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March 25, 2008
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Florida
“For the most part, Florida will be OK,”
he insists, “but the state has really got to get
serious about solving some of the problems
with operating here.”
This is not to suggest that certain commercial products in specific Florida locations are without risk, Schecher says, citing
smaller office buildings in suburban fringe
locations as an example.
“These projects were basically service-oriented in anticipation of ongoing housing
growth that is not going to be happening
real soon,” he maintains. “Or they were
built with cheap money for no other reason
than the appropriate zoning was available.
Of course, if there is a recession, even core
assets are going to suffer, but it probably
would not be devastating.”
Condominium apartment buildings in
overbuilt markets are especially vulnerable
to a serious national economic downturn,
according to Marcus & Millichap’s Berman.
“Some say there’s a four-to-seven-year
supply of luxury condos in Miami-Dade
County alone—a substantial percentage with
seven-figure price tags,” he says. “For the
most part, this is not entry-level housing so
it won’t readily get absorbed into the rental
supply. We have yet to feel the full effects
of many of these units going back to
lenders, typically local banks, which I don’t
expect really to start occurring until the second quarter of this year.”
INTEREST RATE CUTS BODE WELL
Most other investment real estate product
types in Florida appear to Berman to be
much better positioned to withstand future
problems with the economy. “Retail is still
the darling of the marketplace, and prime
locations are selling at premium prices,” he
notes. “Office buildings have been a great
play over the last two to three years, especially with interest rates being what they’ve
been. The threat of a recession will likely
trigger reductions in the prime rate and
that bodes well for real estate investment
as a whole.”
The Federal Reserve has so acted in recent months, cutting the federal funds rate
by a quarter-point in December, then another three-quarters in January.
Wrightwood Capital’s Koletic sees the
industrial sector, which is basically ware-house/distribution space, as representing
a great opportunity either for further de-
