The Most Overlooked Southeast Markets

MIAMI—There are certain Southeast markets that have performed strongly in the recession and in the subsequent recovery. What markets are they? Judd Bobilin, CEO of Chance Partners, shares that and more in part two of this exclusive interview. You can still read part one: Southeast CRE Sees Strong Push for This.

GlobeSt.com: What sectors, if any, are still struggling and why?

Bobilin: Office is likely the only one struggling but that is only a historical comparative as we have heard and read that many assets have shown a strong propensity to leasing up and reducing vacancies.  We have actually heard the "D" word—development—recently for some office markets.

GlobeSt.com: What specific Southeast cities are seeing the most interest and why?

Bobilin: In multifamily, many Southeast regions are seeing strong interest. It really comes back to the basics—population growth, job growth and income growth.  Charlotte, Tampa, Atlanta, Orlando, Raleigh-Durham are a few in the Southeast that are seeing strong interest.

GlobeSt.com: What cities are still struggling and why?

Bobilin: Tertiary markets are likely suffering some. It really is a function of where investor demand is willing to go to acquire deals and most investment committees are going to look at only what and where they have been before and not where a new emerging market might be.

GlobeSt.com: Are you seeing any “negative” trends or major challenges in the Southeast?

Bobilin: All deals are being required to stretch numbers and cap rates to make it work. Capital markets are still strong, however we do believe the fact that Fannie and Freddie are hitting their lending limits will basically push many deals to 2016.  Labor markets in the construction industry are still a challenge and a significant driver of costs, as it's not materials.

GlobeSt.com: How do you expect commercial real estate climates in the Southeast market to change in the quarters ahead?

Bobilin: The quarters ahead is too short of a time period for real estate, but we see these markets continuing to go strong for the primary and secondary cities in the near term and the short term.

GlobeSt.com: What are the most overlooked markets?

Bobilin: We strongly believe one of the most over-looked commercial real estate markets, especially from a risk-adjusted standpoint, are college towns. These markets, on all fundamental levels, have performed strongly in the recession and in the subsequent recovery. 

Our tendency and research has shown that the primary schools are significant drivers of economic growth in these markets. Although many state budgets have cut funding by 30% for state schools, the universities have adapted and those markets have performed extremely well and not just the student housing market. Retail and hospitality also have benefited.