Commercial real estate report: “Sober year for 2010 and maybe not much better for 2011’’

Bad news from commercial real estate source CoStar Group:

A record 900 people participated in this year's Emerging Trends in Real Estate 2010 survey by PricewaterhouseCoopers and the Urban Land Institute. The results won't do much to either comfort the pessimists or encourage the optimists.

Across the board, investor sentiment was at or near record lows. Survey respondents predicted that vacancies will rise and rents will fall in all property types before the market hits bottom next year. Only apartments rated as a "fair" prospect, with all others sinking into the fair to poor range, with respondents especially bearish on retail and hotels. Development prospects ranged from "dead" and "abysmal" to "modestly poor."

"Not surprisingly, the overwhelming sentiment of Emerging Trends interviewees remains decidedly negative, colored by impending doom and distress over prospects for an extended period of anemic demand and costly deleveraging," the report said.

On the other hand, value declines of 40% to 50% off 2007 peaks will present once-in-a-generation opportunities, respondents said. "A sense of nervous euphoria is growing among liquid investors who can make all-cash purchases" from distressed sellers and banks, said ULI Senior Resident Fellow for Real Estate Finance Stephen Blank.

I listened in sporadically to a Web conference about this report on Thursday and the presenters didn't have too much flattering to say about Tampa Bay.

It seems we're not an international gateway. Neither are we a job creation powerhouse with all the requisite cultural amenities and public transportation. We build too many homes in fringe suburbs in a time of rising energy prices. 

"Places that accommodate mass transit will be much better off than places that don’t,’’ said Jonathan Miller, a consultant with Pricewaterhouse, in reference to a question about Tampa Bay.

Tampa Bay's hottest office markets run cold

Pretty dismal news on the office leasing front: Hillsborough County's and Pinellas County's largest and best maintained business districts have some of the worst vacancy rates.

In Hillsborough, the Westshore business district, far and away the biggest office aggregation near Tampa, office vacancy was 20.6 percent in the quarter ending Sept. 30.

In Pinellas' Gateway district, across the Howard Frankland Bridge from Tampa International Airport, vacancy has risen to a brow-furrowing 26.9 percent.

In the third quarter alone - from July 1 to Sept. 30 - 406,000 square feet of net office space vacated in Westshore and Gateway.

Both these job centers were world beaters just two short years ago. But now they're taking the worst of the banking and real estate implosion.

Here's an exhaustive chart offering everything you ever needed to know about commercial real estate, courtesy of Cushman & Wakefield: Download Cushman3Q09

Commercial real estate survey: No Tampa Bay recovery until 2012

PricewaterhouseCoopers has published a real estate investors survey that contained one surprise as far as I'm concerned: It doesn't expect a Tampa Bay commercial real estate recovery until 2012.

Economists have generally forecast a 2011 recovery timetable. Apparently things are worse than expected.

The survey broke commercial real estate into four categories: Office, retail, industrial and multi-family/condo. PricewaterhouseCoopers suggested a 2012 recovery for retail, industrial and condo. But the survey was more pessimistic for office. It will still bottom craw in 2012. Or so the respondents say.

Keep in mind this survey is geared toward investors, not tenants. It's trying to predict when real estate purchases would start paying off in terms of income and appreciation.

Economist: Florida recovery "a couple years away"

Ray Torto, chief economist with the real estate firm of CB Richard Ellis, calls himself an optimist when it comes to the economy. The Bostonian is speaking tomorrow at the University of Florida. I reached the chatty prognosticator on the cell phone as he drove from the Orlando airport to Gainesville. Here's a sampling of his opinions. They didn't seem overly optimistic to me:

• Florida's economic recovery is still "a couple years away." "You partied too much," Torto said. "You've got to pay for it Sunday morning.’’ Torto's specialty is commercial real estate so he's talking mostly about a significant rise in employment that would help fill offices, warehouses and industrial sites.
• He said Florida home prices seem to be bouncing around the bottom, which is a signal for serious people to start buying real estate. "It's a wonderful time to get into real estate as long as you've got cash flow that will last the 5 to 6 years it will take for the market to recover,’’ he said.
• The overall U.S. economy has suffered a "terrific trauma" and remains in intensive care, Torto said. The unemployment rate won't improve for at least a year. That's because employers, even when profitable, will have to make their existing employees whole first. In other words, businesses will have to resume contributing to employees' 401K plans and pensions, restore temporary cuts in salary and commissions and end furloughs. That will consume profits that otherwise would pay for new hirees.
• As he considered Florida real estate, he quoted the late economist John Maynard Keynes: ”The market can stay irrational longer than you can stay solvent.’’
  

Second Tampa Channelside condo developer declares bankruptcy

Last summer, dozens of people sued The Place at Channelside to get their money back on condos they felt they overpaid for in 2005.

On Wednesday the developer had had enough. Key Developers Group and its owner Fida Sirdar asked for Chapter 11 protection.

His is the second bankruptcy filing this year among Channelside condo developers. Towers at Channelside LLC declared insolvency in January.

Sirdar completed two eight-story towers last year but many investors who paid top dollar during the housing boom wanted out of the 245-unit complex at Channelside Drive and Washington St.

You've got to sympathize with both parties: The developer who built with confidence knowing he had bona fide buyers and the buyers who realized too late that imploding home values would skin them alive.

Is office real estate getting a case of the housing willies?

Just what we needed. Housing's in the tank and now office real estate isn't looking so peachy either. Here's the take from a local expert I've spoken to several times:

If every Tampa Bay area office project currently under development gets built, the regional economy will be buffeted –– though not too severely –– by a surplus otherwise known as “overbuild,” says one commercial property expert.   

Stevens E. Tombrink, CCIM, regional vice president for real estate services at Equity in the Tampa region, said he isn’t too worried Tampa’s office market will reach the “overbuild” stage.

 

“We pay very close attention to every project, so we have a clear picture of both the macro and the micro in office development,” Tombrink said.  “The truth is that only a percentage of projects under development now will ever open.  Office development is a rigorous, time-consuming enterprise, and typically more projects start the development process than end it,” he said.

 

Tombrink said office development in the region is more severely affected by high-flying insurance costs and property taxes, which have substantially reduced Florida’s competitive edge in attracting new business and industry to the state.

 

“The true effects on these price hikes are just now being felt and they will only get worse as time goes on,” said Tombrink.  “With all our efforts to create new employment here, the cost spikes are particularly disheartening,” he added.

 

Florida’s flagging housing industry is adding new woes to the region’s economy, Tombrink explained.  With fewer new homes under construction, demand for retail space is also slowing at a time when rents are approaching a ceiling.