Five Signs that I see from my chair.

Fort Myers Retail office

Fort Myers Retail office

Five Signs that I see from my chair.

Southwest Floridians have a myopic view of the economy. Most of us look at hotel bookings, (hotels are all booked now) traffic (don’t ask me to go to the beach), lines at restaurants (you need to know where and when to go), and how many ads we see in the News Press (90% ads, 10% copy). But most of those things are true in Southwest Florida every snowbird season.

This season is different from the past six seasons and I am convinced that the real estate market is on a gradual if not steep rise. I see the rise from my point of view, of course. The businesses I am in are: retail real estate, property management, insurance, commercial real estate, and development.

Let’s start with development. In most cases a development takes at least 24 months from the initial idea to vertical construction. This is because the property has to be identified, purchased, planned, engineered, feasibility studies need to be done, and the product chosen, designed, priced , financed, and finally marketed. Well, two years ago no one was starting a development.

Here is the news folks: many developments that are going vertical now will generally have a greatly reduced cost basis because the project was picked up at distressed prices from the original developer or the institution that foreclosed on the project. Now as much as I have said before that cost does not determine price, the market sets the price, the low cost basis on some of these projects are indeed governing the market price.

Look at Oasis condos, for example. The project ownership changed two times before we took over, and we are able to offer condos at a little over half the replacement cost. I visited another four-plex project this week. Prices were $113 per Square foot for gorgeous brand new 2000 square foot amentitized homes! (This project is s also in it’s third owner transition from original developer to bank to current owner). Here is part two of the important news: These projects are selling out, raising prices, and will be gone soon. The market will go back to the “new normal” and these prices will not be attainable in the “new normal”. We are in a window of opportunity in new construction that will be gone by next season. To see a good web site on new construction opportunities go here.

Land acquisitions are heating up now because the pipeline is not very full. I see it in our office: lots are selling, land is being acquired, and the local engineering firms are busy with entitlements and planning. We have an excellent, very well focused commercial division that is getting busier every day. The pipeline will be filled, but most of these projects will not be ready for next season. (The opportunity is here now folks)

So let’s talk about commercial. Commercial real estate encompasses land, multi-family, retail centers, and offices, medical, industrial, and special use.

Two years ago a ride from Sarasota to Naples on 41 would be spotted with vacant strip centers, dark office buildings, and faded signs on land. That is no longer the case. Buildings are filling up, centers are being repositioned, and land is being acquired. Like the residential market, however, there is a lag time, perhaps even longer than two years, from conception to occupancy.

We have a similar opportunity in commercial that we have in land; prices are influenced by the distressed turnover, so the cost basis of many commercial projects are not market based. In commercial real estate there is no emotion, the prices are all about rents and income potential. A location is only as important in how much the location affects the ability of that property to earn an income. The good news is that with the uptick in business there is more demand for space and this increased demand is pushing up prices.

Residential construction is a big driver of demand for office and industrial space, and since construction is on an uptick, so is demand, which results in a rise in rents. The opportunity in commercial is that you can still be the third buyer here and benefit from the financial debacle that occurred since 2006. The risk is that it is difficult to buy properties that are currently occupied and earning an income. The numbers are larger as are the returns.

Remember, commercial didn’t die as soon as residential and it will be slower to recover, but now is the time to get in.

I got into the Insurance Business (Dean Street insurance) because I saw stability in that business that I did not see in real estate and I also saw an underserviced market. I have the same client base (Commercial and Residential property owners), and really a price Inelastic business; after all the insurance business is regulated. But I saw the need for clients to lower their total expenditures and providing a real estate centric business model seemed to be a wise addition to our business.

How’s business? Excellent – but not what I expected. Certainly I expected a high volume of homeowner polices (that has happened) but what I did not expect or forecast was the large number of commercial policies. We are getting a great deal of commercial business, I believe for two reasons – the number of commercial properties that have new owners and the need for existing businesses to economize on their outlay for all expenditures. It truly is an underserviced market. (By the way – We really would like to have your insurance business – please go to www.deanstreetinsurance.com and request a quote)

From my Property Management seat – we now handle over 300 rentals at www.ma-rentals.com. Julia Schultz that runs that business. She credits some of the growth to northerners buying at today’s modest prices and wanting to put tenants in their properties. In effect many of these buyers are getting their foot on the escalator of rising prices. Rents are on the way up as well. Look, we got into property management as a service to our clients and as a way to keep them as clients. Julia is the best in the business and we gave her and her team the tools and infrastructure to out-perform the competition.

This business is growing along with the general market but would not grow as fast if the team wasn’t as good as it is.

The Retail Residential business is the machine that ties Market America Realty all together. Here we see the earliest and most aggressive growth. Inventory is down, prices are up, money is cheap, and opportunities abound. Our technology driven approach coupled with experts in focused markets make us a leader in our market. Our Lehigh Acres office (Market America Realty Network) is the undisputed market leader in Lehigh Acres because of this focused approach. Lehigh Aces was, after all one of the centers of the housing bubble POP in 2006. As a company Market America is breaking records every month on both the number of sales – and more importantly the average selling price. (now 31% over what it was only one year ago).

So from my seat the market is hot. Hot with opportunity.

If we can help you with your property (or insurance) needs you need only contact us.

Gregg Fous gfous@marketamericarealty.com 800-439-1580

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