Downtown Fort Lauderdale, Palm Beach County Burnish Reputations As Greener Pastures For Businesses

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A little chest thumping never hurt anybody — especially when business is sizzling during inflationary times.

In a case of “strike while the iron is hot,” or perhaps before it turns cold, the Business Development Board of Palm Beach County just took its decade-old “Wall Street South” campaign to midtown Manhattan with the purchase of one-day ads on giant electronic billboards in Times Square and nearby neighborhoods.

“Wall Street South. Head for Palm Beach, Florida,” said one. “Wall Street South. Your Future Is Bright in Palm Beach, FL.” said another.

Fort Lauderdale’s Downtown Development Authority, meanwhile, is circulating a report declaring that its central business district and Flagler Village are generating as much economic activity as Port Everglades and Fort Lauderdale-Hollywood International Airport. For this, think about amounts for each entity that are north of $30 billion a year.

The heads of both agencies are advocates of maintaining hard-earned momentum in a highly competitive economic development game made more difficult by stubborn rising costs for businesses and households.

Kelly Smallridge, president and CEO of the development board, said in an interview that her nonprofit agency caught a deal that was hard to resist: Color ads in three locations for $20,000 — not only for this past Wednesday, but for the forthcoming New Year’s Eve celebration as well.

“This is probably the boldest strategy from an advertising perspective  we’ve engaged in anywhere in Manhattan,” Smallridge said. “I can’t image the hype that’s going to take place when it airs on New Year’s Eve.”

Development board representatives have been visiting New York for years touting the county’s “Wall Street South” campaign, which is designed to persuade executives from financial firms to locate or relocate offices, including headquarters, in Palm Beach County.

Smallridge said her agency was approached by a billboard ad firm and offered a discount rate designed for nonprofit agencies.

“We got very lucky and took advantage of it,” Smallridge said. “We could no way afford the real cost. They approached us to see if we wanted to buy it. They never would have had us on their radar had not been such a big story already. Every time you go to Manhattan, people say, ‘it’s not if we will move, but when.’”

She said the ads appeared at the Times Square Tower, the 43rd Rotunda, and on the “I Love NY” Board at 1530 Broadway,

In a statement, the Business Development Board says that since 2019, it has helped 100 firms open offices in Palm Beach County, which is home to 57 billionaires and 70,000 millionaires. Over the years, the board has even connected headmasters of local schools with company executives to assure them that their children will receive top-notch educations in the county’s schools.

“The 10-year campaign has yielded great results and has certainly boosted our economy in Palm Beach County from Boca Raton to Jupiter,” Smallridge said. “Among those gains: higher salaried jobs, more philanthropic donations to local nonprofits, and companies “run by very smart people. They want to be ingrained in the community,” she said of the newcomers. “None of them has received any financial incentives to move here. We are definitely becoming a finance hub in the Southeastern United States. It’s going to be a continuous effort and we’re not going away any time soon.”

A Surge In Fort Lauderdale

Jenni Morejon, the DDA president and CEO, said the downtown’s growth has its “building blocks” in the wake of the recession triggered by the housing collapse 15 years ago.

A report commissioned by the DDA and authored by Walter Duke + Partners, a commercial real estate appraisal firm,  concludes that the downtown area, which is defined as a 2.2-square-mile area that runs north of 17th Street to the central business district, Flagler Village and Sunrise Boulevard, “has an annual economic impact of $35.7 billion, a $6 billion increase from 2019.”

The impact figure rivals Port Everglades and Fort Lauderdale-Hollywood International Airport, the authority says. They combine for more than $105 billion in economic activity such as jobs, generation of tax revenue and business transactions.

“There are 40 new developments “somewhere in the review pipeline, with some approved by a city review committee,” said Morejon. “I think the sustainable growth in downtown Fort Lauderdale is certainly something unique. Not a lot of cities get that. We’ve grown in population about 35% since 2020, a little over 60% since 2018 and almost a complete doubling of population since 2010.”

The downtown area is now roughly 26,000, according to the report.

The DDA, though, has no plans to broadcast highlights of its uplifting report on Times Square billboards. In the past, Visit Lauderdale, the tourism promotion agency for Broward County, has advertised its latest campaigns there.

 

Source: SunSentinel

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$626B In CRE Debt Maturing In The Next Two Years Is Potentially Troubled

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A somber portrait of the state of U.S. capital markets and their impact on CRE has emerged from Newmark’s second quarter Capital Report.

It depicts a landscape of low loan originations, fewer lenders, underwater loans, troubled debt about to mature, and rising cap rates across a wide swath of the CRE spectrum.

Loans are hard to get in this new world. CRE debt origination is down 52% in 1H 2023 compared to the prior year and 31% compared to before the pandemic. Equally concerning, there are 32% fewer active lenders in the market today compared to a year ago.

