Wedged in a blighted area between Downtown and Ybor City area commercial real estate and city officials are ecstatic about what the project can do for the area.

The city of Tampa was notified by the U.S. Department of Housing and Urban Development that it will receive $38 million in federal funding from the American Recovery and Reinvestment Act to build a shovel-ready project between downtown Tampa and Ybor City on the site of the former Central Park Village apartments….more from Florida Real Estate Journal.

Encore is a 30-acre urban redevelopment project that has been in the development process for more than four years.

Encore is touted as a self-contained community with plans for grocery, retail, housing, entertainment and housing.  The area will be within walking distance of the planned station for the high speed rail project.  Check out the website if you want to learn more.

For those of you that have not been following the situation, local attorney Steve Burton was added to the Airport Authority’s Board in the last couple of months.  Since then, he has been a tempest in a teapot, challenging status quo and making the establishment more than a little uneasy.  Most of his arrows have been fired either directly or indirectly at Louis Miller, Tampa International Airport’s Executive Director.

In his first meeting, at the protest of Tampa Mayor and TIA Board Member Pam Iorio, he called for a special committee to look at why TIA does not have more international traffic.  More recently, one of Miller’s decisions to raze a building on airport grounds has not only raised eyebrows,  but also raised the ire of Burton and other Board Members.  Apparently, Miller did not disclose to the board that Moffit Cancer Center had offered to lease the building, and it was not an obsolete albatross, as had been portrayed by Miller.  One can only speculate as to why Miller would make such a decision, because he has provided the public with no reasonable response.  But, as an outsider looking in the best possible portrait that can be painted is that the decision was questionable.

There is increasing concern in the area that our government leaders are not doing enough to motivate economic development.  And, now, Miller, the Director of a facility that can have direct consequence to the area’s economic health, is involved in a brouhaha about making a decision concerning one of TIA’s assets that, if the apparent correct decision were made, would provide a fairly meaningful job to the area’s lifeless construction industry, not to mention an additional revenue stream for the Airport.

If our area is going to start seeing the light at the end of a very dark economic tunnel, we must hold our officials’ collective feet to the fire.  Needless to say, if Burton entered his position with an agenda aimed at Miller, he just acquired a little more ammunition.

Here is more about TIA’s office building from the Tampa Bay Business Journal:

Miller didn’t tell the authority at its Jan. 7 meeting that Moffitt’s commercial real estate broker had approached his staff as far back as October about leasing the 40,000-square-foot building at 4101 Jim Walter Blvd., public records show.

Ok, So I am a computer and data geek?  What can I say?  Since the time I was young, I had trouble recalling names, places and what I did the day before, but I sure as heck could recite names, numbers and statistics of the Miami Dolphin’s 1972 football team.  I also loved to use sports stats and trends to try to predict who was going to have a break out season the next year.

Well, not much has changed.  As I move (ungracefully, I might add) in to middle age, as a Commercial Real Estate Broker, I still love looking at and searching for that number or statistic that might provide a clue as to where we are headed before the economic data tells us where we have been.  I recently found this tool on Google Finance.  It allows you to track relative Google searches in specific sectors of the economy.  It does not track the specific number of searches, but rather those searches in relation to the entire Google network.

Here is a graph in relation to real estate searches:

A couple of things jump out, besides the fact that relative real estate searches have decreased substantially since the peak of the real estate bubble.  Relative searches for real estate drop off the face of the earth after the first week of August.   Unsurprisingly, this reveals to me the disproportionate number of look-ups for residential real estate as compared to commercial.  The number of real estate sales are skewed to the residential side and residential sales taper off after school starts in August.  Commercial sales tend to follow economic trends and year end tax selling or buying, rather than when little Johnny or Sally start school.  (I won’t even get in to the fact that most of the commercial real estate industry has been dragged kicking and screaming in to the Internet age, and in the CRE world, the Internet still has not gained even a fraction of the traction compared to that the residential real estate world.)

