ORLANDO-Central Florida land prices are flat in some categories; up in others; and almost non-existent for hospitality development, area brokers and developers tell GlobeSt.com. A wait-and-see game is being played out by buyers and sellers as they monitor the recession and lenders’ guidelines.
“There is a ton of cash sitting on the sidelines, waiting for distress to depress prices,” Trevor Hall Jr., vice president, Colliers Arnold Orlando, tells GlobeSt.com.
Land prices “can only go one way–up,” says Dean Fritchen, senior associate, Arvida Real Estate Services Commercial Division, Winter Park, FL. “The good Lord only made so much land and he’s not making anymore to the best of my knowledge.”
George D. Livingston, founder/president, Realvest Partners Inc., Maitland, FL, says “strong sellers will wait while weak sellers will deal–a trend seen as short-lived.”
Hall agrees. “There is a big disparity between bid and ask (prices) at present, as sellers remember too well how good things were in second quarter 2001, while developer and buyers are here and now,” the Colliers Arnold Orlando executive, tells GlobeSt.com. “Their lenders are very uncomfortable.”
Hall expects the economy and land prices to start rebounding by third quarter 2002. “Owners that can hold, will,” he says. However, “those that must move (their assets) before (economic) conditions improve will be still be able to sell but should expect discounts from mid-2001 values of up to 40%, depending on product type and the amount of pressure to sell.
By category, Hall says retail can trend up to $30 per sf ($1.3 million) for ideal corners. Garden-variety, 15-acre grocer-anchor sites are about $5 per sf ($217,800 per acre), “but only if the right anchor will lease the eventual store.”
Office development currently is soft, making values hard to determine, Hall says. “My guess is that what was $9 per sf is now $7 per sf,” he tells GlobeSt.com. “Developers want a 20% return on invested funds and probably won’t build for 18 months, so they won’t buy (land) unless a discount makes sense (for them).”
Industrial land values are flat, “as the market is somewhat soft but not out of balance,” Hall says. “Developers (who buy land now) expect an (economic) rebound by the time approvals and construction are complete.”
The multifamily market is “really in flux,” the Colliers Arnold executive tells GlobeSt.com. “We had a profusion of new units last year with a much lower growth count in 2001, but the availability of decent sites, properly zoned, is nil,” Hall says. “Political issues such as schools, crime and traffic argue against much in the way of newly approved sites, so supply is very scarce.”
Raw land values were in the $6,000 to $11,000 per acre range (14 cents per sf to 25 cents per sf). “I haven’t noticed any new sales lately,” Hall says. “Lenders are pretty scared of this for now and need to see job growth take off again and see occupancies increase.”
Hospitality dirt values are almost non-existent. “That market (currently) is DOA,” Hall tells GlobeSt.com.
But land for single-family, medium-value housing is still appreciating. “The lack of new supply is (largely) due to the Orange County rezoning moratorium,” the broker says. He calls the moratorium “a very poor policy.”
Hall identifies the biggest land bankers in metro Orlando, in no special order, as Flagler Development Co., Lockheed Martin Corp., Crescent Resources Inc., Universal Orlando, Walt Disney World and Bobby Ginn.
Realvest’s Livingston agrees with Hall on the hospitality development scene. The recession has hit the hotel market the hardest. “Few if any transactions are being done,” Livingston tells GlobeSt.com. “Deals in the pipeline are most often being cancelled or restructured.” The developer has heard that up to 85% of planned hotel transactions in Central Florida are now on the back burner.
“It’s almost impossible to finance hotels,” the developer says. And “financing for the other property types now requires more equity or pre-leasing.
Timeshare development, however, “seems to be doing pretty much as before.” Livingston calls that scenario “an aberration to the hotel trend.”
Office development falls right behind hotel development on the sluggish scale. “The demand for land is generally down,” the Realvest founder says. “Prices have yet to erode meaningfully. Deal flow is down but some cash-rich buyers see this as an opportunity to buy sites for future development.”
Industrial demand for land is also down but has had “little impct on price as yet,” Livingston tells GlobeSt.com.
Multifamily “has been little affected, except that the deal flow is down, a continuation of a trend already in place.”
Retail is “little affected” by the recession. “Sites that work are always in demand,” the developer says. “Marginal sites sit without offers.”
Land for single-family development is still strong due to the high level of home sales. “Central Florida still has a shortage of lots as Orange and Seminole counties are en route to build out” their inventory, Livingston says. “Orange makes it tough to rezone due to the schools’ issue.”
The Realvest chief sees multifamily and apartments as the hot properties today for buyers. Industrial is the second favorite.
“Multifamily and retail are driven mostly by population growth,” Livingston tells GlobeSt.com. “Office is driven by job starts. Industrial is also driven by job starts and economic activity. It’s a chicken or egg thing.”
Throughout Florida, prices are all over the map–higher in established markets; lower in potentially developing pockets.
Affluent Palm Beach county, for example, last week saw a 9.75-acre commercial tract go for $5.3 million or $543,590 per acre ($12.48 per sf), GlobeSt.com reporter Pat Taylor reports. In March, the same dirt sold for $4 million or $410,590 per acre ($9.42 per sf). In 1982–19 years ago–the land sold for $900,000 or $92,308 per acre ($2.12 per sf).
Near Simon Property’s 1.1 million-sf Seminole Towne Center in Sanford, FL, 25 miles north of Downtown Orlando, AutoNation USA of Fort Lauderdale, FL paid $4 million or $414,154 per acre ($9.50 per sf) for a new dealership location of 9.75 acres. The same dirt was going for about $100,000 per acre ($2.30 per sf) five years ago, area brokers tell GlobeSt.com.
Florida rural land, too, is rising, reports GlobeSt.com’s Taylor. Alico Inc., a New York Stock Exchange-traded company based in La Belle, FL, 150 miles south of Downtown Orlando, just sold a trophy 2,500-acre tract, about four square miles, to Fort Myers, FL developer O.J. Buigas for $30 millioon or $12,000 per acre (28 cents per sf). The same land five years ago might have gone for $5,000 per acre (11 cents per sf), area brokers tell GlobeSt.com.
Although prices of developable virgin land are stagnant or even falling in several markets, brokers specializing in dirt deals are confident prices will move upwards as the recession plays itself out.