“The small and regional bank lending engine that has driven the CRE market is rapidly slowing with no clear replacement,” the report noted. 

And this is affecting the entire banking industry, not just regional banks. All property types and lending sectors are affected, “though office, debt funds and CMBS/CRE CLOs (commercial real estate collateralized loan obligations) are negative outliers.” Loan originations are down most dramatically for multifamily.

Furthermore, banks are being more restrictive about whom they lend to and the assets they are willing to consider.

And if loans are hard to get, some of those that were made in the good times and are coming due will create new headaches. Newmark predicts that $1.4 trillion in debt will mature in 2023-2025 — but with significantly higher debt costs than when the loans were originated. On top of that, many loans are actually or nearly underwater, especially recently issued property and office debt.

The report also identified clear increases in transaction cap rates, “which now appear distinctly unattractive relative to the cost of debt capital, possibly excepting office REITs.”

 

Source:  GlobeSt.

 

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Real Estate Sector Helps Soar Fort Lauderdale Economy To $35.7 Billion Annually

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Fort Lauderdale’s real estate sector has helped soar the city’s economy to $35.7 billion, a 6% increase from 2019.

“Exciting news! Downtown #FTL‘s economic impact skyrockets to $35.7B yearly, up by $6B from 2019, and Real estate fuels with $5.33B, a 21% surge since 2019,” said Mayor Dean J. Trantalis.

“This is great news, and our city is committed to healthy growth by investing in our infrastructure,” he added.

Fort Lauderdale’s real estate sector is up 21%, or $5.3 billion, since 2019. Over 17,000 residential units and 40-plus developments are planned for the city’s downtown area.

The city’s rocketing housing market has also fueled in its population with 26,000 new residents this year. Furthermore, net migration is up two times from a decade ago.

As an economic hub, Fort Lauderdale has helped create 200,000 jobs in Broward County and the state of Florida, totaling $12 billion in employee compensation each year.

Its migration influx also generated $138 billion in tax revenue, tripling Fort Lauderdale’s surplus from a decade ago.

 

 

Source:  Florida’s Voice

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CRE Property Insurance Spikes Again In Q2

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Multiple severe thunderstorms threw a vicious punch at the commercial real estate industry in the first half of 2023, leaving it with the highest spike in premiums at 18.3%.

The storms accounted for insured losses of around $34 billion in the US alone, which is nearly 70% of global insured natural catastrophe losses in that time and the highest ever insured losses in a six-month period.

Perhaps not surprisingly then, CRE received the highest increase in insurance premiums among any insurance business lines in the second quarter, according to The Council of Insurance Agents & Brokers’ Commercial Property/Casualty Market Report.

In the report, respondents again pointed to rising property values (as a result of inflation) and natural catastrophe losses as the major contributors to the difficulties with this line.

Furthermore, a report by Swiss Re showed this number reached in just six months, is almost twice as high as the annual average natural catastrophe losses for the past 10 years, $18.4 billion.

CIAB suggested that these losses likely further contributed to carriers pulling back on underwriting commercial property—especially coastal property.

One respondent from a large Southeastern firm said today it is “very difficult to insure in the standard markets.”

Others commented that “property deductibles continued a steady upward march” and that carriers were still “pushing increases in property values,” calling it a lingering effect of inflation.

Reinsurance was another troubling aspect.

“Due to lack of reinsurance support, commercial property capacity has been reduced,” explained one respondent from a large Northeastern firm.

In fact, 80% of respondents reported a decrease in commercial property capacity, and nearly half of them described that decrease as significant.

Another respondent from a large Midwestern firm said that the reinsurance market was so difficult for some companies they had to non-renew property because of capacity issues.

 

Source:  GlobeSt.

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Plantation Auto Dealership Changes Hands

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A net-leased automotive dealership property located in Plantation sold for $5,750,000.

The Ride4U dealership, located at 747 N State Rd 7,  is just 1.2 miles away from Florida’s Turnpike on a major auto dealership corridor.  The lot size is 1.7 acres and can accommodate approximately 250 cars between the showroom and service department. The building measures approximately 9,000 square feet which includes a showroom and back office.

The buyer, a limited liability company, obtained a $5,175,000 million loan in acquisition financing.

RJ Realty was not involved in the transaction.

 

Source:  CityBiz

 

 

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Trends Show More South Florida Residents Moving North To Palm Beach County, Treasure Coast

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As South Florida continues to see a constant migration of new residents from northern states, some new residents are also driving north on Interstate 95.

“We moved to Lake Worth March 1,” Ted Belloise, who moved from Broward County.

He said he moved to Palm Beach County without having to move his business, Florida Integrated Security.