But, we can absolutely deduct that there is some correlation between the residential and commercial markets.  It is easy to reason that if residential buyers are out looking for second homes, newer homes or investment homes, there will also be a spill over in to interest in commercial investment properties (strip centers, single tenant net-lease deals, multi-family, etc).  The two types of sales are not necessarily mutually exclusive and completely detached from one another.

Anyway the point is, if Google reports a relative increase in real estate related searches, it is reasonable to draw a conclusion that sales of real estate will in all likelihood follow.  And, if it is an accurate assumption, Google may be one of the leading indicators of real estate sales and activities.  I will revisit this tool over the next several quarters and see if there is in fact any correlation.

I would also love to see Google tweak this tool.  You can make comparative graphs on the tool currently, if there is a corresponding Google symbol for the subject data.  But, it would be nice to break out commercial real estate against residential.  It would also be nice to break out the commercial real estate sectors (such as retail, industrial, etc.) or regions (Miami or Orlando, versus the Tampa Bay area commercial real estate markets) and to my knowledge there are currently no symbols to identify these data descriptors.

Tampa-St Petersburg

• Cap rates in the Tampa-St. Petersburg area are, on average, higher (0.32 percentage points) than that of the state, and range from 8.5% (Apartments) to 16.4% (Condo Conversion).

• Cap rates increased over the past quarter across most property types, with the largest changes occurring in Condo Conversion (+6.92% change) and Free Standing Retail (+0.74% change).

• Cap rate outlooks indicate that rates are expected to either remain the same across most property types in the next quarter. The strongest indication of a cap rate increase occurs in Flex Space.

• Required yields for Tampa-St. Petersburg are higher, on average, than that of the state, 13.62% compared to 12.75% statewide.

• Required yields are highest for Condo Conversion at 19.1% and lowest for Free Standing Retail at 11.6%.

• Required yields decreased across all but two property types last quarter. The largest shifts in required yields occurred in Condo Conversion (-3.31% change) and Warehouse and Distribution (-2.18% change).

• The investment outlook is mixed across property types, with the most positive outlook occurring in Warehouse and Distribution and Neighborhood Centers.

• The outlook for Land Development appears to be neutral to negative for all land classifications.

• Future occupancy rates are expected to be the same or decrease over the next quarter for the majority of property types. The strongest indications of occupancy rate decreases occur in Strip Centers and Large Retail.

• Rental rates are expected to increase slower than inflation across almost all property types over the next quarter.

• Future absorption rate expectations are neutral for both Condominium Development and Single Family.

• Future price increases are expected to occur at a rate that is slower than inflation for both Single Family and Condominium Development.

Click here for  the entire report from the Bergstrom Center for Real Estate Studies.

I received a telephone call yesterday from a business owner 2 years in to a 5 year lease.  This is not an unusual occurance.  It happens frequently.  What made this unusual is the business owner (let’s call him Bob) had spoken with me over 2 years ago, inquiring about using our services to help them relocate their business in Tampa, Fl.

For whatever reason, Bob had decided to go it alone and not use our services.  Now, here he was 2 years later asking me what could be done to rework his lease.  Bob had negotiated a $22/sq ft lease, which would have been on the high side of his submarket as a modified gross lease, but not an unreasonable rate at all.

The problem was, he had negotiated a triple net lease and he was responsible for Common Area Maintenance (CAM) on top of the negotiated rate.  The CAM being charged was close to $6/sq foot and upon reading the CAM definition in the written lease, it was packed full of JUNK FEES!  In other words, CAM (which is supposed to be a pass through cost from landlord to tenant) was nothing more than a profit center for the landlord.   As a result, Bob was paying roughly 30% higher than the market rate and having a difficult time covering his rent.

The fact that we lose business to other brokers is no surprise.  It happens every day, but I am always perplexed when a buyer/tenant decides they can handle locating a property and negotiating a lease on their own.   Commercial real estate is not rocket science, but there are HUGE pot holes that tenants can hit, if they are not careful.  Most services of tenant/buyer brokers are usually paid by the landlord/seller, so it is always hard for me to understand why someone would decide to go it alone in an arena in which they (tenant or buyer) have limited experience, the stakes are high, the amount of market information available on commercial real estate to the general public is limited and the lease structures are complicated.

