Commercial Real Estate Heavy Hitters
Yesterday I was privileged to moderate a panel of commercial real estate heavy hitters as they discussed their views on the commercial real estate market for Broward and Palm Beach Counties to a packed room of commercial real estate brokers and lenders. The power panel consisted of Bob Shapiro of Master Development, Jeff Greene of the Greene Companies, and Malcolm Butters of Butters Construction and Development. Collectively, these three have developed, owned, or invested in billions of dollars of commercial real estate in the Florida market.
Cheaper Bricks and Sticks!
Construction costs are expected to plateau over the next 18 to 24 months which should bring some relief to skinny deals and increase feasibility. The main reason stated was the slowdown in the Miami vertical residential market where many large planned projects are being shelved.
The consensus of the panel was that Broward is in the late middle innings of the current cycle, and that Palm Beach is the early middle innings. The current recovery started in Miami in 2011 and had since worked its way up the coast. Currently, Broward and Palm Beach are very active, and capital is flowing.
Retail tenants are moving very cautiously, often in a pack mentality. Bob Shapiro, who is developing the 3 million square foot Dania Pointe, said that while retail leasing is good, the retailers are very interested and concerned what the other retailers are doing before they make a decision to pull the trigger on a lease commitment, thereby, slowing down the overall process.
Boring is Good!
Malcolm Butters, whose company has developed over 18 million square feet, reports that he is very bullish in industrial moving forward, noting that it is the only property type that requires a larger site because it can’t be developed vertically. It may not be the sexiest product type, but it has the most stable long term prospects and most barriers to entry. E-commerce was cited as a driver as well.
Give It Up for the Burbs!
Even though Jeff Greene predicts massive job losses coming down the road, all the panelists agreed that suburban office might be a good investment because it is not feasible to construct new, so there will be no new competition for years. , due to its proximity to the airport and seaport, and its position along Interstate 95.
Let the Good Times Roll!
All three panelists stated that it would take a lot to damage the currently robust South Florida commercial real estate market, but three potential headwinds include the outcome of the U.S. presidential election, an increase in interest rates, and the weight of the world recessionary conditions. Any of the three could wobble the markets and expose any weaknesses.
Penny for Your Thoughts!
All three panelists favored the passing of ballot initiatives in Broward and Palm Beach Counties concerning traffic and infrastructure but cited concerns over a lack of a plan for how the money will be spent.
If You’re Not First, You’re Last!
Jeff Greene noted that West Palm Beach CBD could probably only handle one new office tower and maybe one more hotel during this cycle, acknowledging a lack of market depth. Butters noted that Florida doesn’t enjoy the massive corporate relocations to the extent of a market like Atlanta.
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