State of the Market - Fall 2015

While downtown Sarasota has garnered considerable attention for the new residential and hospitality projects under construction there –Vue Sarasota Bay, CitySide Apartments, the aloft hotel/One Palm Apartments and The Jewel condominium tower, to name but a few which  are about to come on line – the region’s industrial market has quietly tightened up considerably and shown signs of significant health.

This rebound is important because industrial and flex buildings were particularly hard hit during the Great Recession.  Lender-controlled properties deflated the market for several years resulting in higher vacancies and a painful stagnation in the industrial sector.

Now, however, time and the modest economic recovery has pushed industrial vacancy rates down dramatically, and the supply of distressed properties has been whittled so drastically that many properties are fetching prices at, or above, replacement costs – a key indicator of demand and desirability.

This measurement is significant for a number of reasons. Primarily, when a market sector becomes aligned with replacement costs, it presents an opportunity for investors and landlords to increase rental rates and generate additional yield -- assuming expenses like taxes and maintenance remain relatively constant.

At the same time, when prices rise to the level of replacement costs in any sector, it often signals that new development is on the horizon, which in turn can have tremendous ramifications for the market as a whole.