New Construction in 2003 Will be Flat, Mortgage Banker Says

ORLANDO-Commercial real estate operations and new construction in Central Florida in 2003 are expected to be flat in 2003, much like 2002, according to metro Orlando industry professionals. But opportunities to refinance existing stabilized properties with a strong operating track record are favorable.

“Although construction projects are at an all-time low, the long-term lenders, such as life insurance companies and Wall Street conduits, are looking for good loans on existing properties and are funding them at historically low interest rates,” David J. Patten, president of Interlachen Financial Group in suburban Winter Park, FL, tells GlobeSt.com.

Long-term, fixed-rate loans on anchored retail, industrial and office properties range from a high 5% to low 6% with multifamily loans in the mid-5% interest range, says Patten, the income state chapter president of the 10,800-member National Association of Office and Industrial Properties.

With average industrial and office vacancies in the mid-teen range, long-term lenders are “scrutinizing the rent rolls and operating statements more carefully and looking at the status of the comparables, as well,” he adds.

The consensus of NAIOP members and directors at the group’s recent convention in Nashville, he continued, is that “next year is going to be pretty much like this year, with the economy beginning to come out of recession, but very slowly.”

Still, metro Orlando demographics remain firmer than many cities around the country, Matt Sullivan, managing director, Colliers Arnold/Orlando, tells GlobeSt.com.

“As the U.S. struggles to recover from the recession, Central Florida is holding its own,” Sullivan says, although industrial and office development is “generally slow.” Industrial space absorption in the third quarter in metro Orlando totaled a negative 528,000 sf.

“On the positive side, leasing activity is picking up,” the broker states. “We know of several large-scale transactions that are in negotiations now, which shows that some businesses are growing despite the recession.”

But Sullivan says the spread between asking rent rates and deal rates is “still pretty significant,” adding that generally, “we’re seeing about a 10% difference between what is asked for a property and what the lease is being signed for, and in some submarkets, the spread is highe.”

Venture capital for startup companies these days is difficult to find, George D. Livingston Jr., president of NAIOP’s Central Florida chapter, tells GlobeSt.com. “Venture capitalists are very leery these days,” says Livingston, founder/chairman of suburban Maitland, FL-based Realvest Partners Inc.

“The mood was very different a few years ago,” he states. “The economy was expanding; technology was a Holy Grail; and venture capitalists made themselves accessible to entrepreneurs with bright ideas and business plans. It may be a long time before we see that sort of gung-ho attitude again.”

He notes that venture capital is to be had, “but the range is limited to technology companies with billion-dollar potential and healthcare companies.”