Uncertainty Hinders Real Estate Outlook

GAINESVILLE, FL-Uncertainty continues to plague Florida’s real estate outlook, with high unemployment and home foreclosures bogging down the possibility of a quick rebound. Those are the findings of the latest quarterly survey of industry professionals conducted by the University of Florida’s Bergstrom Center for Real Estate Studies.

“Most economists think the recession is over, but people are afraid to spend money as unemployment keeps going up, which creates problems for every sector of the real estate market,” says Tim Becker, director of the Gainesville-based center. “Florida was the first one into the recession and it’s probably going to be the last one out.”

The survey shows that commercial real estate is the weakest sector of the economy, with no improvement expected until the job market turns around, Becker says. Struggling retailers are asking landlords for rent abatements and are deciding not to renew leases or closing stores outright, he says, though discounters appear to be weathering the tough times.

Vacant storefronts may also be an indication that some merchants have traded up to space at fancier venues with more favorable rents than were available in better years, he adds. “One of our respondents said that the old adage of ‘location, location, location’ really means something right now in the ability to lease at premiere locations,” he says. “It’s the second-tier properties that are struggling.”

Survey respondents expressed concern that a double-dip recession is on the horizon, especially with the state’s 11% unemployment rate causing trepidation among Floridians who still have jobs, Becker says. Although sales of foreclosed homes are now booming, another wave could come from additional layoffs and the inability of homeowners to keep up their mortgage payments, he says.

As banks continue their reluctance to lend, survey respondents believe foreign investors will provide relief, Becker notes. Favorable currency exchange rates, particularly the euro over the dollar, are prompting international investment of low-priced commercial properties, he says.”Everybody thinks that Florida will rebound because we have so much going for us,” Becker says. “Foreign investors see that, too, and believe their prospects are good for long-term investments.”

The Bergstrom Center’s quarterly report is the most extensive survey of Florida professional real estate analysts and investors conducted on an ongoing basis. The 268 participants in the most recent survey represent 13 of the state’s urban regions and up to 15 property types.