Brokerage Revival

A year ago, commercial real estate firm Avison Young secured a beachhead in Florida when 30 brokers and property managers left longtime Florida player Flagler Real Estate Services to join the growing Toronto-based leasing, property management and investment sales firm.

In short order, the Fort Lauderdale-based Florida region added Dan Carlo, a veteran of commercial real estate firm HFF, who joined in May as managing director in Miami. The next month, Avison Young acquired WG Compass Realty in West Palm Beach, 24 more brokers and employees and an entry into the retail market. Then in September, it bought Tampa'sLane Witherspoon & Carswell Commercial Real Estate Advisors and its sibling property management company and 19 people. Avison Young is up to five offices, 83 people and 20 million square feet of property listings or property under management in Florida.

Florida managing director Pike Rowley, a 59-year-old native Floridian who was with Flagler, says it's just a start. The firm plans to be in all the major Florida markets. "We're just excited about being able to take a very entrepreneurial platform and push it around the state," Rowley says. "There's an elite number of national companies at the top of the food chain and then there's everybody else. What we're doing is cracking into that elite group."

The recovery of commercial real estate in Florida has seen a revival in firm-building. Franklin Street, a Tampa-based commercial real estate services firm, started in 2006 and now is up to 200 employees in four main offices in Tampa, Miami, Jacksonville and Atlanta. It's expanding into Nashville, Kentucky and Dallas. Its model, in addition to the standard leasing, sales and management services, also offers financing and insurance. "It's been pretty powerful," says CEO Andrew Wright. "We've fortunately had a lot of success."

Avison Young's model is to offer real estate firm owners and veteran professionals shareholder status to join. Lower-level Avison Young employees also can buy shares. Using that model, Avison has grown from 300 people and 11 offices companywide four years ago to 1,300 and 53 offices today.

"It's a pretty simple concept," Rowley says. "You're a middle-aged broker and you've had a very successful career and you wake up and you're realizing you're collecting ordinary income and giving away a good chunk to your house and at the end of the career what do you have to show for it? Where's the wealth creation?"

Avison is growing just as the comeback in residential real estate helps build demand for commercial. Investors are on the prowl for industrial real estate in Miami, Rowley says. "Anything that comes on the market is snatched up in a heartbeat. That market is on fire," he says.

What the impact of the new fast-growing firms will be on the market remains to be seen. As a senior executive at one national brokerage firm said, in essence it's the same people, different business cards. Avison recently took its first assignment in the Orlando market and wants an office there and in Jacksonville too, but building Miami is "foremost." It accounts for a third of the entire state market.

* Miami

>> Between international money flowing in and companies positioning themselves to benefit from port projects and trade, Miami is a market like no other in Florida. "We've got kind of a perfect storm in a positive way working for us here in south Florida," says Ken lKrasnow, managing director at CBRE. "We are seeing a pretty good picture, a nice landscape out there, pretty much across all of our product types, office, industrial, retail, multifamily, hotel. Some are accelerating at a real fast pace. Some have eclipsed peak pricing and activity."

>> Swire Properties'$1-billion, mixed-use Brickell CityCentre project, with 505,000 square feet of retail, dominates all retail discussion. And it's growing. When the owners of 700 Brickell put their 1.5-acre site on the market, CBRE held several rounds of bidding for more than a dozen interested groups before Swire won the competition in July by paying $64 million. Swire will build an 80-story tower on the site, which it's adding to CityCenter.

>> Core Class A offices are coming back, though the overall office vacancy rate still looks weak. Landlord concessions are dwindling - fewer free months, less money for tenant buildouts. With the competition from condo developers bidding up site prices, office development will be constricted, which augurs well for existing landlords.

Biggest New Lease Deal

The industrial market in Miami-Dade is the most in demand. Industrial Income Trust signed OHL, a logistics company, to a 185,520-sq.-ft. lease at its new industrial development in Medley. OHL was the third major deal in a month in north Miami-Dade and south Broward. OHL moved from within north Miami-Dade but increased its space by 50%. As of July, it was the largest new lease in Miami's market this year, says Jones Lang LaSalle, which represented the landlord. "The OHL lease demonstrates the demand for newly built industrial space, while further positioning Medley as an attractive submarket," says Steve Medwin, managing director at Jones Lang LaSalle.

* Broward County

>> In the office market, lease rates aren't soaring, but concessions are abating.

>> Developers and landlords also are looking east as development opportunities dwindle in the west, says Steve Hurwitz of Continental Real Estate Cos.

>> Miramar in the suburbs still has high vacancies while Plantation and Sunrise, fed by I-75 and I-595, perform better. Miami-based Fifteen Capital Group paid $52 million for the Sawgrass Technology Park, a 12-building office, warehouse/flex project in Sunrise that benefited from its proximity to I-75 and I-595.

>> Investor appetite can be keen. Atlanta-based Carroll Organization in June paid $225 million, a Florida apartment record, for The Resort at Pembroke Pines, a 1,520-unit rental development, says CBRE Vice Chairman Robert Given.

>> The disposal of distressed real estate has made for a more fluid market as tenants no longer have to clear deals through lenders and can rely on new owners' financial stability.

