This is what COVID-19 has done to commercial real estate in Bradenton-Sarasota
Stan Rutstein’s “Let’s Talk” signs on prime real estate seem to be everywhere in the Bradenton-Sarasota area, inviting potential commercial real estate developers to take a look and run the numbers.
Seven months into the COVID-19 pandemic, Rutstein is still ready to talk. But the pandemic has had a dampening affect on commercial real estate, much as it did initially on single-family home sales. The difference is that residential sales bounced back quickly, super-heating the market, and bringing multiple offers and record prices to sellers.
That’s not been the case in the commercial market, the segment that focuses on office, industrial, retail and rental apartment space.
“It is best to look at it by category. Retail at the moment is at a hiatus. There is a severe credit issue. Cash flow has been little or none,” said Rutstein, agent/broker at Re/Max Alliance Group in Bradenton.
The retail market was already ailing before the pandemic.
“There are 6,000 stores planning to close in the United States this year,” Rutstein said, rattling off a list of companies that have either gone out of business or are scaling back their brick-and-mortar operations, including Pier 1, Dress Barn, Stein Mart, JC Penney, Neiman Marcus, J.Crew, Stage Stores, Sears and Kmart.
Another factor is online sales, which continue to grow and entice buyers with easy point-and-click technology. Online shopping, with its convenience and free shipping, represents a lifestyle change that is attractive to families pressed for time.
“The question is how much retail will return?” Rutstein said.
One of the challenges facing retail sales is illustrated at the intersection of Manatee Avenue West and 75th Street West, where former Alberston’s and Kmart stores faced each other across the street. Target recently confirmed that it will be taking over the Kmart space, but the Albertson’s space remains a vacant parking. A Lucky’s market was planned for the site, only to be derailed by the company’s bankruptcy filing.
Restaurants are one sector of retail that had been growing, Rutstein said, but the pandemic has had a devastating effect on them.
Nationwide, thousands of restaurants will close and not reopen, he said.
Another area of concern is rental apartments. By executive order, Gov. Ron DeSantis banned landlords from evicting tenants who could not pay their rent..
There could be a financial reckoning for landlords who had continuing expenses while much of their revenue stream was cut off during the pandemic.
In spite of the challenges of deal making during the pandemic, buyers and sellers have figured out how to do business without meeting face to face.
“We are very positive on the west coast of Florida. Interest rates are very good right now. Banks, from a capital standpoint, are as strong as they have been in decades,” Rutstein said.
And he believes that working at home may not always be the new normal.
“I believe that working at home will wear thin. Workers miss the ability to communicate with each other and the social aspect,” Rutstein said of some of the synergies that come with a team working together in commercial office space.
Janet Robinson, commercial director for Coldwell Banker Commercial NRT on Florida’s west coast, agrees that office workspace trends are shifting.
At one time, office designers were allocating 215 square feet per worker, which was reduced to 125 square feet, but it is once again growing larger, she said.
“It is a challenging time right now,” she said.
Despite the pandemic, potential buyers continue to return, looking for better prices, particularly in property priced at $250,000 to $650,000. Not that there is a lot of commercial real estate available in that price range, Robinson said.
“Florida is still very hot and we are getting more calls on retail from out of the area,” she said.
Rick Kerper, owner of the Shoppes at Commerce Park and Gateway Office Park, both at Lakewood Ranch, says that he has lost a few tenants because of COVID-related issues.
But overall, he is seeing strong activity, saying that a better location is always a plus. ”People are moving forward, but they are moving more carefully. People are very cautious,” he said.
“Better locations do better in bad times,” Kerper said.
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