The Bottom; Will We Ever Get There?

Will we ever hit the bottom?!?! So many different reports are floating around these days - some say the commercial markets have “bottomed out”, and others say they haven’t reached it yet. A recently-completed report by The University of Florida stated that the fundamentals of the Florida real estate markets are showing signs of improvement, and we will begin to see more sale and lease closings in the near future. I hope they’re right!

I have been working several deals across the country during the last few months, and in my discussions with other brokers, there is a consensus that there is a lot of activity, and we are all very busy, but closing a deal is like trying to get your two year-old to eat asparagus. It will happen, but only after a long, hard fight-to-the-finish, where you’ll have to leverage every incentive under the sun! Personally, I think we are very close to the bottom, if not already there, but, unfortunately, we will remain in this position for the rest of 2010, perhaps longer. You might see a slight uptick here and there, only to be followed by a drop off in production across the board. With that being said, I believe more and more investors will come off the “sidelines” and jump into this market, and more and more sellers will “get real” about sales prices, the bid/ask gap will narrow and deals will close. Sooner or later, sellers and buyers will wake up and realize that the deals being offered will not get any sweeter in the near future.

Now that I’m done with all the maybe’s and hope-so’s, I can share some good news with you - the weather here in Jacksonville is about as good as it can get! The ocean is getting warm, and the girls are out in full force at the beaches. The Players Championship was held here last weekend, and you can bet I was in attendance cheering on the players. I had so much fun I almost broke my arm walking in between holes… there was a pesky root that I did not agree with, and the trip-and-fall was not fun! Luckily, the x-ray came back negative, and it’s still attached, so all is well. Until next time… have fun out there.

Jacob Horsley
NAI Commercial Jacksonville

Hillwood Development & Market Update

If you subscribe to our newsletter, you may have read a recent article about the Hillwood Development deal going on in Jacksonville. The proposed master development contract between the City of Jacksonville and Hillwood at the Cecil Field DRI (Development of Regional Impact) has been the “talk of the town” of late, as local developers and followers of the local commercial marketplace debate the merits of this lucrative deal. Many believe it is a great thing and will be very beneficial for the city. On the other hand, there are many local interests that feel “robbed” and believe it will be detrimental to the city and, in effect, create a development monopoly for Hillwood. At this time, I am not sure what the best move is. Cecil Field has been aggressively marketed by the City for several years with little to no success, and a change is needed to kick start new possibilities.

Updated Jacksonville market statistics reflect more outside interest from investors, and there are some off-market deals floating around town that will benefit those who have the cash to pull them off. The leasing market is starting to pick up a little steam, and I am personally involved in several deals at the moment. This activity is still on the smaller side (20,000 SF and under), but more business owners seem to be ready to take advantage of the cheap rents and other concessions landlords are offering to get a deal completed. Lately, I have even come across Landlords who are so eager to do a deal that as soon as they get wind of one, they are ready to submit a proposal whether the tenant has any interest or not! As you can see, it’s a great market in which to be a buyer or tenant shopping for new space. In 2010, our typical client is upgrading their space and location and paying similar or cheaper rents than they are paying at their current location. As for owner/user sales, the bid-ask gap is still too wide and completed deals are few and far between. There appears to be some buyer interest, but sellers are just not ready to accept today’s depressed values. However, I believe it won’t be too much longer before this gap starts to narrow and sellers in this market start to make some deals. Personally, I think later this year - in Q4 2010 and definitely by Q2 2011 - you will see several owner/user sales completed and the sales market, in general, picking up steam.

The past weekend’s weather wasn’t ideal, but I still managed to get sunburned at the beach on Sunday. The Players Championship is coming up in the next couple weeks, and locally, we are all looking forward to getting out and enjoying the tourney. I hope Tiger decides to make the trip, because if you haven’t seen him play in person, it’s a real treat regardless of how many mistresses he has following him around. I’m going to call it a day after that politically incorrect comment…and until next time, thanks for reading!

Jacob Horsley
NAI Commercial Jacksonville
Industrial Group

Welcome to The NAICJ Industrial Group Blog!

Welcome to the NAI Commercial Jacksonville Industrial Group Blog! Since this is my first entry, I want to explain a little about the purpose of this particular blog. I plan to use this forum in multiple ways. First, I would like those reading my newsletter to be able to comment on the articles posted in it; second, I want to encourage the Blog’s readers to discuss their interests, deals, and questions surrounding the commercial real estate industry in today’s economic climate; and finally, I will post my thoughts and opinions, as well as some pertinent facts about the industry and deals I am completing.

Now, getting down to business, I want to comment on something that has been bothering me over the last several months. Why are all these different news articles in the paper and industry-related publications one week talking about how business is picking up and signs of recovery are on the way, and the next week predicting doom and gloom in big bold headings? Why doesn’t someone just come out and say they have no freaking clue what’s going on, and the turmoil we are in today has never been seen by anyone before?! I have to admit I’m guilty of posting some of these contradicting news stories in my newsletters for the simple reason that they’re interesting and contain some factual information. Sometimes I find them very funny, and other times they’re just downright frustrating to read.

My advice is… business is slow, and times are tough… quit trying to predict the future, put your nose to the grindstone and work through it! Be creative, be better than your competition, and forget the rest. It doesn’t do any good to dwell on what may or may not happen 6, 12, or 24 months in the future. Take care of today, and plan for tomorrow.

Now that I’m done venting for today, it’s Friday afternoon, I am in Jacksonville, and the NCAA Tournament in town! I will be at the evening session watching Duke vs. Ark-Pine Bluff and the grand finally Louisville vs. Cal… have a great weekend everyone and until next time.

Jacob Horsley