“Let’s face it, even in Broward County now, if it’s past 3:30, you don’t leave your house because the traffic is too crazy,” he said.

Traffic is just one reason real estate professionals said people are leaving Miami-Fort Lauderdale for Palm Beach and the Treasure Coast.

“Everything thing right now is about the letter “I,” and I is for inventory. It’s for interest rates. It’s for inflation,” Jeff Lichtenstein of Echo Fine Properties in Palm Beach Gardens said.

He adds that many people relocated from the south are also going directly to the Port St. Lucie area.

Data from Florida Atlantic University points to 10-year population projections at 20% for Martin, St. Lucie and Indian River counties. Palm Beach County is not too far behind at 12%. Broward County’s growth projection is 7.35% while Miami-Dade County is 3.8%.

“As Palm Beach County east of I-95, east of [Florida’s] Turnpike has gotten more filled up, then they’re going farther north, then it’s the next 30 to 35 minutes,” Lichtenstein said.

Belloise, who started living in his first home in Miami-Dade County, said he may keep going north.

“Every 25 years I go up a county, so I’m just hoping to make it to Martin [County],” Belloise said.

 

Source:  WPTV

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Commercial Real Estate Investors Continue To Bet On Interest Rates Coming Down

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Challenged by rising interest rates, a sometimes staggered economy, and empty office space buildings, commercial real estate (CRE) investment has become a game for the haves and the have-nots. If you have cash, there are opportunities across the country, and if you’re looking for funding, there are still some deals out there if you’re counting on rates dropping later.

The value-added strategy is always popular, whether it’s office space, commercial, or a warehouse. The real value comes when interest rates go down and first-time developers get in. Unfortunately, because the rates are higher, a lot of people are trying to get out, so that’s where someone with cash who understands the market steps in and gives them that out. Single-use properties, which are less risky, are also being sought after. If they find a tenant, they proceed, and if not, they can easily back out. A single stand-alone property like a warehouse or industrial site with a single tenant has the potential to double investment.

Despite the presence of empty office space, there are still deals to be found. If you can get a good deal and have a good team in place, there are still companies willing to occupy them. Transitioning to residential or mixed-use properties depends on obtaining zoning relief. Apartments can be a profitable option, but only if the municipality allows for it. Certain locations offer land and buildings for nothing, while in others, potential rents make the investment worthwhile.

The warehouse and industrial sectors are outperforming all others in the CRE market. Warehouses are being built everywhere, but the expectation of securing Amazon and FedEx as tenants has not materialized.

In Philadelphia, various property types are in demand. Warehouse and industrial spaces, as well as single-tenant buildings, are in high demand. Some clients are also buying office spaces but with specific-use in mind and companies ready to move in. Investors are not buying properties solely to enter the market.

In summary, CRE investors with cash continue to bet on interest rates coming down. They see value in the current market conditions and opportunities in different property types such as warehouses, single-use properties, and specific-use office spaces. Despite the challenges, there are still deals to be found, especially when considering potential future corrections and market fluctuations.

 

Source:  Gillett News

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Banks Expect To Tighten Standards For CRE Loans Even More

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A new Federal Reserve report noted that banks continue to get nervous overall and in particular about commercial real estate.

“Regarding loans to businesses, survey respondents reported, on balance, tighter standards and weaker demand for commercial and industrial (C&I) loans to firms of all sizes over the second quarter,” the report said. “Meanwhile, banks reported tighter standards and weaker demand for all commercial real estate (CRE) loan categories.”

The reactions to CRE lending was similar levels of tightening by large banks and others.

The July Senior Loan Officer Opinion Survey on Bank Lending Practices, or SLOOS, got responses from 66 domestic banks and 19 U.S. branches and agencies of foreign banks. Surveys went out on June 15, 2023, and were due back June 30, so all the data is more than a month old. It may be that conditions aren’t changing quickly enough to reduce the information’s meaning.

That said, according to the Federal Deposit Insurance Corporation (FDIC), as of the first quarter of 2023, there were 4,672 FDIC-insured institutions and 3,006 FDIC-supervised, so even though a concentration of the largest banks responding to the Fed’s survey might well be descriptive of that segment, the remainder isn’t nearly large enough for a comprehensive look at the banking industry.

The survey included two special sets of questions. One was about current lending standards compared to the midpoint of a range they have been in since 2005. The other question was bank expectations for changes in their standards in the second half of the year and the reasons for any change.

In the second quarter, “major net shares of banks” said they had tightened their standards on all categories of CRE loans. The same degrees of tightening were reported by large banks and other banks, though, again, without a representative sample, it’s impossible to say whether a majority of all banks were doing so.

Additionally, banks were largely reporting that there was weaker demand for all CRE loan categories. This was more pronounced in banks that were not the largest. Foreign-based banks reported similar responses on both questions.

