After the Zelman Survey in December showed that apartment buildings increased occupancy and improved cap rate trends towards 8 %, REIS reported last Friday that the U.S. Office Market has gained office space for the first time since 2007. Office buildings added 2.5 million square feet in the fourth quarter of 2010 in the U.S.
These are national trends and the questions remains, what these trends mean for Florida. Local commercial brokers report similar trends and if you drive along the street and open your eyes you will see popping up new businesses and reoccupied offices. However, rents are down, and only landlords who are savvy enough to follow the trend have a chance to fill up their properties. For a visible recovery in both residential and commercial real estate, we need jobs, jobs, jobs.
In the residential sector the Manatee Association of Realtors reports a decrease in home sales of 4.8% in December 2010 (in comparison to 12/2009) and a decrease in median price from $250,000 in 12/2009 to $239,850 in December 2010. (Compare to $389,900 in June 2006). The inventory remains at an unhealthy high with 3,540 units for sale and 305 units sold in the month of December. If the pace of sales stays at that level and NO NEW properties would be listed, this inventory would need 12 months to be absorbed.
Now, is there light at the end of the tunnel?
Not yet is the sad answer, at least not for Florida. Don’t be mislead by real estate agents who are painting a much rosier picture. They need to display a positive attitude to create an environment where sales can take place. And I do not see that as a negative, it is part of the profession of an agent.
Market Analysis Experts like Fishkind & Associates are all predicting a slower growth and thus a slower recovery for Florida with employment rates improving towards 2016. Scary? Absolutely and we can only hope that the new governor will keep his promise to deregulate government and open Florida for business.
Keep an eye on the residential market; when the inventory goes down to about 4-6 months, then we can see light a at the end of the tunnel. The residential market needs to recover first, before the commercial market will follow. And the recovery of the commercial market in turn is needed to create jobs and with that enable people to buy and rent real estate. And although there is slight improvement in the office and apartment market (nationwide), the overall commercial real estate market is in distress with multiple properties sitting in banks waiting to be purchased as short sales or REOs.
As always, please call or email with questions and comments.
