State of the Market - Winter 2017

Investment money continues to eye Sarasota for quality long-term real estate investments, and our market checks many boxes for those seeking to develop new product or buy existing space. With the November elections behind us, the business community is cautiously optimistic that long-awaited reform of the tax code will occur, and that deregulation and tax decreases could be forthcoming. Locally, an anti-growth faction is blooming in Sarasota and as a result developments will likely receive greater scrutiny and therefore will be more expensive. A key indicator of market health is the office vacancy rate, which had dipped below 10%. Recently, it inched back up above 10%, an anomaly in an otherwise slow but steady absorption rate. Absent significant businesses leaving the area the office market vacancy is expected to decrease in the short term. Between 1998 and 2007, vacancy rates hovered around 4% to 5%, the result of steady job growth and business expansions and a lack of significant new product without tenants in place. With the steady but slow decrease in office vacancy rates speculation has arisen that a new office building will be constructed somewhere downtown and driven by a single, large tenant. To date, however, those plans – if they exist – have yet to become public. It also remains to be seen whether any tenant, despite a shortage of large blocks of contiguous space downtown, would be willing to pay the mid-$30-per-square-foot full service rental rates that new development would demand.