A year ago, the COVID-19 pandemic put the damper on the commercial real estate market in the Bradenton area, while the single-family home market surged.
Today, the home market is still surging, and the commercial real estate market has recovered its footing, driven in part by some of the same forces.
An influx of new residents and new businesses from places like New York, New Jersey, Connecticut and California, and the arrival of COVID vaccines, are all helping reopen the economy and bring workers out of lockdown and back into the office.
Commercial real estate includes office, industrial, retail, and rental apartment space. Of those broad categories, industrial, apartment rental space and office space are doing the best, while retail, with some exceptions, continues to lag.
The hospitality industry — free-standing restaurants and hotels — were hurt so badly during the pandemic that the Manatee County Property Appraiser’s Office is making adjustments to its valuations, said Mark Johns, director of appraisal services.
Despite the challenges restaurants faced during the pandemic, which put some out of business, a significant number of new restaurants also opened.
Major restaurant chains are also very active in the market, said Stan Rutstein of the Re/Max Alliance Group.
Other brick-and-mortar retail businesses continue to face significant online competition, which only intensified during the pandemic.
“It’s growing exponentially,” Rutstein said of online sales.
Office space market improves
Also showing marked improvement is office space leases.
“We have leased a lot of space in the last six to eight months again. It’s time to go back to work again now that people are vaccinated,” Rutstein said.
Susan Goldstein, a commercial real estate specialist with Michael Saunders & Company, recently sold an office building at 1206 Manatee Ave. W., Bradenton for $2.2 million.
Existing office buildings may be a relative bargain, considering that building supply chain shortages are affecting construction of commercial and residential properties.
Among her current listings is a 12,187-square-foot free-standing office building at 7349 Merchant Court, Lakewood Ranch, offered at $2.8 million.
“You could not build anything like this today,” she said of worker and material challenges facing builders.
“There are opportunities out there in commercial real estate,” she said.
Selling points for the Merchant Court office building: 1. It is available, and 2. It is located adjacent to Casto Development’s Center Point project on 50 acres of prime Lakewood Ranch real estate south of University Parkway.
Center Point is already home to the 77,000-square-foot Center Point Medical Center, 6600 University Parkway, and Roper Technologies, 6901 Professional Parkway E.
Announced for Center Point are Olivia’s Italian restaurant, Owens Fish Camp restaurant, a McDonald’s restaurant and a 7-Eleven convenience store, with more to come.
“This is an opportunity for the right business that needs this kind of space. Look at where it’s located,” Goldstein said.
While the inventory of commercial property has tightened in the Bradenton area, it comes nowhere near the lack of inventory chronically experienced in the residential market that has driven prices to record levels.
“Ten percent or a little below that is a healthy vacancy rate. It allows businesses to move,” Goldstein said.
With renewed interest in the local commercial real estate market, sellers are sometimes seeing multiple offers.
“More than we ever have,” Goldstein said.
The commercial real estate market was at its low ebb in March through June of 2020 and started to rebound in the first quarter of 2021, said Janet Robinson of Coldwell Banker Commercial NRT.
“People are moving to Florida from Connecticut and New York to get themselves a suburban office space or to work from home,” Robinson said.
Tax code helps fuel commercial market
Many of the businesses that sold their out-of-state property to buy business property in Florida are doing so under the Internal Revenue Code 1031 exchange program, Robinson said.
“Whenever you sell business or investment property and you have a gain, you generally have to pay tax on the gain at the time of sale. IRC Section 1031 provides an exception and allows you to postpone paying tax on the gain if you reinvest the proceeds in similar property as part of a qualifying like-kind exchange. Gain deferred in a like-kind exchange under IRC Section 1031 is tax-deferred, but it is not tax-free,” the Internal Revenue Service says.
The rebound makes it an exciting time to be in commercial real estate, Robinson said.
Rutstein, Goldstein, and Robinson all agree that one of the most in-demand types of commercial real estate is industrial or warehouse space.
“Anything from 10,000 to 100,000 square feet is getting very hard to find,” Robinson said.
Among the most successful new industrial real estate developments are Harrod Properties’ Gatewood Corporate Center at Lakewood Ranch and Benderson Development’s Florida International Trade Port at Interstate 75 and U.S. 301 in Ellenton.
“Distribution centers and warehousing are powerful,” Rutstein said.
Despite the challenges that commercial real estate faced in 2020, sales activity was not much different than in previous years, Mark Johns said.
“The market is very strong in 2021,” Johns said.
A prime example is the $73.5 million that the Aria luxury apartments, 102 Manatee Ave. W., recently brought.
This week, MHCommercial Real Estate Fund LLC, a Florida-based discretionary private real estate fund, announced that through a joint venture with Contrarian Capital Management, LLC, a Connecticut based hedge fund, it had acquired 9000 Town Center Parkway, a 101,312-square-foot Class-A office building located in Lakewood Ranch for $20.25 million.
The two-story building, developed in 1998, is primarily occupied by TriNet USA, Inc.
Whatever the challenges that commercial real estate might face, Rutstein is philosophical.
“This, too, shall pass. It’s reality. It’s life,” he said.
This story was originally published June 16, 2021 5:00 AM.