Courage Will Bolster Market

The commercial real estate market in southwest Florida has many vacancies to fill.  Few new businesses are moving here and when combined with layoffs and hiring freezes, commercial landlords are left to chase each other’s tenants for relocation leasing. This activity has pushed commercial rental rates and values into the basement since lowest rent often wins the hearts and wallets of local tenants with expiring leases.

The solution is simple: businesses need to expand. The hard part is convincing them to expand in the face of continued weak economic data.  It can be difficult to have courage in a questionable fiscal environment like this. The easy thing to do is nothing. That’s what a lot of businesses are doing today even when their business fundamentals are solid and they hold boatloads of cash. They look at these times as an opportunity to cut deadwood, reduce costs and sit on cash in case things do not turn around quickly. While everyone is looking at each other waiting for a positive sign, this economic stagnation is perpetuating our soft market…and should continue until such time as businesses muster the courage to expand.

One unlikely place for inspiration might be found in the Wizard of Oz. Remember it was the Cowardly Lion who said, “What makes a king out of a slave? Courage! What makes the elephant charge his tusk in the misty mist or dusky dusk? Courage!”

Well, before we charge into the misty mist of business expansion, let’s look at some of the issues that concern us today and see if they really warrant fear.
1.    Unemployment tops the list. Nationally we went from 5% in April 2008 to a peak of 10% in December 2009. U.S. unemployment is down to 9.1% as of May 2011. Florida is 10.6% and Lee County is 10.8% as of May 2011. While we are moving in the right direction, it is slow going.  Almost everyone knows someone who lost their job and remains unemployed so this strikes close to home. Fear of losing a job in this market affects consumer spending which then impacts the hiring plans of businesses that rely on those consumers. So it is really fear that is holding back our recovery.  Nine out of every hundred people across the U.S. are currently unemployed and yes it may take years for them to find jobs at their former income level. But 91% of Americans do have jobs today and chances are they will keep these jobs going forward as our economy slowly sputters back to life. Employment will accelerate when businesses find the courage to expand.
2.    Government intervention spending did appear to stabilize our economic free-fall but it did not spur private sector growth as once hoped.  The lack of confidence is holding back businesses from expanding. They need to find courage in this economic environment as growth must come from the private sector and not the government.
3.    Uncertainty and fear has followed health care reform as well.  The quicker the kinks get worked out the faster patients and health care providers will feel confident once again. But it could take some time.  In the meantime, we need to feel confident that the leaders we elected will eventually work it out to the benefit of the majority. People will continue to age, get sick and need doctors…of that we are certain.
4.    The rising costs of goods including food and gas has been troubling. Rest assured this will not go on forever. Nothing goes up forever. Our recent real estate bust proved this point clearly.

Inspiration from FDR
My dad was 8 years old when Franklin Delano Roosevelt (FDR) gave his first inaugural address on March 4th, 1933.  The depression had reached its’ depth without programs such as Medicare, FDIC and Social Security to act as a safety net. Dad used to say, “Back then, if you didn’t work, you didn’t eat.”

FDR inspired courage back then by reminding us that our common difficulties concerned only material things. FDR said at the time:
“This great nation will endure as it has endured, will revive and will prosper. The only thing we have to fear is fear itself….nameless, unreasoning, unjustified terror which paralyzes needed efforts to convert retreat into advance.”
“We face the arduous days that lie before us in the warm courage of national unity, with the clear consciousness of seeking old and precious moral values, with the clean satisfaction that comes from the stern performance of duty by young and old alike.”

My grandparents (on my father’s side) were born in Poland and lived in Providence, Rhode Island when FDR gave that speech. With six kids, speaking little English, they read his speech the next day in the Polish newspaper “Gwiazda” (or “Star” pronounced yez-da). They loved FDR. They voted for him and were inspired by the hope he gave them during the great depression. The reality of our national psyche today is not that different from 1933.  We’re all concerned. But our economic nation is different today than that of the 1930’s.

Today we are a nation of people that provide mostly service work. According to the US Bureau of Labor and Statistics, 84% of the US workforce was employed in knowledge and service jobs in 2008. Therefore, FDR-like programs to build roads and bridges won’t help most of our workers get jobs today. But we do have a private sector sitting on their hands and piles of cash who can lead us out of this recession. If you happen to own stock in any of these firms, next time it comes up for a vote, insist they use their cash to expand their business or pay it back to you in a dividend. I am sure you can find good use for that cash if they can’t.

Taking a lesson from the Wizard of Oz, it may not hurt to send your company CEO a medal to wear that says “COURAGE”. It worked for the cowardly lion. Who can forget actor Bert Lahr’s immortal words near the end of the show when he said, “Read what my medal says. COURAGE! Ain’t it the truth? Ain’t it the truth?”

Mark Alexander, CCIM
Sperry Van Ness
National Director, Medical Office Sale/Leasebacks
2104 West First Street, Suite 804
Fort Myers, Florida 33901
239-826-4174   marka@svn.com

CMBS is Back, But Distress is Up

Recent video on Globest.com

LAS VEGAS-The big flow of distressed assets in the industry never took off, says Jerry Anderson, an executive managing director at Sperry Van Ness who specializes in the Florida market. But that could change, he told GlobeSt.com’s Ian Ritter here at the recent ICSC RECon show.

