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Update on commercial real estate in Florida

Andrew Wright founded real estate leasing and management company Franklin Street in 2006 when he was only 26. To better weather market downturns, Wright’s Tampabased firm later branched out into insurance services, lending and appraisals. “I wanted a balance of offensive and defensive businesses,” he says.

The strategy served him well. When the mortgage loan business began collapsing as the recession hit in 2007, “our insurance business was taking off,” Wright says. “In the downturn, the banks needed property management and valuation appraisals. When the market picked up, we were able to recruit brokers and grow our retail business.”

In addition to its Florida offices — in Tampa, Jacksonville, Miami, Orlando and Fort Lauderdale — Franklin Street has an Atlanta branch. The company now employs more than 200 and recently hired a new president of real estate and management services, Kurt Keaton, formerly with JLL. Wright envisions Franklin Street becoming a national brand within the next five years.

In 2014, Tampa Bay Lightning owner Jeff Vinik tapped Franklin Street to oversee the leasing and management of Channelside Bay Plaza, the waterfront entertainment center in downtown Tampa. Wright says the plaza eventually will tie into Vinik’s bigger plans for Channelside and downtown Tampa.

More generally in Florida, Wright sees opportunity in the apartment building and office sectors. “The rents are strong, and there’s a demand to buy properties.” Wright also views retail as a hot sector because of rising rents and tightening of space. “There’s a lot of demand for well located, high barrier-to-entry retail,” he says. “I see a lot of opportunity to reposition assets.”

Wright also has seen opportunities that intrigued him as investor. He has invested personnally in several real estate and finance transactions, careful not to invest in anything that would compete with his clients, he says. In some instances, his investments are partnerships. “Sometimes clients want us to co-invest in their projects so we are not just in it for fees, and we do it.”



Building Boom

Demand for Florida retail space remained strong in 2015, with net absorption topping 3.7 million square feet. Retail spending was fueled by rapid population growth (Florida was No. 2 for population growth in 2015), a hot housing market and record tourism. Restaurants and specialty grocers were a particularly active segment in the retail market. Developers built some 1. 7 million square feet of space in 2015 — the highest annual total of the current market cycle — and 3.8 million square feet were under construction at year-end.

The bulk of the 2.4 million square feet in retail development under way is in Miami, but development is expected to accelerate in Broward County, Tampa, Orlando and Jacksonville as high prices for development sites in Miami prompt developers to look north for opportunities.


7-Year High

About 8 million square feet of industrial space was built in Florida in 2015, more than in any of the previous seven years. Most of the industrial space built was concentrated in central Florida, which is becoming a major logistics hub. Publix, Amazon and others have opened large distribution centers to gain access to some 18.4 million consumers within reach for same-day or next-day delivery. Florida industrial space also saw across-the-board improvements in leasing rates. Real estate professionals expect that to continue in 2016, particularly in central Florida.


A Shortage of Space

Almost twice as much office space was absorbed in 2015 as during the previous year.Downtown is the place to be — lease rates in central business districts across the state saw strong growth. In Miami-Dade County, 770,000 square feet of office space was under construction at the end of 2015. Miami accounted for 66% of the total space under construction in the state, but even with the additional space Miami will remain undersupplied compared to other major office markets nationwide. Brokers believe statewide office lease rates (hovering above $25 a square foot) will continue to grow through the end of 2016.


Rising Rents

Effective rents rose in most markets in Florida in 2015 as the national homeownership rate dropped. Real estate professionals expect the trend to continue, at least through the end of this year.Of note, Orlando was named one of 10 multifamily markets to watch in 2016 by LeaseLabs, after recording a 7% year-over-year rent increase in 2015.



Demand for buildable property continues to be strong. Some investors are purchasing land to “bank” it for future development, but most tracts are being bought for immediate development.


Fewer Acres Sold

The total number of ranch acres sold fell from 83,400 in 2014 to 62,855 last year, but demand remains strong. Dean Saunders, founder of Coldwell Banker Commercial Saunders Real Estate in Lakeland, says he sees increased demand for smaller recreational tracts that may sell for higher prices. However, he believes pricing for larger ranch tracts will stabilize in 2016.


Big Investors

Crop land in southwest and central Florida has drawn interest from institutional and overseas investors. In south Florida, agricultural land sales have cooled, but during the last year, several large land deals have taken place within the Homestead area. In north Florida, crop land market activity was fairly low overall.


Record Territory

Last year saw record sales, with the biggest being the sale of Foley Timber & Land — nearly 563,000 timberland acres spanning multiple counties — for just under $712 million. Another large sale was the 97,700-acre Plum Creek land in Levy County to Boston Timber Opportunities for a reported price of $1,230 per acre. Largetract sales totaled more than 719,000 acres with an average sale price of $1,464 per acre — about a $100 per acre increase over the 2014 average.



Facing the impact of greening, growers must decide whether to continue to fight the disease and expand — or sell. Groves near population centers will likely see a demand for transitional use, including residential and commercial development. The sale prices for 38 transactions in land near metro areas ranged from about $1,974 per acre to $12,500 per acre in 2015. Last year’s sales were highlighted by two of the largest agricultural sales in recent history — the Premier Citrus sale with grove land being converted to farm lands and the Met Life portfolio of ranch lands and grove lands being converted to farm lands.

Notable Projects

» CocoWalk/Sunset Place, Miami-Dade County

A joint-venture led by Federal Realty has acquired The Shops at Sunset Place in South Miami for $110 million and CocoWalk in Coconut Grove for $88 million. Federal Realty’s Chris Weilminster says he and his partners are meeting with politicians and community groups in both towns to get input on the reconfiguration of the centers.

» Loews Sapphire Falls Resort at Universal Orlando, Orlando

Universal’s newest addition is a $300-million- plus resort set to open this summer.

» The Henderson, a Salamander Beach & Spa Resort, Destin

The project by Dunavant Enterprises, estimated to cost more than $300 million, will center around a 170-room beachfront hotel expected to open this year.

» Preferred Growth Properties, near St. Johns Town Center, Jacksonville

Developer Preferred Growth Properties has proposed a mixed-use project south of the new Town Center Exchange. Permitted uses are up to 500,000 square feet of enclosed retail and commercial space, 100,000 square feet of office space, up to 400 hotel rooms and up to 500 multifamily residential units.

» The Shoppes at Edgewater, Panama City Beach

This spring, the Panama City Beach planning board approved a conceptual plan to transform the Shoppes at Edgewater on Richard Jackson Boulevard into an outdoor town center along the lines of the nearby Pier Park outdoor mall.

» Creative Village, Orlando

Infrastructure work is nearing completion on Creative Village in downtown Orlando, a billion-dollar project that promises to transform the former Amway Arena site into a 68-acre mixed-use, transit-oriented complex.UCF and Valencia College have committed to a campus that would anchor the project.

» Park Place, Tallahassee

Developers are moving forward with plans for the proposed Park Place Outlet Mall in the city’s northwest area. About 75 acres are earmarked for up to 800,000 square feet of commercial development, with the initial mall to occupy 350,000 square feet.

» South Florida Logistics Center, Miami

This 200-acre intermodal logistics complex being developed by Flagler Global Logistics continues to draw demand from global industrial users. The developer built 1.25 million square feet of industrial space last year and leased about 235,000 of it for operations at South Florida Logistics Center, along with build-to-suit facilities. By the end of the year, South Florida Logistics Center’s development will reach its halfway mark with 1 million square feet completed and 1 million to be developed.