UF survey finds Florida’s real estate outlook is perking up
Monday, February 14, 2011
Optimism has increased slowly but steadily in Florida real estate markets through the fourth quarter of 2010, a new University of Florida survey finds.
The fourth quarter Survey of Emerging Market Conditions found improvement in several key categories, including the outlook for sales in new single-family homes and condominiums, office occupancy, retail occupancy, land investment, and capital availability.
Much of the optimism derives from the political arena with the defeat last fall of Amendment 4, a proposed constitutional amendment that would have required a referendum for all changes to local government comprehensive land-use plans, says Timothy Becker, director of UF’s Bergstrom Center for Real Estate Studies. The conclusion of mid-term elections also eased respondents’ uncertainty as it provided a clearer picture of the future, Becker says.
"The state welcomed a new governor who has promised to make Florida a more business-friendly state,” Becker says. "If he can succeed on his goals, respondents believe it will have a positive impact on the real estate market. Any help in attracting new business to move or form in the state will no doubt have a positive impact on job growth.”
Survey respondents’ expectations for occupancy and rent increased across every property type. The investment outlook rose in a majority of the property types, and the statewide outlook was the highest since the survey’s inception in 2006. Additionally, private capital is abundant as investors seek the few good products on the market. Overall, the market appears to be improving and will continue to improve at a slow pace over the next year, Becker says.
Despite the positive outlooks in many asset classes, respondents’ optimism is tempered by troublesome economic factors, most notably Florida’s high unemployment rate of 12 percent. Respondents also relayed fears over federal, state, and local budget issues, Becker says.
"Local revenues continue to decline as property values decline, placing a tremendous burden on local budgets. This will require tough decisions by local officials,” Becker says.
The outlook for single-family and condominium sales increased slightly this quarter, but Becker says home builders continue to have a negative outlook because financing is difficult to obtain and lower prices in the foreclosure and short-sale market take potential customers away from the new housing market. Unexpectedly, respondents’ outlook for investment in residential development increased for both single-family homes and condominiums. Becker says the low cost of fully developed lots provides incentive for investors and developers.
Expectations for office and retail occupancy continued to improve. Occupancy expectations in the office sector increased and the outlook for rental rates increased slightly but is still expected to continue lagging inflation, Becker says. In the retail sector, occupancy expectations improved for all property types. Becker says respondents believe occupancy will increase in neighborhood centers and large retail centers.
Accordingly, the investment outlook in retail increased for neighborhood centers while declining for the remaining property types.
Land investment and capital availability also rose this quarter. More respondents believe land is beginning to be priced at levels that support longer-term investment, Becker says, despite the fact that lack of financing for land purchases continues to be a concern. The optimistic outlook for capital availability is due in large part to respondents’ belief that future capital availability will increase.
"Respondents believe there is a need to add additional apartment units based on the fundamentals and expect development financing to be available for that sector,” Becker says. "Private equity continues to be plentiful for quality core assets and valued-add assets.”
Expectations for apartment occupancy and the industrial sector were mostly stable.