Home sales rise, prices may be flattening in South Florida

Residential markets are always an indication of commercial real estate markets. Florida’s residential markets seem to be a good indication for our commercial real estate markets.

Home sales rise, prices may be flattening in South Florida
By TOLUSE OLORUNNIPA | Miami Herald
tolorunnipa@MiamiHerald.com

South Florida home sales continued to soar in May, while prices slowed their declines overall, and actually rose in parts of Broward County’s market, according to data released Tuesday by the Miami Association of Realtors.

Florida’s unemployment rate drops slightly in May

Recent article published in the Tampa Tribune reveals hope for the Florida commercial real estate markets.

By MICHAEL SASSO | The Tampa Tribune
Published: June 17, 2011

The Florida Agency for Workforce Innovation released its May unemployment data Friday and the results showed a modest improvement. The unemployment rate fell to 10.6 percent from 10.8 percent in April, which was the lowest level since August 2009. It’s also an improvement over May 2010, when unemployment stood at 11.3 percent.

Economy grows in Florida

It is good to see that Florida’s economy is on the move in a positive direction. This kind of information gives tenants, landlords and commercial real estate investors the confidence they  have been searching for lately.

By G. Scott Thomas, Business First of Buffalo, N.Y.
Date: Monday, June 13, 2011, 1:27pm EDT – Last Modified: Monday, June 13, 2011, 2:48pm EDT

Florida registered a 1.4 percent increase last year in gross state product, an annual measure of the total output of goods and services. The Sunshine State’s GSP grew to $673.37 billion last year from $664.08 billion in 2009.

Sperry Van Ness Florida Mentioned by Nationally Syndicated Columnist & Author

Harvey Mackay’s national syndicated column this week is about the power of an “elevator speech” and Terri Sjodin’s just released new book, Small Impact Big Message.

One of the examples in the book is Sperry Van Ness. Here’s an excerpt:

Here’s another unique example. What started out as a traditional three-minute elevator speech has morphed into more. Sperry Van Ness hired Sjodin Communications to deliver our workshop on the three-minute elevator speech to a group of twenty of the company’s “top producers.” Approximately one year after that training, Jerry Anderson, CCIM, who owns the master license for Sperry Van Ness Commercial Real Estate for the state of Florida, decided to expand on the elevator speech training he received and take it to another level to build his organization’s prospect base in a challenging market.

Jerry is a true believer in the power of today’s new, morphed elevator speech concept and uses it to provide hundreds of agents around the state with a tool that consistently and effectively tells how his company differs from its competitors-to the benefit of the client:

Terri, as you know, I believe that less is more. The best part of our new, morphed approach is what it can do before the agent even meets the prospect face-to-face. We converted our Sperry Van Ness Florida corporate elevator speech into what we now call a “2.5-minute media elevator pitch” that agents use to sell the Sperry Van Ness Commercial Real Estate Story online.
136 Small Message, Big Impact

The prospect can start and stop or fast-forward at will, and yet the message is engaging, persuasive, and fast-paced. It is delivered consistently and accurately-something our agents don’t always do when delivering in person, to say the least. (Believe me, we have tried for years to train everyone to understand and deliver the message, and some are always better than others.) So this has really helped to ensure the consistency and accuracy of our message. What our agents are good at is being their friendly, personal selves engaged in meaningful and probing interaction. This strategy plays to their strengths.

The result? A perfect illustration of the “Elevator Speech Effect.” Our 2.S-minute media elevator pitch helps the sales force and has helped us as an organization to convert more leads to prospects.

In one example, Sperry Van Ness’s two-and-a-half-minute media elevator pitch led to an appointment with a prospect who hired the company to market more than 10 million dollars’ worth of commercial property. The meeting to close the deal lasted less than forty-five minutes.

“Without a short, fast-paced electronic elevator speech,” Jerry concluded, “we might have bored the prospect with our old rendition and never have reached the most important person in the room-the prospect. Let me rephrase that-our client!”

Also, make sure to take a look at Harvey Mackay’s full article.

Real Estate is Local…Always Has Been…Always Will Be

Here is our latest video on the fact that real estate is local. It always has been. It always will be. Contact any advisor from Sperry Van Ness Florida and you will receive local expertise with the resources of a national network.

Spike in Distressed Property Sales Is A Healthy Sign, Says Moody’s

By Matt Hudgins, NREI Contributing Writer

An index of U.S. commercial real estate prices fell to a cyclical low in March that was down 47% from the peak in October 2007. So why should investors be happy?

The Moody’s/REAL National All Property Price Index measures price changes on completed sales of apartment, office, industrial and retail properties. A 4.2% decline in the index since February stems in part from a surge in transaction volume among distressed properties, which accounted for more than 30% of March sales.

