square feet available for a 12 to 13 percent vacancy rate. Beery writes that Coldwell Banker would be more comfortable with 8 to 9 percent vacancy, which at the current pace of deals would take six years to reach.
On the retail side, 25 deals removed 44,324 square feet from the market, leaving 852,249 square feet available for a 9 to 10 percent vacancy rate. A healthy rate would be 5 to 7 percent, which would be reached in 20 months at the current pace.
Alma Mater Custom Apparel did its part by moving in March from a 1,500-square-foot space in Westgate Shopping Center into a 3,700 square feet space nearby — on the other side of Play It Again Sports.
Owner Brian Meade said business has grown steadily since opening two years ago to provide screen printing and embroidery for UF sports teams, the Greek system and other clients.
"I think just the proximity to UF helps us out a lot," he said.
Alma Mater needed more space for equipment and storage, and also has a larger retail section in the front to sell Gators apparel, Meade said.
Alachua County also has seen a growing number of agricultural and timberland sales, with about 35 to 40 deals just from Realtors in the first half of the year, Beery said.
That is part of a trend of wealthy investors buying land "in the pathways of development," continuing to farm the land to cover the property taxes and sell to developers in 10 to 15 years at a large profit, he said.
Surrounding counties also are seeing a lot of land sales, Beery said.