Commercial realty begins rebound, experts feel
By Patricia Hoyos
The commercial property market has bottomed out and is beginning to grow in some sectors as their fundamentals start to improve, expert observers say.
These fundamentals were discussed during the Realtor Commercial Alliance Super Conference & Commercial Real Estate Expo, which drew about 200 realtors and brokers Nov. 18 at the Biltmore Hotel,
Opening speaker Randy Anderson, the Howard Phillips Eminent Scholar Chair of the University of Florida, said it's crucial to understand what drives each commercial sector in order to predict which direction the market will go.
No one can predict when the market will be at the top or the bottom, he said, but knowing the status of each of the fundamentals can signal the best times to sell or buy.
"As long as you're buying somewhere near the bottom and selling somewhere near the top, you're doing well," he said.
The industrial sector in particular is expected to growth with the improvements being made to the Port of Miami as well as the planned expansion of the Panama Canal, which is expected to double the capacity of the canal by 2014, he said.
"All factors suggest improving fundamentals and long-term performance," he said.
More ship traffic to Miami could mean that more warehouse space will be needed in the county. However, the exact impact of these two factors on Miami's industrial market isn't clear just yet.
"Customers are not going to demand more product simply because there's more ships coming," said Chris Metzger, executive director for Cushman & Wakefield, during a panel discussion.
The question remains how much of the cargo of the new shipments will be stored in Miami rather than be shipped elsewhere, he added.
Regardless, the industrial sector has taken off in the past 12 months, according to Lee Katsikos, founder of the Katsikos Group. Rates for industrial properties have also risen in the past six months, he said.
As far as new land being developed for industrial purposes, experts agree there hasn't been much activity, but they expect this will change, although it may be a slow, lengthy process.
Less attractive than industrial properties are retail sites, Mr. Anderson said. Although retail sales, which account for 70% of the US economy, have recovered back to pre-recession levels, he said, the steepness of their current level isn't sustainable. This means sales are going to begin to plateau, he said, making retail investments risky until they begin to stabilize.
Miami's office market has also been a risky investment as many buildings experience high vacancy rates, Mr. Anderson said. However, he said, the market is probably 12 to 18 months away from stabilizing.
The multifamily market, on the other hand, is expected to grow as the number of households that choose to rent rather than buy increases.
By 2020, an 11% increase of renter households is expected, Mr. Anderson said. The huge demand and limited supply is likely to boost this market. This sector is doing better than other markets, he added. Demographics, he said, suggest long-term growth in apartment demand.
Even in the midst of the nation's biggest downturn, real estate outperformed stocks and bonds, Mr. Anderson said.
Right now, he said, commercial properties are in their seventh consecutive quarter of growth.
"In general," he said, "the market has flattened out."
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