According to conference speakers, the subprime collapse has caused decisionmakers to pause, but "the sky is not falling completely," said Keith Tickell, executive vice president-development for Flagler Development Co. "There are some cracks, underwriting is more difficult now and companies are re-evaluating some of their building starts, but the slowdown is just temporary," said Tickell.
"It's much tougher to close deals that were under contract before the credit crunch," adds Larry Richey, senior managing director of Cushman & Wakefield, Tampa and Orlando.
Others agree. "When you wipe out the condo market, which was a major source of capital for our market, you're going to see some influence [on the rest of the commercial market]," says J. Patrick Duffy, MCR, president of Colliers Arnold, Central Florida. "We're seeing questions being asked about what tenants do for a living. They're not just looking at the leases but at how secure the tenants will be as well."
The subprime problems are threefold--a lax approach to credit, inadequate underwriting and bad pricing. However, most commercial practitioners are seeing that banks will still loan the money as long as the buyer has proven that they're experienced in what they're doing and they've got an experienced team.
"I think we were all a bit surprised by the subprime mortgage ripple into the CNBS market, and it's shrunk the low-cost capital mindset," said Bill Moss, senior managing director of CB Richard Ellis in Orlando. "But, the money is still there--you'll just see higher cap rates through the end of the year before it returns to normal--normal with stricter underwriting."
One shining star in the Central Florida commercial sector is the industrial market. With vacancy rates as low as 6.5% in Orlando and 5.8% in Tampa, Central Florida is poised for growth. "We've got all the fundamentals in place," explained David J. Murphy, senior vice president of brokerage services and industrial properties for CB Richard Ellis Inc. in Orlando.
"It's great to be in Florida," said Bob Krueger, regional director, Central Florida, First Industrial Realty Trust. "Rents have escalated, but that will probably slow. Vacancies are still low and there are plenty of buyers. We're seeing that the decisionmaking is taking a long time. People have choices, and they're wondering about the economy, so they're taking more time to weigh their options. But, anything in the I-4 corridor will do well."
In addition, the area is seeing a lot of growth in the trade markets as it relates to consumer goods to support population growth.
One concern in the industrial market is retrading, changing the contract terms and price based on what the client terms an "adverse market," although the RealShare experts agree that it's mainly affecting class B and C properties. "You're seeing a retrade mentality but only with B-class properties," said Murphy. "If someone wants to retrade on a class A space, we'll put it back on the market." Most agree that the media's portrayal of the market largely fuels the retrading mentality. "There's no justification in the market for retrading," says Murphy. "Buyers are being retraded on their deals, so when they come back around, they want to retrade you--it's the power of getting a lower price."More than 300 commercial practitioners attended the RealShare Central Florida conference is produced by Real Estate Media, publisher of GlobeSt.com, Real Estate Forum and Real Estate Florida.
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