>> In industrial, Broward is a tale of two markets. South of 1-595 has benefited from Miami-Dade tenants seeking lower prices and thus has seen higher occupancies, such that developers are building. Chicago-based Bridge Development has - bought 28.5 acres for $14 million to build 400,000 square feet of industrial. North of I-595, a market that depends more on home builders and related businesses, industrial has been slower to recover but Restoration Hardware in July signed a lease for 101,105 square feet at Atlanta-based Weeks Robinson's distribution center under construction in Pompano Beach.

>> Institutional buyers are circling every Class A industrial deal on the market just as in Miami-Dade County, says Jones Lang LaSalle Senior Vice President David Wigoda.

>> Projected investment returns are being compressed.

Downtown Boom

The downtown and Las Olas office sector recently had its best quarter for absorption in years. Law firm Becker & Poliakoff took 46,000 square feet in Ivy Realty's1 East Broward Boulevard. Ivy purchased the building for $42 million as a half-empty distressed asset and has upgraded lobbies and other areas. CBRE handles the leasing. Meanwhile, BBX Capital, memorabilia and collectibles business Fanatics Mounted Memories and others are moving in from the suburbs to downtown, although Fanatics also just signed for 178,791 square feet of industrial warehouse space in Sunrise.

* Palm Beach County

>> Office vacancies are down, with Boca Raton doing the best. New office construction is scant. Related Cos. is designing the 200,000-sq.-ft. Gateway Tower at CityPlace in West Palm Beach.

>> The industrial market shows improvement. In Royal Palm Beach, American Tire Distributors' 125,000-sq.-ft. warehouse is under construction to be leased from Exeter Property Group. The Charlotte, N.C., company will bring 30 jobs. In the same town, discount grocer Aldi has a 650,000-sq.-ft. distribution center under construction with completion scheduled for early 2014. Aldi, which has 20 area stores but is expanding, will employ-150 there initially. A future, second phase will bring the total to 800,000 square feet.

>> In retail, the 500,000-sq.-ft. Palm Beach Outlets, a reuse of the site of the old Palm Beach Mall on I-95, is moving toward a February opening under developers New England Development and Eastern Real Estate.

Driving Down Vacancy Rates

Boca Corporate Center and Campus, IBM's old Boca base now owned by Blackstone, will see Tyco Integrated Security move into 72,224 square feet on Jan. 1. Tyco, after it split from its sibling ADT, left ADT at 1501 Yamato Road, which they shared, to get its own digs. ADT will expand into the space at Yamato Road that Tyco left. Vacancy rates in Boca, mid-30% during the recession, have dropped into the low 20%. It was at 10% to 11% before the recession, says Jeff Kelly of CBRE, who represents Boca Corporate Center. "We've got a lease out for 25,000 square feet. We've got another guy we're working with for 20,000 we're hoping to finalize. We've got internal expansions. And nothing's being built."

* Southwest Florida

>> Industrial demand is almost strong enough to spark a new construction wave.

>> Retail has improved, but no widespread new building is occurring aside from restaurants and convenience stores.

>> Many new rental complexes are under way or about to break ground. The subcategory of assisted-living facilities is finally delivering on expectations; developers plan 10 new communities, says Gary Tasman, founder and executive director, Cushman & Wakefield Commercial Property Southwest Florida in Fort Myers.

>> Permitted residential land is selling to builders - "white hot right now," Tasman says.

>> Bottom-fishers who bought commercially zoned land at steep discounts are putting their properties back on the market at significant markups. "They're making good money on their investments, as we anticipated they would," Tasman says.

>> The office vacancy rate fell below 14% for the first time since 2009.

>> Locals are encouraged by Hertz's decision to move its headquarters from New Jersey. It has leased 40,000 square feet in the Fifth Third Center in Naples for a temporary world headquarters while it builds its campus on a 34-acre site in Estero, scheduled for completion in 2015.

Lagging

As in other Florida markets, the Fort Myers office sector is bringing up the rear in the southwest Florida recovery. A bright spot: A newcomer, call center company Alta Resources, took 63,275 square feet on Gateway Boulevard.

* Tampa Bay

>> Tampa retail lags much of the state with half the rental rates of Miami.

>> Sweetbay Supermarket, now owned by Jacksonville-based Bi-Lo, shuttered 22 stores in the Tampa Bay area in 2013 while Trader Joe's, Sprouts and Earthfare are moving in.

>> Retail center owners and alternative users have found common ground. Owners want tenants whose businesses don't conflict with those of existing tenants, generate traffic for existing tenants and fill space. Charter schools and quick-care medical operations, orthopedic offices and other medical specialties, in which proximity to the patient matters more than proximity to a hospital, want locations near consumers. "It's a great backfill use," says Andrew Wright, CEO of commercial real estate firm Franklin Street.

>> Fitness centers and restaurants also are driving absorption, rather than merchandise retailers, but Dick's Sporting Goods opens next year in an old Saks store in the Westshore Plaza. Movie theater company Cinemark moved into the Lakeland Square Mall on U.S. 98.

>> Southeast Hillsborough has among the better retail occupancy rates in the bay area.

