COMMERCIAL REAL ESTATE OUTLOOK

COMMERCIAL REAL ESTATE OUTLOOK by Deedee Davis, Owner/Broker Nai Pensacola Commercial Real Estate

2019 was one of the best years we have seen in commercial real estate in a long time. But, 2019 is history and what can we expect from 2020? All indicators point to much of the same. One of the reasons is that our market here in Northwest Florida is different from the national and even the state scene. We do not experience the extreme peaks and valleys, other than recession driven conditions, that most of the country does. And with the leveling factor of our region, we can look to stretch out a very good run. Most of the country felt a bit of tapering off in the 4th quarter, but here in Northwest Florida, we had the busiest year end for sales and for leasing that we have seen in recent years. A lot of this was because of 1031 money that had to be placed—all very typical of a strong economy. We currently have an abundance of investors hungry for income producing properties, but an inventory that has been nearly depleted. Apartment complexes and shopping centers remain a hot ticket, and industrial is coming back strong. Industrial is positioned to be the fastest growing sector of the 2020 market as online retail continues to expand. Distribution centers are in big demand and not just Amazon-sized centers. Plenty of people are starting businesses out of their homes but need climate

controlled storage and shipping areas. Prices have increased significantly for such properties.

Downtown Pensacola continues to prosper, but there is an abundance now of available office space. Small suites from 1500-3000 square feet, however, remain in demand. The Imperium, a newly completed project at 120 West Government Street, promises to expand the prosperity of Palafox Street. Steve and Paul Grimes have transformed this parking lot into a state of the art live/ work building. Downstairs houses three small retail/office spaces while the upstairs includes three spacious, beautiful residential units. One residential unit has closed and the others are all currently available. This is the first new downtown development since the completion of the Southtowne project. Look for more new construction on Garden Street as the former School Board administrative building gets a new look and the corner space where Property Appraiser Chris Jones had his office become a new, exciting food venue. Old buildings that have been repurposed into offices are another great option. The Seville Historic District frequently has openings in such buildings. Most seasoned real estate brokers have relationships with owners

there, so if this is what you are looking for, ask. They don’t always show up on the market, so a connection comes in handy. Also typical of a strong economy, we have seen an explosion of title companies as they respond to a strong housing market. Most 3500-5000 square feet suites have been absorbed by them and many new buildings have also gone up in response to the demand.

Airbnb homes and condos continue to flourish. With so few government regulations and restrictions on the industry currently, profits are strong. Many people are turning extra rooms, garage apartments and studio areas into available Airbnbs. Look for the hotel industry to push for stronger controls, similar to what they must comply with. It is much like the situation with taxis v.s private rides such as Uber and Lyft. Competition traditionally benefits the consumers, but hotels argue that Airbnbs currently have an unfair advantage with few regulations. It is highly unlikely that Airbnbs will ever replace hotels, but they remain a popular option. Owners individualize these spaces to accommodate guests in a way that hotels simply cannot. Marketing for Airbnbs usually drive home the fact that hotels are cookie-cutter. The Blab building on Palafox Street recently sold and while the available front space has been developed into a microbrewery, the back will reportedly be set up as two Airbnb apartments.

You may have noticed the proliferation of microbreweries mushrooming around the downtown area and wonder how so many can thrive. Crazy, but this is a leading indicator of growing, dynamic downtowns. The success of such businesses is largely based on a younger population. Cities die when the young move away, so count your blessings every time a new one opens.

The west side of downtown is no longer the forgotten side, as developers recognize the opportunity. Renfroe’s Pecans has joined Joe Patti on the same block and look for more retailers to get in on the trend. We have our very own “West Side Story” as lots are gobbled up for redevelopment there, largely in anticipation of the longawaited Maritime Park project that could continue to unfold this year. The Hallmark townhouses on the former school site of the same name are nearly sold out and homes are popping up throughout what were once blighted neighborhoods, creating a highly desirable residential option that, until recently, was almost non-existent.

Despite the math that makes the real estate market profitable, viable and, yes, fun, it really all gets down to relationships. Having the right real estate broker is as important as the right financial advisor, banker and attorney. All offer expertise that can help you make decisions that affect your bottom line. A relationship with a real estate broker means you may get information about a property that will go on the market and is something that broker knows you would be interested in. A broker can advise you as to a good time to sell, much like a financial advisor does in the world of stocks and bonds. A broker can identify real estate investment opportunities so that you diversify your assets. Take advantage of a strong market and build or strengthen a relationship with one of the many great agents/brokers in our region.