Down the Pike - Fall 2018

Occupancy rates for new residential product being delivered in and around Sarasota, both for-sale condominiums and rental apartments, will be closely watched in the coming months. Sales generally appear to be strong, even for luxury projects such as The Kolter Group’s 73-unit Residences at the Ritz-Carlton, where prices are ranging from $2 million to a reported $8 million per unit, but some projects are lagging – a comment perhaps more on the individual project’s deficiencies rather than that of the market as a whole. Moreover, many condo sales continue to occur through all-cash transactions, indicating a lack of reliance on leverage by buyers. That speaks to the overall health of the market, as does the absence of buyers involved in multiple purchases of units during the pre-construction phase of a development, which in part foreshadowed the market’s last crash. We at Harshman & Co. expect to see some free rent and other concessions offered by developers over the next six months in the downtown rental market, especially, as freshly completed multi-family rentals like CitySide, The Desota, Arcos and Elan Rosemary all compete for what may be a finite pool of tenants willing, or able, to pay rental rates on a per square foot basis that are mostly unprecedented for Sarasota. Our prediction is the significant number of deliveries will stymie any rental rate increases over the short term and create an ephemeral “tenants’ market.” However, we believe that the heightened supply of product will be a limited phenomenon, and any oversupply will be largely absorbed in less than two years.