HOUSTON — Southwest Florida’s commercial real estate market mirrors much of the nation’s failure to rebound the way residential segment has, according to analysts at the National Association of Real Estate Editors conference here.
Experts contend that most of the U.S. commercial market has suffered from stagnant wages and a housing hangover.
The situation is very different, however, in California — which is enjoying tech gains and record corporate profits — and an in Texas — where an energy boom is occurring — pushing commercial markets to recent highs.
“We’re more optimistic about the recovery today than we have been in seven years,” said John Sikaitis, senior vice president and director of office research for Jones Lang LaSalle, a national brokerage and development firm.
“Office is behind multifamily and industrial, where we have some substantial speculative development. But office is catching up. We’re seeing a tale of a couple different markets.”
Across the U.S., commercial real estate rents continue to sputter and have grown only marginally since 2010, Sikaitis said Thursday during a conference panel discussion.
But Jones Lang LaSalle is forecasting rent hikes of an average of 17 percent in the next three years, because few new commercial projects have been built since the Great Recession.
The same will likely be true in Southwest Florida, where the commercial market has lagged a robust housing recovery.
The 10.8 million square feet of office and industrial space in Sarasota and Manatee counties had a combined vacancy of 17.4 percent in the first quarter, down from 19.7 percent during the same time last year and 21.2 percent in 2012, according to reports from a network of area brokers.
Bradenton’s downtown has been hit harder than anywhere else regionally, with 29.3 percent of the commercial space there vacant at the end of the quarter. Downtown Sarasota had an 11.7 percent first-quarter vacancy, while Lakewood Ranch boasts the lowest commercial vacancy, at 7.8 percent.
Lakewood Ranch has fared better because its commercial properties are generally newer and offer more modern amenities than comparable space in other submarkets regionally.
Landlords also are preparing for major demographic changes. In 2010, half of the U.S. workforce was composed of baby boomers, born from 1946 to 1964. By 2020, however, millennials now in their 20s will compose 50 percent of the nation’s workforce.
For Southwest Florida to fill the 1.9 million square feet of commercial space now empty, young professionals will be key, experts note.
“Millennials want a lot of amenities, so when you look at the older 1980s buildings, that’s not what they’re looking for,” said Matt Khourie, CEO of CBRE Global Investors. “It’ll be tough to meet the demands of the millennial generation.”
Also affecting commercial markets is a trend toward using less space, as more employees work on the go or in non-traditional settings such as coffee shops or their homes.
“You don’t need that big office anymore,” said Cassie Stinson, a commercial real estate broker in Houston. “All you need is a computer and a place to focus.”
