The U.S. average apartment vacancy rate was 8 percent and the asking rental rate was $1,026.
Of the other major Florida markets, Miami had the lowest vacancy rate at 5.8 percent as well as the highest asking rental rate at $1,063. Tampa-St. Petersburg had a 10.7 percent vacancy rate and an $827 asking rent and Orlando had a 11.2 percent vacancy rate and an $869 asking rent.
New York-based Reis (Nasdaq: REIS) is a commercial real estate performance information and analysis company.
I just learned that 601 N. Ashley sold last month. Besides the fact that the building is immediately next to our office, I find the sale interesting as I believe it is a microcosm of what is going on in the Tampa market. Novare Development and partners purchased the building in 2005 with the intent to convert the building to condos.
Well, life happened in the wake of what seemed like a great plan and the market downturn torpedoed any opportunity to break the building down and sell it. The purchase price in 2005 was $7,000,000 or $114.27/sq ft. The price on last month’s sale was $4.1 million, or $67/sq foot, a 41% decrease. While the Tampa Downtown Sub market hovers around 20% vacancy, it will be interesting to see what the new owners have in store for the property.
“This is a generational opportunity for law firms, for those whose leases are up in the next couple years,” said Jack Lowell of Flagler Real Estate Services. “We’ve been through this a few times before in Miami. These cycles last for two to three years.”
This was a piece from the Miami Herald today. It is interesting to watch the way law firms are handling the current downturn in the Tampa Bay area. Some are looking for the 10 year leases to really capitalize on their positions in the market. Others are moving in to sub-leases at 30% below market rents, with 2 year terms. Confidence in the staying power of their firms is a big factor in which way they decide to go.
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.
Unfortunately, the Tampa Area unemployment rate continues to climb. Until the unemployment rate increases reverses its negative trend, the area commercial real estate vacancy rates will continue to be under pressure.
The Tampa Bay area’s jobless rate jumped half a percentage point to 12.3 percent, making it the most job-challenged major metropolitan area in Florida. The region’s most sluggish county remained Hernando, which saw its unemployment rate rocket to 14.7 percent, up from 14.0 percent the prior month….from the St Pete Times (for complete article)
(TAMPA, FL) — As vacancy in the metro Tampa office market climbs and rents recede, property owners and investors continue to look for the turning point that will signal the onset of an economic recovery.
Marcus & Millichap predicts a 20.5 percent vacancy rate by year end. Rents are forecast to slide 7.9 percent to $17.23 per square foot.
• 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.
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 had the pleasure of sitting down with attorney Fernando Perez, of Perez and Associates in Tampa, Florida this week to discuss immigration issues with real estate investors. Mr. Perez has been practicing immigration law since 1982. He is a regular contributor on FOX News and Univision related to immigration issues. He is a “go-to” guy in Florida when it comes to business and commercial immigration.
I attended the recent OPP LIVE conference in London, UK this past October and was asked repeatedly about the process of acquiring a visa by those interested in managing distressed properties in Florida or buying investment properties to manage. With the currently weak dollar and the depressed real estate prices in the State of Florida, I certainly understand why there was such keen interest.
While this interview focuses on commercial real estate investment, many of the points Mr. Perez covers can be utlized for other purposes, such as buying or starting a business in the US, or a buying a beach vacation home. The important point I took from our discussion is the US is open for business and investment from foreign investors, but one needs to understand the visa laws and work with a professional that can help them guide the way.
Mr. Perez’ website is a wealth of information about visa requirements. Click here for more information.
Full Transcript
INTERVIEWER: Eric W. Odum, Lic. Real Estate Broker, Net Lease Commercial Advisory, Inc.
INTERVIEWEE: Fernando Perez, ESQ.
Eric: Hello, and welcome to another series from Net Lease Commercial Advisory. Today we have with us Fernando Perez. Thank you very much for joining us Fernando.
Fernando: My pleasure.
