Overbuilding Not Happening, but FDIC is Right in Raising a Caution Flag, says Stiles

ORLANDO-The nation’s office, industrial and retail markets are not overbuilt in certain first and second-tier markets, but the Federal Deposit Insurance Corp. is correct in alerting the industry to that potential danger, Terry Stiles, chairman of Fort Lauderdale, FL-based Stiles Corp. and son of the firm’s founder, tells GlobeSt.com.

The FDIC’s semi-annual Glut List last week cited 13 overbuilt markets that could lower property values and endanger lenders who had funded the ventures. Brokers generally challenged the agency’s findings, arguing cries of overbuilding currently are not generally supported by statistics.

“The FDIC wants to prevent a repeat of the 1980s debacle where numerous projects went under when the national economy changed,” Stiles said in a telephone interview. “I don’t think we’re likely to see that situation recur because everybody in the industry, from user to investor to developer has access to much more information than they had 15 or 20 years ago.”

Additionally, the developer says, “banks today are not dropping their pants, as they did in the 1980s, and offering 105% loans.” Lenders today are demanding a developer/owner have at least 20% to 30% equity in a project before handing out a construction loan, Stiles says. “There is much more discipline in the market today.”

Stiles Corp. concentrates on office and retail product with offices in Fort Lauderdale, Charlotte, Fort Myers, FL, Nashville and Atlanta. The company also has retail assets in Orlando. Stiles Corp. is currently developing a total three million sf and has completed 20 million sf of office, industrial and retail over the past 50 years.

“I don’t see any overbuilding in those markets,” the developer says.

Demand for office and retail in Stiles’ five markets are “strong but not feverish,” he says. Retail demand is coupled with location. “If you don’t have a good location, the demand factor isn’t as strong,” the developer emphasizes.

Stiles says overbuilding danger signals a developer might watch for are urgings by advisers to enter a market solely to build a better product, and to enter a niche market.

“The only reason to build is demand,” says Stiles.

“Every market is different,” the developer says. For example, “if you drop a 100,000-sf building in the South Florida market and it doesn’t lease up quickly, it won’t be that noticeable. But if you do the same in a smaller market such as Jacksonville, you’ll likely hear cries of overbuilding.”

Stiles started directing Stiles Corp. in 1971. He quickly grew the 50-year-old firm from a primarily residential construction firm to a full-service commercial development company.

He will be cited as 2000 Developer of the Year by the National Association of Industrial and Office Properties at its annual conference and marketplace at the Hyatt Regency Grand Cypress hotel in Orlando Oct. 18. South Florida entrepreneur H. Wayne Huizenga will make the presentation.

Stiles’ relationship with NAIOP dates to 1978. “I couldn’t even tell you what an office park was” at that time, the developer says. “I used to attend NAIOP meetings with pads of paper full of questions, and they were always answered,” he says.

The developer has held numerous leadership positions within NAIOP, including national president in 1998; president of the South Florida chapter in 1982; and director in 1982, 1989 and 1991.