Here are some reasons why you should consider hiring a commercial property agent to help secure property:

1. Expertise. Good commercial property brokers scour the market on a daily basis.  They know the owner of many of the properties in the area and know how willing which landlords are to negotiate and which ones are difficult.

2.  Cost of Service. Typically, landlords have built in commissions for buyers and landlord representation.  If you elect to not have representation, the budgeted commission goes to the broker negotiating against you, not on your behalf.

3.  Time Savings. A good agent knows the market and does not have to start from scratch learning the good areas and good deals.

4.  Negotiation. Structuring leases or purchases can be complex.  It should help to have someone on your side of the table armed with knowledge on sound structure and market conditions.

5. Space efficiency. Some buildings are more efficient than others.  Common areas can consume enormous amounts of space and increase your rent dramatically.  A good agent can guide you away from buildings that have huge common area charges (or at least provide an apples to apples comparison) and provide additional insight on to how best to design office layout after you have decided on a location.

6. Data and Tools. Most commercial property agents spend hundreds if not thousands of dollars a month for reports and market data on sales and leasing trends in their markets.  This can be invaluable when making site selection decisions, discovering where your customers are and how best to logistically position your business.

7.  Integrated Services. Legal, interior design, office layout, architectural services.  Would you know where to go and who to trust to help you properly set up your business or practice?  Leverage the commercial broker’s network to help you accomplish your goals.

One final note: Please seek legal advice when buying and leasing.  It is not unusual for a 2000 square foot lease to run as much as $100,000 over the entire term. Relatively speaking, a quick review by an attorney can be well worth the investment.

Trump Sued in Tampa

Trump Tower Tampa Buyers Say They Were Bilked by The Donald in Suit Filed by Clark & Martino PA and Williams Schifino Mangione & Steady PA

TAMPA, Fla.–(BUSINESS WIRE)–Donald Trump is in hot water again – this time in Tampa where Trump Tower Tampa buyers allege that the real estate mogul misrepresented his stake in the ill-fated condominium development in Downtown Tampa and committed fraud to line his pockets with their hard-earned dollars. In a suit filed jointly on Nov. 12, 2009 by Daniel Clark of Clark & Martino PA and Kenneth Turkel of Williams Schifino Mangione & Steady PA, the 30 plaintiffs in the complaint are seeking damages on several different counts including an Interstate Land Sales Full Disclosure Act (ILSA) violation, negligent misrepresentation and fraudulent misrepresentation. Similar, but not identical, suits against Trump were recently filed in Miami, Florida and Baja California. (click here for the entire release)

Comments:  It should come as no surprise to anyone that a lawsuit became official.  We reported the news of the  foreclosure on the property earlier this year. For months there have been rumblings from investors that they had been misled by Trump and SimDag, the developer.  Earlier this month, James Thorner of the St Pete Times wrote an article about the posturing on the project.  To quote Mr. Thorner, ” Considering how many rich people lost money on Trump Tower Tampa, it’s almost surprising it didn’t happen sooner.”  Yup…that pretty much sums it up.

Excerpt from the TB Business Journal:  Existing single-family home sales were up 33 percent statewide and almost that high in Sarasota-Bradenton as real estate practitioners look back at the third quarter.

Home sales jumped 32 percent in Sarasota-Bradenton, the best increase in the Tampa Bay region, according to Florida Realtors. More than 2,300 homes were sold in the quarter, compared with 1,758 the year before.

Strong sales numbers also were experienced in Tampa-St. Petersburg-Clearwater as well as Lakeland-Winter Haven with both areas rising 20 percent. Nearly 7,800 homes were sold in the Greater Tampa area, compared with 6,502 the year before, while Lakeland’s numbers were up from 2,633 to 3,377. (….rest of housing in Tampa story from TB Business Journal)

Comments:  With Unemployment in the Tampa Area pushing 12% and personal income continuing to drop, its hard to believe that housing sales are sustainable.   Anecdotally, most residential brokers are telling me the sales are in the lower priced homes, taking advantage of the government programs.  Meaningful housing numbers will follow a rise in employment.

