If you want to get a sense of the real estate industry in Alachua County these days, picture the pendulum on a grandfather clock.
For the past two years, that pendulum has been pegged to one side—the recession side. Now it’s starting to swing back.
But keeping the momentum going in a positive direction will depend on reducing restrictions on lending, spurring buyer’s confidence and, quite likely, shifting the type of development being done to take advantage of new trends.
Those were the messages that came out of this year’s 2nd Annual UF Bergstrom Center Real Estate Forum.
The event featured a panel of prominent developers, Realtors, bankers and local officials. The group was cautiously optimistic about some parts of the real estate market, but the speakers also said there are significant roadblocks that need to be cleared before the area fully recovers. Here are some of their thoughts:
Tighter Regulation is Strangling Lending
Lending restrictions are a significant challenge, even for the best potential deals. While some may put the blame on local bankers, they’re not the problem, said Danny Gilliland, market president for Gateway Bank.
“Banks want to lend money; that’s how we make money. But right now, regulations and regulators are strangling us,” he said. “It’s really toxic.”
Still, Gilliland said he’s confident the regulatory environment will slowly improve as the economy expands and foreclosed properties are flushed from the market.
Class A Retail Development Still Positive
While most categories of industrial and retail development are stagnant and residential real estate is still in decline, there are still a few opportunities. The best: building retail in prime locations, especially if Publix is an anchor tenant, said Tim Becker, director of the Bergstrom Center at the University of Florida. “Banks and private capital are chasing good deals and offering excellent [capitalization] rates,” he said.
If You Have Money, You Can Make Money
If you have cash, this is a good time to invest in real estate because of the number of properties available at a fraction of their former value. For example, local developer Ken McGurn purchased over $50 million in distressed properties in the last year, some in partnership with fellow Gainesville developer Mike Warren of AMJ, Inc.
To make money off deals like these, “you need to understand the dynamics of the property and the dynamics of the borrower,” Warren said. And often, the goal is to buy a property at discount from a bank then turn it quickly by selling it back to the original borrower at a lower price the borrower can support, said Warren.
Apartment Industry Is Slowly Reviving
The Gainesville apartment market is starting to improve, with fewer apartment owners having to offer the incentives they did in the past to lure renters, said John Fleming, managing partner for Trimark Properties.
“You’re not seeing the $1,000 gift cards, the mopeds, the trips,” he said. Also, landlords are tentatively boosting rental rates and standalone rental homes near campus that were vacant last year are starting to rent again.
But, the number of vacant units is still greater than three or four years ago. “Are vacancy rates great? No, but they’re getting better,” Fleming said.
Downtown Development is the Future
Fleming said the most encouraging news from his perspective is the potential for development from projects like UF’s Innovation Square, which will be built on and around the former Shands at AGH site.
That site could be developed into three million square feet of space for high-tech and bio-tech firms. “You want to talk about what can be built? That’s it,” he said.
Audience member Bruce Delaney agreed. Delaney, who is director of real estate for the University of Florida Foundation, said the so-called cultural creatives who work in tech start-ups like an urban life in which they can work, socialize, live and dine within a small area. Also, rising gas prices could encourage more people to live closer to work. Innovation Square and surrounding properties could offer the perfect solution. “The greatest opportunity for investment will be in the core of the city,” he predicted.
Pent-Up Demand Could help Residential Developers
While the market is mixed now, there’s a significant bright spot ahead in the hundreds of thousands of potential homebuyers who are now sitting on the sidelines, said local developer Barry Rutenberg, who also is first vice chairman of the National Association of Home Builders.
Now, those potential consumers are staying at home with parents or living in apartments. But when lending and the economy improve, that pent-up demand will create opportunities for residential developers across the county.
The real estate forum was presented by Beau Beery, vice president of commercial real estate for AMJ, Inc. Mike Ryals, vice president of Bosshardt Realty’s commercial division, moderated.