>> The bay area's industrial market is struggling. Rental rates are flat, creating opportunity for tenants. Tenants are upgrading to more efficient, modern space. A hefty share of existing inventory is obsolete or well on its way there. But with little new product coming, occupancy rates should increase.

>> Northeast Tampa has the highest vacancy rates.

>> The anticipated arrival of Amazon is the 800-pound gorilla in the industrial market.

>> In office, Westshore, downtown Tampa and downtown St. Petersburg are the only submarkets generally commanding lease rates north of $20 per square foot.

>> Raymond James submitted plans fora 1-million-sq.-ft. campus on the Wiregrass Ranch site in Pasco County. A long approval process awaits. Raymond James says it is "evaluating our occupancy requirements and believe the Wiregrass Ranch property is a good future development opportunity."

Rare Sight

Ryan Cos. expects to deliver a 75,000-sq.-ft. office building this month at Citrus Park Crossing in northwest Hillsborough, a rare major new office building in Tampa Bay. Invest Financial has signed to take 40,000 square feet of it, says CBRE'sBrian Devlin.

* Orlando

>> Office is coming back, albeit slowly. Real estate firm research arms differ on the extent of the comeback.

>> Altamonte Springs and the tourist corridor are doing better than Lake Mary.

>> Orlando job growth tends toward the tourism industry, and it takes awhile for growth in that sector to translate into more office jobs.

>> Verizon's new 220,000-sq.-ft. office project broke ground this year in Lake Mary.

>> Construction begins this quarter on the Golf Channel's new gateway structure at its expanded headquarters - a total of 163,000 square feet - at Sand Lake West in south Orlando, says CBRE. To the extent there is new office construction, it's for such single-tenant users.

>> CNL Center I and II at City Commons has asking rates of $30 per square foot, a level not seen since before the recession.

>> In sales, Stiles Realty'sOrlando office and Divaris Real Estate sold AIG's 64,695-sq.-ft. Class A Baldwin Park office complex, a repositioned property, for $8.64 million to a private investor.

>> In multifamily, the 300-unit Crosswater at Lakeside Village sold to Atlanta-based REIT Post Properties for $48.5 million, or $161,667 per unit, a record per-unit price since the downturn in suburban Orlando, CBRE says.

>> Industrial vacancies are down, and rents for Class A and B properties show increases as availability falls. That said, Orlando's market isn't as strong as those elsewhere in Florida.

>> West Palm Beach-based McCraney Property, in a joint venture with New York'sClarion Partners, broke ground on 243,000 square feet of speculative industrial in John Young Business Park and recently wrapped up construction of Dade Paper's 150,000-sq.-ft. central Florida distribution center and offices in the same park.

>> Retail is Orlando's shining star. "We're seeing things pick up," says Drew Forness, president of Winter Park-based Forness Properties. "Landlords can be more bold with their negotiations. You're seeing a little more velocity in the market with tenant interest." Rent increases will depend on the market. "You're seeing kind of a slow creep upward," he says.

Big Box

In a sign that empty big-box spaces are being revived, Old Time Pottery is taking a former Bealls store that sat empty for three years at Sand Lake Corners, says Drew Forness of Forness Properties.

* Jacksonville

>> Jacksonville'sSouthside office market is the city's best-performing area.

>> Office activity has increased but is slower than in other sectors, with most of the activity coming from in-market relocations and absorption of sublease space.

>> In retail, the vibrant area also is on the Southside at Simon Property Group'sSt. Johns Town Center and the adjacent Markets at Town Center, which Houston based REIT Hines Global bought this year for $135 million. Nordstrom comes to the Town Center site in 2014 while Nordstrom Rack is opening at The Markets.

>> As in the rest of Florida, any development occurring is for tenants who have preleased. Major speculative construction isn't evident.

>> Land sales are doing well at in-fill sites.

>> Multifamily is strong.

>> Jacksonville, less vibrant than .south Florida but less prone to peaks and valleys, offers superior projected returns on expected income compared to those in south Florida, which are attractive to investors, says Craig Thomas, senior associate with Marcus & Millichap.

>> "The activity here is picking up, but with office in particular, it's not white hot by any means," Thomas says. But, he adds, "We've got some pretty darn good transaction velocity in the market. In the not-too-distant past, that wasn't the case."

>> Orlando'sParkway Properties is the latest to see opportunity in Florida East Coast Industries' move to monetize its mature real estate projects to invest in other, higher-yielding endeavors, such as logistics and All Aboard Florida, its Miami-Orlando passenger train. Parkway paid $130 million for FECI Flagler Development's 1-million-sq.-ft. Deerwood office portfolio on the Southside.

Charter Help

Throughout Florida, charter schools have been ready takers of vacant retail space. Industrial space doesn't convert into school rooms easily. But in Jacksonville, non-profit Compass Rose Foundation in May paid $5.2 million for a 168,000-sq.-ft. former Mercedes-Benz USA vehicle processing center on I-95. CBRE First Vice President Bruce Jackson, who arranged the purchase for Compass Rose, says the foundation plans to turn the warehouse, into a school for training workers in automotive and diesel technology, equipment repair, commercial driver training and other fields.