No 'stupid money,' 'sticker shock' on office leases, conservative retailers: Tampa Bay commercial real estate update
By Ashley Gurbal Kritzer
Tampa Bay Business Journal
Published: Sep 29, 2014

If spirits at NAIOP Tampa Bay are any indication, the region's commercial real estate market is definitely trending upward.

NAIOP, a group of commercial real estate professionals, held its annual broker update event last week. A panel of seven, each from a different sector, discussed the status of the region's real estate market and where it's heading.

Below are snippets from the conversation:

Where are we in the real estate cycle? When will it end?

Bruce Erhardt, executive director of the land brokerage group, Cushman & Wakefield of Florida Inc.:"2020. We had a cycle from 1993 to ‘07, ‘08 in the land business and land development here in Tampa. We had a dot-com bust in 2000, but that was only like seven months long. I don't think there's going to be stupid money lending to people to build things, so I don't think we'll have that boom-bust. I think we have a real good shot at getting into 2020 before the cycle ends.” Has residential growth in Tampa Bay driven retail development?

Tom Hand, senior vice president, Redstone Commercial:"I think the difference between now and 2005 is that most of the retailers were developing based on anticipated growth, and Florida was booming, and it didn't feel like a whole lot of risk. Retailers now are much more conservative, more careful, which is leading to more infill development. They want to see homes built and occupied rather than projects announced and dirt being turned.”

What trends have you observed in the office market?

Clay Womack, vice president, CBRE Group Inc.:"We've had significant capital trades on institutional quality product in Westshore and the [central business district]. One of the nice trends we've seen is these are smart owners who realized what needed to be done to these assets to bring them back in line for leasability and marketability. We've seen good money come in and recapitalize these buildings.

"The only negative trend we've seen is sticker shock on renewals. Tenants are really having to evaluate, do I take the increase and stay? At the end of the day, 90 percent realize, ‘I'll have to take the increase.'”

Describe the current lending environment.

Tim Koletic, vice president, Fifth Third Bancorp.:"Everybody's crystal ball about interest rates is going to be right.

You're all going to be right, you just don't know where. We've been in the recovery for five years, and we've been talking about rising interest rates for three of them. Like everything else in this recovery, it's just taking longer.” An update on investment sales

Paul Carr, senior vice president, Cassidy Turley Real Estate:"If you look at everything currently under contract and getting ready to close, the 2014 sales volume could end up being close to $685 million in excess of 5.1 million square feet. A lot of that is being driven by some of the larger downtown [buildings] that have traded, that have moved the needle, but if you start thinking about 2014 being three times the sales volume of 2013, it's a good story.

"Some of it could be driven by extremely attractive interest rates because the buyer profile has been predominantly private equity outside of some well-known institutional groups.

"New sources of capital are buying into Tampa being a good growth story and a favorable basis play. That's the primary driver.”

Ashley Gurbal Kritzer is a reporter for the Tampa Bay Business Journal.