….Well, I did say “it isn’t so” and still do say that the predictions of impending crash of the commercial real estate market are greatly exaggerated.  I was recently quoted by James Thorner, of the St Petersburg Times about my feelings on the market.  I believe I was the only Tampa commercial real estate broker or professional in the article that felt the gloom and doom is over done.  Is there stress in the market?  You bet there is.  Vacancy rates are at their highest in years.  Values have fallen in the area on average between 30-40%.  The loans on all of these deals that were made at the peak of the market will have to be renewed in the next 3 years.  Under normal times, these loans would be challenging if not impossible to renew.  BUT….these are not normal times.

The banking system has been rocked from the collapse of the residential and derivatives markets.  The sytem has been leaking water like an old wooden skiff.  The regulators and elected officials have decided that it would not be a good idea to kick the teetering financial system over the cliff.  As was mentioned in previous posts in this blog, the IRS and FDIC have provided new guidance in regards to easing renewals of loans that are performing, but failing to meeting current underwriting standards (called performing/non-performing assets).

I don’t think these measures can be taken lightly.  The government has the ability to stamp out a commercial real estate fire or at least keep the burn a controlled one.  Certainly, the bankers I have spoken to have felt some of the pressure taken off, particularly from the FDIC guidance (although, you can trust me that they are not sleeping soundly these days, regardless).  And, I don’t believe these will be the last actions government bodies will take to make sure the “problem can” will be kicked down the road.  The general call to action is “A rolling loan gathers no loss” and this will be the recipe du jour for some time to come.  Are we facing tough times?  Yes, the commercial market will be a tough slog over the next few years?  But, what about Armageddon?  Nope.  I don’t see it happening, not this time anyway.

For those interested, here is Mr. Thorner’s article from the Sunday paper:

Commercial Real Estate Crash Coming, Many Say

By James Thorner, Times Staff Writer

In Print: Sunday, November 8, 2009

We all know why home foreclosures are bad. Nose-diving home values and neighborhood blight are just two of the ugly offshoots of mortgage defaults.

But should we care if the neighborhood shopping center, office park or condo project go bust?

We should. A lot.

Experts fear that a commercial real estate meltdown, following hard upon the housing collapse, could prolong economic turmoil in a Tampa Bay region (…..for the complete article)

Source: Tampa Bay Business Journal and Marcus & Millichap

Moderating fundamentals, tighter underwriting and rising cap rates have kept many investors on the sidelines, the report said.

Retail sales have fallen sharply due to a decline in employment, states the report. Specifically, a loss of 33,000 jobs in the Tampa Bay area in the first nine months of the year is cited for a 6 percent decline in retail sales.

For Complete Story on Tampa’s Retail Real Estate Market (3rd Quarter)

Excerpt from the Tampa Tribune:

…..All told, Tampa ranks 46th out of 65 metro areas by highest rate of distressed commercial property, factoring in the size of each market. Las Vegas ranked first, with an estimated 32 percent of its commercial properties in some type of distress, followed by Detroit, at 24 percent.

Most-distressed commercial real estate markets

Percentage of properties in distress

1. Las Vegas 32 percent

2. Detroit 24 percent

3. Miami 20 percent

4. Tertiary West 19 percent

5. Cincinnati 15 percent

46. Tampa 6 percent……

Complete Article from the Tampa Tribune

Comments: Daily, we receive phone calls from individuals looking for commercial real estate in the Tampa Bay area.  Usually the prospective tenants will quote articles and facts about the commercial real estate market and then proceed to use these “facts” as evidence as to why they should be entitled to seriously under-valued rent or the right to purchase a property at pennies on the dollar.  Adjusting the expectations of some clients can be particularly challenging.  The reality of the situation is, however, that as sluggish as the market is in the area, it is really not that bad, particularly when compared to the rest of the US.  Yes, vacancies are high.  Yes, there are more distressed properties on the market than 2 years ago.  Yes, you can find better deals that you could back in 2006.  But, Tenants are still moving to the area (albeit at a reduced rate) and deals are still getting done.  As of right now, the market is soft in Tampa….but it is not dead.