On January 21, 2016, Certified Commercial Investment Members (“CCIM”), Southwest District, held its 16th Annual Commercial Real Estate Outlook Conference at the Harborside Event Center in Fort Myers, Florida. The annual event was well attended and full of positive projections from local leaders regarding market trends for Southwest Florida’s real estate industry. Land Use Attorney Austin Turner and Real Estate Attorney Michael Lehnert attended and provide the following recap:
The Mayor’s Inside Look at Downtown Fort Myers
The program began with the City of Fort Myers Mayor Randy Henderson providing an “inside look” at downtown. He explained that our community is postured for many robust real estate opportunities in the next decade, such as the development of its urban infill areas. Mayor Henderson seemed confident that the real estate market, both on a statewide and local level, “is back.” He stated that Fort Myers has recently issued permits for private development that will result in $450 million invested into the downtown area. The Mayor also stated that Florida SouthWestern State College (FSW’s) new baseball stadium and potential basketball arena will positively influence the community’s youth.
The Macro Outlook of Florida’s Real Estate Market
The next discussion with Michael Timmerman (President and CEO of MJT Realty Economic Advisors, Inc.) and Raymond Sandelli (Managing Partner of CRE Consultants) provided the group with an overview of each of Florida’s regional real estate markets based on “Macro Outlook” modeling. The analysis utilized a combination of three specific criteria: (1) population; (2) the ratio of household formation to housing starts; and (3) changes in employment.
Mr. Timmerman explained that the main objective is to avoid building more housing units than the projected household formation (which is what lead to the real estate crash crises in 2005). Based on the Lee/Collier County MSA, the number of housing starts in 2003-2005 resulted in a surplus of units in Southwest Florida that were not absorbed until recently. Moving forward, since Lee County is still not over-built, many opportunities remain for businesses to get started in our community. Also, given Lee County’s lower impact fees, businesses and developers are more likely to flock to Lee County than the neighboring Collier County. Overall, the economic advisors were optimistic about the current balance between the supply and demand of Florida’s real estate market. However, each also acknowledged that the potential ending of our current economic cycle and the upcoming presidential election could unfortunately cause the market to slow down.
Adam Palmer (LandQuest Commercial) moderated the next discussion panel, comprised of the following well-respected local appraisers: Gerald Hendry (Maxwell, Hendry, and Simmons, LLC) speaking about the Lee County market, Steven D. Gant (Riverside Realty Services, LLC), the Charlotte County market, and Michal P. Jonas (Capstone Valuation Advisors), the Collier County market. In 2010, closing sales prices were approximately 20% lower than appraisal value, but the panel agreed that this disparity is steadily decreasing as we move into 2016. Gerald Hendry noted that in Lee County, retail and medical office sales are on the rise, as is the demand for industrial distribution space as retailers move toward the “amazon-style” business models. Steven Gant shared that there is strong demand in the Charlotte County residential market, which is also driving the industrial market. On a lighter note when asked about interesting product sales, Michael Jonas chuckled when he mentioned a new trend to purchase “mancave” products — where men purchase industrial space to “store a car and just hang out.”
Banking and Financial Resources Panel – Lenders Have Money to Lend
Brian D. Bailey (Federal Reserve Bank of Atlanta) moderated a panel of four esteemed banking executives: Maryann Mize (Senior Vice President, Senior Credit Officer of Charlotte State Bank), Bryan Simmering (Area Executive Vice President of First Citizens Bank), Tom Maiale (Group Vice President, Regional Sales Manager Small Business South of CBC National Bank) and Todd H. Barfiled (Regional Private Banking Manager of Wells Fargo Private Bank). The panel encouraged the audience stating that the economy is healthy. Despite the banking industry’s increase in cautiousness with each economic downturn, they shared “we have money to lend.” The panel agreed that capitalization rates are at historic lows, and that incidents of cash deals has decreased, as buyers are increasingly relying on financing to close deals. Unfortunately, the panelists shared that the Dodd-Frank Act has led to burdensome, complex regulations that impose significant costs on banks, which ultimately results in increased costs to end consumers.
Senior Living Panel
Enn Luthringer (CRE Consultants) wrapped up the conference moderating a panel of experienced executives with extensive knowledge of senior living services and facilities, including Gregg Fous (Founder Market America Realty), Bob Bray (Chief Financial Officer Millennium Physician Group, LLC), Kevin Ahmadi (Executive Director Gulf Coast Village) and James J. Henley (Burt Hill/Pollock Kreig Architects).
Enn Luthringer focused the discussion on how to provide housing for the 65+ population in Florida, which is expected to increase by 88% in the next 15 years. The consensus seemed to be to increase the supply of assisted living services, but the market must be cautious not to create a surplus, given that only 15-20% of senior citizens utilize those facilities. The remaining 80-85% prefers to remain in their homes. In discussing how best to provide the assisted living facilities that are required, the panel made clear that converting current residential multi-family buildings is not the most effective route. The significant costs associated with the necessary improvements coupled with the difficulty in complying with an onerous building code, tend to steer assisted living facility providers to build their own facilities.
The panel concluded with a recommendation for any parents out there to encourage their children to become doctors, registered nurses and physical therapists because the current demand significantly exceeds supply and that disparity is only expected to increase as we move into the future.
Attendees left with many new insights and with new perspectives on how to approach real estate opportunities in 2016.
We look forward to the next big real estate conference Henderson Franklin is sponsoring, Market Watch on Real Estate on Tuesday, February 23, 2016 at the Harborside Convention Center in Fort Myers. Hope to see you there!