MIAMI—Commercial real estate players from across South Florida gathered at Gulfstream Park in Hallandale Beach, FL on Thursday afternoon for the Urban Land Institute‘s 2013 South Florida Economic & Development Outlook Program. The venue’s Sport of Kings Theater was packed out with leaders hoping to hear perspectives on the future of South Florida land use and real estate from some leading voices in the industry.
Gene Berman, program chair of the event and executive vice president and managing director at Marcus & Millichap, offered what he called a summary of the market in its simplest form: “We took the ride up. We took the ride down. Now we are slowly growing again.”
Speakers included: Dr. Randy Anderson, Howard Phillips Eminent Scholar Chair in Real Estate, UCF Anderson; Victor Dover, principal at Dover, Kohl & Partners Town Planning; Josh Gelfman, senior vice president of New York City Economic Development Corp.; and former Miami Mayor Manny Diaz.
Anderson kicked off the event by offering a look at the real estate market from both national and local perspectives. He discussed how economists offer analyze the market according to shapes, like L-shaped or V-shaped or double-dipped. Then he described the current recovery as a “gravy boat.”
“We’re in a gravy boat recovery because of the job market,” Anderson says. “In the last downturn, we had the highest percentage of jobs lost that will never come back. We need to retool.”
Anderson also tackled the I-word: inflation. If there’s any upside to the down labor market it’s the fact that it’s stemming off inflation. In other words, Anderson says inflation is indeed coming, but not until the labor market improves. Unfortunately, he added, when inflation does reemerge it will come back with a vengeance.
Anderson went on to make several points through is slide presentation:
- Private real estate outperforms total and income returns. Real estate has provided the highest-risk adjusted returns, when it’s well-located and good quality.
- Office is improving. Anderson says it’s almost time to get back into office: “Capital is already starting to look there.”
- Industrial is improving. Vacancy rates have decreased substantially but recent severe rent declines will take years to regain.
- Retail is also improving. Vacancy rates declined slightly and effective rents are starting to tick back up. Anderson says net lease is hot but you are “effectively buying a long-term bond.” He also pointed to a long-term trend of retail stores shrinking in square footage thanks to e-commerce and says commercial real estate property owners should prepare for this reality.
- Multifamily has a low vacancy rate that’s projected to remain low and will prompt significant rent increases in the coming years. But Anderson does not expect the traditional housing market to continue giving way to multifamily growth at the same pace: “People still want big houses.”
“Everyone said Florida would never recover. Florida is improving,” Anderson says. “Miami and Orlando are the most attractive Florida cities for institutional investors because they are the only two Florida cities people outside the United States have heard of.”
Come back this afternoon for more coverage of the ULI meeting.