Downtown Miami: The comeback kid

South Florida Business Journal – by Kevin Gale
Date: Friday, May 27, 2011, 12:32pm EDT

It seems like downtown Miami was a national poster child for overdevelopment just a few months ago, but now a flood of development plans is sweeping into the area.

The latest capper is Genting Group’s plans for a sprawling hotel, convention, entertainment, restaurant, retail, residential and commercial complex on 14 acres along Biscayne Bay where the Miami Herald is headquartered. It promises to bring a heavy dose of South Beach glitz to the mainland, perhaps even with a casino.

Retail bucks U.S. trends in Tallahassee marketplace

By Francis Rentz

TALLAHASSEE – Since the beginning of the recession several years back, all commercial real estate markets have been affected by a reduced demand for office, apartment and retail space across the nation. The apartment and office markets were hit the hardest with an increase in the unemployment rates and are also the markets that were and still are the most overleveraged.

 

While the Tallahassee market is not immune to this national trend, the area, with its universities and public sector jobs, has fared better than other markets nationally, which is consistent with past downturns.  

 

The retail market in Tallahassee has fared better than most markets nationally – the occupancy rates in most Tallahassee shopping centers have remained relatively stable over the last several years. Through 2009 and 2010 most of the national retailers put all new store expansion on hold. We saw national chains Circuit City and Bombay Stores file bankruptcy and liquidate; Movie Gallery / Hollywood Video has liquidated and Blockbuster Video has virtually disappeared from any retail centers.

 

While bankruptcies and store closings have dominated the headlines by national retailers, local tenants have made a resurgence and have filled in the gap. Shopping center lease transactions completed in the last two years have most likely been to local or regionally based “mom and pop” tenants.

 

Over the last two years, Village Commons Shopping Center, anchored by Steinmart and Fresh Market, has transitioned from national tenants to a higher percentage of local tenants. We have completed new leases with Black Fig, Rayann’s Christian Book Store, Bernina Connection, and we have expanded Loli and the Bean, all strong locally based merchants.

 

Capitol Plaza, anchored by JoAnn’s Fabric, is another example of a shopping center that has been transformed over the last several years, and most of their new leases have been with locally based merchants such as Fuzions Frozen Yogurt, Hobby Town (local franchisee) and Capital City Runners.

 

One trend that has helped these local merchants expand is that landlords have lowered their rates. Two years ago, lease rates in the northeast were averaging over $18.00 psf, with some tenants paying as high as $25.00 psf. In 2011, they are averaging $15.00 psf, so the lower rates allowed landlords the ability to tap pent-up demand from local merchants. 

 

Retail trends

 

Most of the national retailers are expanding again and have now come up with expansion plans for 2011-2012. One interesting trend is big box stores are taking less square footage and getting smaller across the board, with a smaller prototype. Best Buy has reduced from 45,000sf to 30,000sf. Office Depot and Staples now look for 20,000sf instead of 30,000sf.

 

Look for many of the nationals to move around in their existing shopping centers or to relocate within their existing markets to secure a smaller footprint and thus more efficient operating costs. Big box stores will be getting smaller across the board.

 

The Tallahassee store for Borders Books was not slated to be closed in their bankruptcy reorganization, despite the fact that Tallahassee pays a higher rent than stores they are closing in Tampa and Orlando. This is attributable to a stable demand in Tallahassee, a great location and limited competition. We rarely hear from retailers that their top-performing store is in Tallahassee, but we hear on a consistent basis that their Tallahassee store has higher sales per square foot than other markets.

 

Tallahassee has few retail properties that are distressed. One, however, is the Tallahassee Mall. It has a unique set of challenges with a design that has a certain amount of obsolesce. The mall will have to go through a significant redevelopment to be viable as a retail center in the future. Fallschase, also in distress, has an excess inventory of land and retail development sites. 

 

The dollar stores have gone through significant expansion nationally. We will continue to see dollar stores expand in the North Florida markets as they offer great convenience, value and an expanding product inventory.

 

Restaurant demand is as strong as it has ever been in the Tallahassee market. There is no way that we will have enough sites for all the restaurants that want to expand in this market. Panera Bread should begin construction shortly on its third local store in front of Books-a-Million on Thomasville Road. Chipotle Grill entered the market with two stores in 2010. Panda Express and Jersey Mike’s Subs both opened on West Tennessee Street. Five Guys Burgers opened at Capitol Plaza and is looking to add additional units locally. Jimmy Johns is active in the market with two additional units to open in 2011 or early 2012. 

 

Youfit Health Club has leased the space formerly occupied by Walgreen’s at Lafayette Place (Publix) shopping center on the east side of town.

 

Publix will relocate from Lafayette Place into a new shopping center at the old GMC dealership site. They will be joined by a new Academy Sports (50,000sf). 

 

There is an oversupply of car dealership locations, and we will see them redeveloped into alternative uses as we continue to see a consolidation of automobile dealership franchises.

 

Dunkin Donuts has re-entered the market at Bannerman Crossings Retail Center in Bradfordville and is looking to add additional locations in the Tallahassee market.