According to the sample, standards tightening isn’t over. Major net shares of banks said they expect to tighten standards on construction and land development loans as well as on nonfarm, non-residential loans.

A moderate net share of banks said they would tighten standards on all residential real estate loan categories, including those that are GSE-eligible.

Also, the number of FDIC-insured and -supervised institutions in the first quarter of 2022 were 4,796 and 3,100 respectively. In the first quarter of 2021, there were 4,978 and 3,209. And in the first quarter of 2020, 5,116 and 3,303. While not a survey, the progression offers a partial different view of how the industry might be doing.

 

Source: GlobeSt.

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15 Years Of Low Interest Rates Reshaped The U.S. Economy. Here’s What’s Changing As Rates Stay Higher For Longer

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The United States is entering a new economic era as the Federal Reserve has been hiking its benchmark interest rate.

Interest rates today stand above 5% as the Fed tries to slow the economy down and fight inflation. As interest rates climb, economists say financial conditions are headed back to being more normal.

“Having interest rates at zero for such a long period of time is very unusual,” said Roger Ferguson, a former vice chair at the Federal Reserve. “Frankly, no one ever thought we’d get to that place.”

Back-to-back financial crises gave past Fed policymakers the conviction to take interest rates as low as they can go, and keep them there for extended periods of time. Along the way, they disrupted the basic math of personal finance and business in America.

For example, the Fed’s unconventional policies helped to sink the profits investors received from safe bets. Government bonds, Treasury securities and savings accounts all return very little yield when interest rates are low. At the same time, low interest rates increase the value of stocks, homes and Wall Street firms that make money by taking on debt.

As the Fed hikes interest rates, safer bets could end up paying off. But old bets could turn sour, particularly those financed with variable loans that increase alongside the interest rate. A wave of corporate bankruptcies is rippling through the U.S. as a result.

“You’re, to some extent, limiting nonproductive investments that would not necessarily generate revenue in this high interest rate environment,” said Gregory Daco, chief economist at EY-Parthenon. “It’s very different in a low interest rate environment where money is free and essentially any type of investment is really worth it because the cost of capital is close to zero.”

In recent years, economists have debated the merits of zero lower-bound policy. As the Fed lifts that federal funds rate, policymakers warn that rates may stay high for some time. That could even be the case if inflation continues to subside.

“Barring a catastrophe, I don’t think we’ll see lower interest rates any time soon,” said Mark Hamrick, Washington bureau chief at Bankrate.com.

To view CNBC‘s ‘How The Federal Reserve’s Interest Rate Hike Are Reshaping The U.S. Economy‘, click the arrow below:

 

Source: CNBC

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Fewer CRE Loans Being Refinanced, But Lenders Find Other Ways To Work With Borrowers

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Lenders and special servicers are looking beyond refinancing options when it comes to working with borrowers on commercial real estate loans that are set to mature in the coming months and years, even as those loans increasingly are backing properties facing distress.

According to an analysis by Moody’s Investors Service, the percentage of real estate properties that use commercial mortgage-backed securities debt that are being refinanced is on the decline. Conduit refinance rates were 78.1% and 71.8% in the first and second quarter of this year, respectively, compared to 85.5% in 2019, the year before the Covid-19 pandemic and broader economy upended the commercial real estate market.

“Given the low interest-rate environment that existed before the pandemic, it wasn’t surprising to see so many loans refinanced then, especially if a borrower had a strong debt-service coverage ratio, which measures available cash flow versus debt obligations,” said Matthew Halpern, vice president and senior credit officer at Moody’s Investors Service.

Interest-rate hikes imposed by the Federal Reserve over the past year in the wake of rising inflation have compressed real estate values. Add to that rising vacancy rates and a weaker leasing environment in especially the office sector, and the pressure has increased on building owners with loans coming due in the near term.

“Some loans are performing well from in-place cash flow but are unable to refinance,” Halpern said.

Lenders also have tightened standards in the wake of a more challenging economy and commercial real estate market, with some banks outright saying they’ve stopped new lending to office properties. While fewer loans are getting refinanced overall, there’s been an uptick in the number of performing loans that are past maturity but haven’t been formally extended. That amount, negligible before the pandemic, reached 5.2% in Q1 of this year and 6.9% in Q2.

“That means the borrower is still making interest and principal payments as if the loan hadn’t matured — which typically suggests the borrower is committed to the property,” Halpern said. “Because the overall refinance rate has declined in recent quarters, the number of performing loans past maturity has naturally risen.”

The Moody’s analysis, which only examined CMBS loans, found 16.7% of maturing loans tracked by the firm were delinquent as of the second quarter. That share was much higher in the office sector, with 27.6% of office loans scheduled to mature in Q2 2023 considered delinquent.

 

Source: SFBJ

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