Commercial Real Estate Need in SWFL Produces Run on Vacant Land

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Southwest Florida’s strong job growth and population influx is boosting commercial real estate sectors throughout the region, and while there are indications that a commercial property bubble may be forming elsewhere in the U.S., Charlotte, Lee and Collier counties appear poised for further growth.

There is some justification for saying the region may be in the early stages of entering a commercial real estate bubble, though.  Commercial property prices have risen 60% since 2012 in the U.S., far outstripping residential appreciation or yields from other investments. That phenomenon has caused investors to flood markets nationwide, pushing up prices to levels that will require vast rental increases to support deals — on top of anticipated interest rate hikes.

But that may not apply to Southwest Florida in the same way it would in, say, a San Francisco, Washington, D.C., or Boston. Thanks to job growth and household formations in the three counties that has outpaced Sarasota and much of the Gulf Coast — though the Orlando area continues to lead the state in job creation — the region remains healthy. There’s ample runway left in the multifamily and especially industrial sectors.

The latter has grown in popularity as online commerce has gained traction among consumers as never before. People are clicking, clicking, clicking, but those merchants need warehouse space to fulfill those deliveries.  Fort Myers, in particular, has been viewed as a hub for Southwest Florida industrial space because of its fairly centralized location in the region and proximity to Interstate 75. The location has prompted at least one development firm to consider building speculative industrial space in the area for the first time in several years.

By contrast, a handful of developments in the Interstate 4 corridor between Tampa and Orlando — an area that can reach roughly 18 million Floridians within a 24-hour drive — could deliver more than 2 million square feet of new distribution space on a spec basis this year.

To learn more about the commercial real estate market in SWFL and how you can sell your vacant land, contact an expert member of the 9 Core Realty Team!

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Boomers Fuel Surge in Home Starts in SWFL

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Housing starts bounced at a 20 percent clip in Southwest Florida last year, but analysts say the baby boomer-driven demand still outpaces the supply of new homes. Builders broke ground on 5,591 new single-family homes in the region in 2016, and new and future retirees will continue to fuel a home construction surge for several years to come, according to a new report by data supplier Metrostudy.

Home building cooled somewhat in the final three months of 2016, with housing starts rising just 3 percent over the year. But that followed three straight quarters when the region posted the highest number of home starts in 10 years.

The Sarasota area has yet to experience the peak demand from the boomers. The new housing inventory stood at a 6.5 months’ supply at year end, which is on the “low side” of equilibrium. While 100 new finished vacant lots came on the market last year, the stock of vacant, developed lots, known as VDL, was down 1.2 percent.

Arguably, the biggest supply issue is VDL supply, and the challenge will be keeping up with demand over the next few years. Potential road bumps still include rising interest rates, rising costs, affordability issues, public sentiment towards growth, the overall economy and the ability to sell homes ‘up north.

Local builders say home sales remained strong in 2016, primed by boomers who have retired or are making their way to the Sunshine State. Lakewood Ranch-based Neal Communities, the largest locally based home builder, said it posted a record 1,109 sales last year, which beat the previous record by two sales. Closings hit $430 million, up from $369.6 million the prior year.

“If the worldwide financial environment remains the same this year, we expect further improvement in 2017,” chairman/CEO Pat Neal said.

Competition from new construction helped deflate sales of existing homes by 2.6 percent in the Sarasota-Manatee region last year.

New construction was huge in 2016. Resales took a beating because new construction communities can offer thousands of dollars in incentives that a resale cannot; money towards upgrades in the design center, and credits toward closing costs which are tough competition.

Confidence among builders in the single-family market remained firm in January in the National Association of Home Builders/Wells Fargo Housing Market Index.

NAHB expects solid 10 percent growth in single-family construction in 2017, adding to the gains of 2016. Concerns going into the year include rising mortgage interest rates as well as a lack of lots and access to labor.

In Southwest Florida, starts for new homes priced under $250,000 fell 1.1 percent from 2015, Metrostudy said, while starts above that price jumped 30.2 percent. Metrostudy expects another strong season in 2017 and several more to follow in the coming years.

To learn more about new construction in SWFL contact an expert member of the 9 Core Realty team today!

Work at Babcock Ranch in SWFL Continues

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The band shell that will host concerts for those gathered on an inviting green has been completed. On the opposite side of the green, a splash pad is nearly finished and waiting to hear the playful laughter of children of all ages. Benches that offer inviting places to relax, read, have conversations with friends, or enjoy views of Lake Babcock have been installed. A lakefront boardwalk at the northern edge of the green beckons the young and the young at heart to take a stroll along the lake or, perhaps, to rent a kayak, paddle board, or row boat and enjoy being on the water. This is Founder’s Square, the 13-acre heart of the Downtown District at Babcock Ranch, a new eco-centric town being built by Kitson & Partners in Charlotte County just 20 minutes east of Fort Myers off Florida State Road 31. Babcock Ranch is the first solar powered town in the world and will include 19,500 homes, nearly 50,000 residents, and 6 million square feet of commercial space.

