© Lori Sax Duff Rubin is the president of Coldwell Banker Realty in Florida
The COVID-19 pandemic is uncharted territory and has impacted home and employment life for millions across Florida, including commercial real estate leasing and sales slowing significantly in the first quarter of 2020, revealing the market’s unpredictability. This is a unique moment in the commercial real estate market, and I’ve never seen the market shifts that we’re seeing today, even in my prior position as the owner of a commercial real estate company before selling it to Realogy, Coldwell Banker Commercial’s parent company.
According to Coldwell Banker Commercial’s 2021 Mid-Year Update, the commercial real estate sector saw increased market activity revealing continued strength and recovery in self-storage, net-leased and industrial markets, and concerns in the brick-and-mortar retail, office leasing and the hospitality markets.
Due to the increase in demand, lumber is up 75% from a year ago, although it has come down 50% from May highs. Increases in demand have also affected plywood and steel prices. While our commercial professionals are seeing developers across the state pause new construction projects with a “wait and see” approach to the market, other real estate developers and investors are purchasing parcels of land for recreational, residential, and industrial purposes at a pace previously unseen by brokers.
As the economy continues to recover from an unprecedented year, investors are increasingly returning to the commercial space. Re-development of existing commercial properties, particularly in Sarasota, has attracted many developers to the city, counties, and surrounding areas.
According to data provided by CoStar, Sarasota’s office market is greatly outperforming the national index, with approximately $260 million in sales volume year-to-date, an 11.2% growth from the previous year. A similar performance can be seen in Sarasota’s multifamily and condominium market, with approximately $718 million in sales volume year-to-date, a 44% growth compared to 2020.
Elliot Rose, a talented Sarasota-based commercial real estate broker with Coldwell Banker Commercial NRT recently shared with me that, “developer interest in greater Sarasota continues to be robust. Coastal sites suitable for luxury condominium redevelopment are highly pursued, including ‘bulk purchases’ of existing condo complexes. Downtown mixed-use redevelopment of existing buildings and suburban land tracts for residential single-family homes in the residential categories are currently in high demand. In addition to local and regional interest, developer interest from domestic urban markets abounds, especially from the Northeast and Midwest.”
Among the 2021 Mid-Year Update’s findings, Coldwell Banker Commercial brokers are also witnessing a tenant’s market, with a drawdown from a previous need by businesses for large office space to demand for much smaller spaces that are below 10,000 square feet. Increasingly, companies are adopting a hybrid business model and looking to save on the overall cost of leasing office space. This desire for smaller office space comes from a variety of businesses, including new enterprises, labs, professional service providers, medical offices and cryptocurrency traders. This shift in demand could see landlords offer established and prospective tenants anything from fully furnished office space to high-quality central business district (CBD) assets at discount pricing.
Even with this monumental shift in office space demand, the need for some form of office space for companies to conduct business is still present. Rick Locchead, a Pensacola-based commercial real estate broker with Coldwell Banker Commercial NRT, shares that “there are many great benefits to online meetings, but there are challenges to training and developing new talent over time without in-person collaboration. With rapid inflation, the cost of that new talent/trainee is increasing. Working together in an office is still more efficient than online for most businesses.”
While the commercial real estate market trends in Florida across all sectors ebbs and flows, understanding these shifts and keeping our finger on the pulse of the market is key to being a part of the economic impact driven by the commercial real estate sector throughout our state.
Duff Rubin is the president of Coldwell Banker Realty in Florida.
This article originally appeared on Sarasota Herald-Tribune: Home Front: Investors eye commercial real estate at uncertain juncture