Eric: Fernando is an attorney that has been specializing in immigration law over the past 27 years. We’re very fortunate to have him sit down with us today to talk a little bit about some of the investment and visa requirements for investments, primarily with real estate, but also in covering a wide range of other types of activities in terms of buying business and whatnot.
Fernando has been a consultant in both the State Department and Congress, and he also has a face for television. We know he’s been on FOX news and Univision, in terms of consulting on immigration matters, and so we’re very fortunate to have him with us today.
So hopefully you will be able to get a lot out of this and it will be able to help you make some decisions. Thanks again Fernando.
Fernando: My pleasure.
Eric: Let’s talk a little bit about the immigration visa. Typically, what people understand is that to get into the United States when you’re buying real estate or a business, you’re going to have to put down a million dollars—invest a million dollars, and hire 10 employees. When I go out and I speak to people, that is the common perception, is that really accurate?
Fernando: Well it depends, which is a great lawyer answer. What happens, Eric, is that there are two separate investment visa categories under the immigration laws, and people tend to confuse the two. Now, there is a visa category which is called the EB-5. It’s also been referred to as the Employment-Creation Visa or the Immigrant Investor Visa. Now, the characteristics of that are that persons from any country can qualify, but it does require in most instances, an investment of at least a million dollars in a US business, and as a result of that investment, 10 jobs for US workers have to be created.
Eric: Okay.
Fernando: Now, while we’re talking—
Eric: Which is not really ideal for a real estate investor—
Fernando: Exactly. It’s not going to be feasible in a lot of situations. Now, there is a new variation that I will touch on with the EB-5 before I get into the Treaty Investor category. There is a variation of the EB-5 that is an investment in something called a regional center. Those are areas of the United States that have been designated by the government as distressed. Now, if somebody makes an investment in a regional center, the investment amount is reduced to $500,000 and there is no requirement that you create employment because the investment itself, which has been pre-qualified, is already structured to create employment in the local community. So that’s the EB-5.
The other investment category, and this is the one that really is the most practical to most individuals, is what’s called the Treaty Investor Visa or the E-2. The differences are that the E-2 is only available to nationals of countries with which the United States has a qualifying treaty.
Eric: Generally, what kind of countries are they? How many are there, do you know?
Fernando: There’s probably, off the top of my head, over 50 or 60.
Eric: It’s a lot, close to half of—
Fernando: It’s a lot. Most of Europe qualifies. England, Spain, France, Italy; all those countries qualify. Canada and Mexico qualify.
Eric: Those are the big three that are investing in the United States. It’s the UK, Canada, and Germany.
Fernando: Columbia, Australia; they are all over the world. So, for somebody like that who is interested in doing something like that, just basically contacting someone like me and saying, I’m from such-and-such country, is there a qualifying treaty? And we can tell them right away, yes there is.
So, assuming there’s a qualifying treaty, the next thing—and this is the thing that’s really important—is that when you’re dealing with the E-2, there is no minimum investment required.
Eric: A big difference from the E-5, which is a million dollars to $500,000.
Fernando: Huge difference.
Eric: I mean, really, no minimum amount.
Fernando: Exactly. And if the investment is packaged correctly, for example, I’ve had investments qualify with an investment of $7000. Now, that’s rare and there were a lot of other factors involved, but the point that someone needs to take away from this conversation is, don’t think that you have to have a certain sum of money ready to invest to be able to qualify for the E-2. That’s the biggest difference between the E-2 and the EB-5.
The second thing is that with the Treaty Investor category, there is no requirement that you have employees. If the investment in the United States, is able to generate enough income to support the investor and their family, there is no requirement to have employees.
Eric: Wow. That’s another big difference.
Fernando: Huge difference. Let’s just use a real example. Let’s say that you have a British family that comes over here and buys a strip center. It’s a commercial investment because their job is that they are renting this. That clearly qualifies for E-2 treatment.
Now, the only “employees” they may have may be independent contractors. Maybe they hire a company to mow the lawn to keep up the landscaping and somebody else to do repairs every now and then, but they don’t really have to have any internal employees that they, themselves, are supervising. That’s perfectly fine. As long as that investment generates enough money to support that family in the United States, then they are good to go.
