Commercial Real Estate Sarasota: A Year End Update

If you’ve walked down Main Street, around St. Armands Circle or through any other major retail zone in Southwest Florida you’ve probably noticed far fewer vacant store fronts.  Not to mention many new stores, restaurants and boutiques that weren’t there this time last year—or even six months ago.  That’s because just as our local economy appears to be shedding its doldrums, commercial sales and leasing rates are holding at their lowest levels since before the real estate boom.   Consequently, forward-thinking businesses are seizing on today’s best buying and leasing opportunities as a guaranteed way to keep a lid on their operating costs.

Commercial markets from coast to coast have had precious little to be cheerful about over the past few years.  Our market is no exception, as sales remained relatively flat throughout 2011.   Still, as the year winds down, we are starting to notice a slight—but  encouraging—sea change in the economic fundamentals that drive the commercial real estate market.

According to the Bureau of Economic Analysis, gross domestic product rose 2% in the third quarter.  Like the second quarter, all major components advanced—with the exception of government spending.  Moreover, business spending accelerated with each successive quarter of 2011; and rose by 14.8% during the third quarter.  Meanwhile, the first two record-breaking weeks of the holiday shopping season suggest that retail sales will finish much ahead of last year.  Thus we believe the commercial real estate market is poised to follow the same slow but steady arc of recovery that residential real estate enjoyed throughout 2011.

To date this year, agents from the Commercial Division of Michael Saunders & Company have completed leases involving 377,301 square feet of space; not to mention $12.2 million in new revenue for property owners.  This represents a slight improvement over 2010; but the circumstances involving these leases suggest a compelling new twist to our recovery.

In the past year, there’s been a 7% increase in businesses leasing extra space to expand their existing capabilities in the region.  These spaces were leased by such retailers as Richard’s Whole Foods, Pamaro Shops and Sonny’s Barbecue.  More than just a vote of confidence in our market, they’re demonstrating their belief that lease rates are at or near the bottom, that our local economy is on a prolonged path to recovery; and that it’s finally safe to hire anew.

Meanwhile, there’s been an explosive increase—approaching 40%—in leases being taken-out by smaller, new start-up companies, who are often cited as the prime source for new jobs in today’s economy.   One of these, Rational Energies MC, Inc. is not only a newcomer to our area—having expanded its Minnesota-based operations to Southwest Florida—but is also engaged in the manufacture of green, environmentally sustainable products.  The company, which plans to hire nearly two dozen new employees in Manatee County by early next year, converts agricultural and municipal waste into synthetic crude oil.  Their confidence level is so high that they’ve taken out a ten-year lease.

Looking ahead to 2012, as the recovery gathers steam, demand for rental properties will continue to trend upwards as vacancy rates recede.  As such, rents will rise accordingly, albeit minimally at first.  On this, the National Association of REALTORS® agrees.  They are forecasting for commercial vacancy rates to decline by as much as 6.3% in 2012; and for rents to respond with modest increases.  Over time, rising rents and declining vacancy rates will cause owners and renters to once again recognize the value of buying property now to control costs later.

To learn more about the commercial sales and leasing opportunities available in today’s market contact the Commercial Division of Michael Saunders & Company at (941) 957-3730; or toll-free at 552-5228.

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