Kitson’s approach at Babcock Ranch is focused on creating a sense of place that will be embraced by residents and visitors alike. Founder’s Square epitomizes that vision. It will serve as Babcock’s central gathering place, the site of community events and celebrations, and the anchor for every aspect of life in the new town.

Visitors will stop by the information center at Woodlea Hall, Babcock’s first civic building scheduled to be completed in late February on the western edge of Founder’s Square. Hikers, bikers, kayakers, boaters, and fishing enthusiasts will enjoy Curry Creek Outfitters next door to Woodlea Hall. The lakefront Table & Tap restaurant also scheduled for completion late this month includes indoor and outdoor dining and a beer garden adjacent to the green at Founder’s Square. A towering 80-year old oak tree transplanted from the Babcock property provides a backdrop for the beer garden. Aspiring and rejuvenated entrepreneurs will congregate at the Hatchery’s Encore Career Center, a place to share ideas and create new enterprises. A market offering a coffee shop, grab and go items, and an ice cream shop is slated for completion in July. The Babcock Neighborhood School will open in the fall of 2017 across the street from Founder’s Square. And a Wellness Center is scheduled for completion in the spring of 2018 on the eastern edge of the Square. Whether it’s relaxation, playing, celebrations, information, dining, commerce, education, or wellness, Founder’s Square is the place to be at Babcock Ranch.

But Founder’s Square is more than just the place to be. It is a true center of town, that place where all facets of life are shared and lifelong memories are created. It will be the place where babies experience the tasty chill of ice cream for the first time, where their older siblings pop a balloon on the 4th of July, where middle school boys and girls stumble through conversations over a soda, and where high school boys attempt to impress their dates while dining at Table & Tap. Inspired ideas and business decisions will be discussed over a glass of wine and dinner at the restaurant. Families will come to the Square to enjoy music, play on the splash pad, or throw a Frisbee while creating moments that will never fade. Their neighbors will arrive by bike or on foot to share good times as only true neighbors can. Moonlit proposals will be made on the green or the lakefront promenade. Hikers, bikers, kayakers, and workout enthusiasts will encourage one another over coffee while enjoying lakeside breezes. Empty nesters and retirees will walk hand-in-hand along the boardwalk, laughing over recollections of a life well lived and in anticipation of their next adventure. First time visitors to the information center will feel the Square’s embrace and know they have arrived at a special moment in time. Founder’s Square will be a place where people come to engage and share those unique aspects of life that matter to them on a personal level and that will rarely be forgotten.

To learn more about investment opportunities in Babcock Ranch, contact a member of the 9 Core Realty team!

 

Housing starts hit best year since 2007

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Housing starts increased in December as they started making up ground from the previous month’s drop, according to the release from the U.S. Census Bureau and the Department of Housing and Urban Development.

Privately- owned housing starts increased 11.3% month-over-month to 1.23 million in December. That is up from November’s 1.1 million, and up 5.7% from last year’s 1.16 million.

While this number is an increase from last month, experts explain that it is still far from what is needed in the market.

Let’s hope the rising trend in new home construction continues throughout 2017. As evidenced by the brisk pace of rent and home-price growth, the country desperately needs more housing units.

Aside from providing consumers with more choices, the increased construction also brings added benefit of boosting economic growth and job creation. Ideally, housing starts should be in the range of 1.5 to 1.6 million. Good news today on trend, but still far from the goal.

Of those, single-family housing starts actually decreased 4% in December to 795,000, down from November’s 828,000 starts.

Despite this decrease in the single-family sector, 2016 proved to be the best year for housing starts since 2007, proving the heights of consumer demand.

For the year as a whole, housing starts of 1.17 million units were the strongest since 2007 as home builders try to keep up with rising demand – pushed up by low, if rising, mortgage rates, solid job growth, rising wages and faster household formations, especially from Millennials.

Even with stronger home construction in recent years, more increases in the supply of new homes will be needed to balance out the market, reflected in rapid house price appreciation in recent years.

Building permits also saw a monthly decrease as privately-owned housing units authorized by building permits in December decreased 0.2% to 1.21 million. This is down slightly from November’s 1.212 million, but is 0.7% above December 2015’s 1.2 million.

However, single-family authorizations performed better in December at 4.7% above November’s 780,000 to 817,000 permits.

This increase in single-family building permits could be just what the market needs to fuel new home builds to meet the growing demand in 2017.

2016 ended on a high note for home builders, with a rebound in construction on new homes in December.

While tight inventory continues to be an anchor holding back the housing market, the year-over-year growth shows momentum is building and heading in the right direction.  Demand should remain high as confidence in the economy grows stronger.

Privately-owned housing completions slipped in December to 1.12 million, down 7.9% from November’s 1.22 million but up 8.7% from the previous year’s 1.03 million.

Of those, single family housing completions decreased only 0.9% from November’s rate of 768,000 to 761,000 in December.

There is still room for growth, and housing starts continue to struggle against historic norms.

While starts increased modestly in December, they are only at 62% of their long-run average. Clearly, starts have much room to grow to meet historical norms.

To learn more about housing starts, new construction and build to rent homes in SWFL, contact a member of the 9 Core Realty team today!