Now, when somebody comes here in E-2, the spouse can get permission to work in the United States and the children are automatically authorized to go to school. The children don’t have to qualify for a separate student visa, the wife doesn’t have to qualify for some separate type—it’s automatic. Obviously there is a paper process, but it’s not going to be denied.
Eric: So let’s talk a little bit about the types of investments you can do. If I wanted to buy a residential property down the street, am I able to do that?
Fernando: Well, yes, you can do that. There’s nothing stopping you. This is nothing to do with investments per say, but this is something that’s also misunderstood, and unfortunately it’s also misunderstood by immigration sometimes.
If somebody is here as a visitor, which is a B1, B2—or for a lot of Brits and people from European countries, they can come in under the Visa Waiver Program, which allows them to be here for 90 days without a visa. Persons like that, it’s perfectly legal for them to buy a residence in the United States. They don’t need any special permit, they don’t need to change their classification to buy that residence.
So if they want to come here and, for example, buy a vacation home, and they want to rent it out for part of the year and come back and live in it part of the year, that’s perfectly fine. They don’t need a special category for that. On the other hand, if they want to really use this as an investment that will allow them to live in the United States on a longer term, then simply buying a residence won’t do it.
Eric: Essentially, we talked about four options for them today. So why don’t you go ahead and quickly summarize for our audience what those four options that we discussed—actually there are a lot of different options, but why don’t we talk about those four that we discussed, again, just to summarize things for our viewers.
Fernando: In the area of investment, and particularly in investment that’s real estate related, the four options are these:
The Treaty Investor category, which, as I mentioned before, is available to nationals of countries with which we have a qualifying treaty, requires no minimum investment amount, does not require any number of employees, and does not require the day-to-day management of the investor.
Then we have the EB-5 category in it’s purest sense, which does require a million dollar investment and does require the creation of jobs for 10 US workers. When it is a million dollar investment, it does require the active management of the investor, it does result in a green card, and it’s available to people from any country in the world. There is no qualifying treaty that precedes that.
A subset of the EB-5 is investment in a regional center. The similarities are that it’s available to anyone and it still results in a green card, but if you’re investing in a regional center, the investment amount is $500,000, you do not have to create any jobs, and you’re not going to be actively involved in operation of the business.
The last area that we talked about is if somebody just wants to come here and buy a vacation home that they are going to use three to six months out of the year, even if they are going to rent it the rest of the time or just leave it closed the rest of the time. It’s perfectly legal for someone to do that while they’re in the United States and simply a visitor for business or pleasure status, which can be someone who enters with a natural B1 or B2 visa, or somebody who enters under the Visa Waiver Program without a visa.
Eric: Perfect. So that summarizes, essentially, the four options that we have for real estate investors to get involved in the United States. Certainly, Fernando, as an attorney, has a considerable amount of experience in this area. We’re very thankful he was able to join us today. So Fernando, again, I appreciate your time, and hopefully our viewers got something out of it. I’m sure they did.
Fernando: My Pleasure Eric.
Eric: Maybe it will help some people in the future. Thank you very much.
Vacancy rates are continuing to rise in the Tampa Bay area’s office market as regional employment is expected to decline by 54,600 jobs by year’s end, states a fourth-quarter report by Marcus & Millichap.
About 2,100 office jobs have been eliminated monthly throughout 2009, dropping overall office employment to a level last seen in 2003, states the report. A resumption of hiring is still several months away.
That means vacancy rates will continue to climb while rental rates decline. (Complete Story)
Commentary: We continue to see sprouts of green on the barren economic landscape right now, but unfortunately, employment and subsequently vacancy is going to continue to be an issue in to the first quarter of 2010, if not further. As has been stated many times in this blog, Tampa, Hillsborough County and the State of Florida have been entirely too reliant on construction and growth with limited thought or planning as to what would happen when the music stopped.
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