We're a long way from normal, but the region's economy is on the upswing.
By Cooper Levey-Baker
After years of downward-sloping bar graphs showing major declines in everything from home prices to employment, things are finally looking up. “We are feeling well in Southwest Florida,” says First National Bank of the Gulf Coast executive Jody Hudgins. By and large, national, state and local indicators bear him out. Let’s take a look.
RETIREES ARE RETURNING
Both Sarasota and Manatee County added residents at a solid clip between 2010 and 2012. Sarasota grew by 1.8 percent during that time, while Manatee’s population increased 3.4 percent, beating the state average of 2.7. (Contrast this with the shocking news back in 2008 that Florida, including Sarasota, actually lost population for the first time since WWII.) What’s driving those numbers? Chalk it up to the pent-up demand from well-to-do retirees and baby boomers who are feeling more confident about the economy and their
Of course, Florida and our region have relied on the influx of seniors to fuel our economy for decades. In 2012, in both Sarasota and Manatee, the 65 and older population grew faster than any other age group. Housing, home furnishings, health care, professional services, restaurants, retail, recreation and the arts continue to benefit as seniors buy second homes or relocate here.
Even better, Southwest Florida—especially cities like Naples and Sarasota—appeals to affluent retirees. “Quality communities will attract money when the money is there to spend,” says Hudgins.
Get used to that growth, says Sean Snaith, the director of UCF’s Institute for Economic Competitiveness. He predicts the population in Sarasota County will increase in each of the next three years, with the county possibly hitting 400,000 residents in 2015, up from 2012’s 386,147. Manatee County is projected to reach 344,672 residents in 2015, up from 330,302 in 2012.
INVESTORS RELIEVED BUT CAUTIOUS
The Dow Jones Industrial Average grew by 13 percent between 2012 and 2013. Investors are feeling more comfortable, but they’re still playing it safe. Investment adviser Raul Elizalde, the founder of Sarasota’s Path Financial, says that as the Federal Reserve begins easing up on its stimulus policies, there might be some “volatile” effects, and that as interest rates rise, bond prices will drop. “For right now stocks look good,” he says, but he cautions that we’re not on the cusp of a 20-year rally like we saw between 1980 and 2000. What he tells his clients: “You can’t just buy stocks and go to sleep.”
Cumberland Advisors chairman and chief investment officer David Kotok says investors’ jitters about rising interest rates are “overdone.” He’s optimistic about investment in the health care field, in particular. With the nation’s affluent, aging population, Kotok is anticipating big growth in biotech companies. “The health care sector, which used to be thought of as a defensive position, is a very strong growth position, and it’s likely to be for many, many years,” he says.
One sector Kotok calls “problematic” is consumer discretionary spending—retail, media, consumer services, etc. Kotok says the success of that sector will depend on both a “robust housing recovery” and “rising labor income.” “That has not been the case yet,” he says. “It’s better now than it was a couple years ago. Can we have an upward trend that can last the rest of the decade? Probably yes, but a slow start and gradual acceleration over the years is more likely.”
REAL ESTATE REBOUNDS
According to Florida Realtors data, single-family home sales in the North Port-Bradenton-Sarasota region climbed by 24.2 percent between July 2012 and July 2013, and the median home price increased 18.5 percent. Data compiled by Snaith shows that local inventory in May 2013 fell to just 4.4 months, a 25 percent drop from 5.8 months in May 2012. “That’s sending a signal to builders that we need new product in the housing market,” says Snaith. “That’s really what’s triggering hiring over the next few years.”
Of course, those numbers also reflect how ugly things had become. The median home price in Sarasota County, for example, plummeted from $294,500 in August 2006 to $130,750 in July 2010.
Much of the activity is being driven by hedge funds and high-net-worth investors who are snapping up properties through cash-only deals. Cash sales made up 66 percent of all Florida transactions in July, according to a RealtyTrac report. “It can’t stay this way forever,” says Snaith. “That’s not a normal market.” (See “Another Bubble?” on page 38.)
Real estate professionals are also casting a wary eye on the 2012 federal legislation that is mandating an increase in flood insurance rates. Premiums for coastal properties will rise—in some cases significantly—and this is likely to affect sales and market values.
On the commercial side, vacancy rates have dropped steadily since the beginning of 2012, according to numbers compiled by Coldwell Banker Commercial director Janet Robinson. She says businesses are moving from Class B and C space to Class A properties, particularly those in downtown Sarasota and Bradenton. “They’re taking advantage of lower prices,” she says, “and they seem to be more comfortable with the direction of their businesses.”
Companies are also headed out to the Interstate. Vacancy rates have dropped in Lakewood Ranch and along I-75 between Fruitville and Clark. But sale prices haven’t rebounded like they have in the residential market. “We basically hit bottom,” says Robinson, “with the prices of industrial and retail going up slightly.”
HARD HATS AND CONSTRUCTION CRANES RETURN
Housing starts jumped 70.8 percent between the second quarter of 2012 and 2013, while the region’s vacant developed lot inventory dropped 1.6 percent, according to Metrostudy.
Snaith is predicting 9.2 percent growth in construction jobs over the next few years. This growth has to be seen in context, though: The region lost 17,000 construction jobs after the bubble burst.
A number of significant projects are slated to come online soon, from The Mall at University Town Center to Neal Communities’ 1,999-unit Grand Palm community in Venice. As Hudgins points out, new construction means more work for architects, lawyers, plumbers and electricians, who in turn need grocery stores, dentists, the works. “It creates expansion opportunities for the businesses we bank,” says Hudgins. And that leads to greater lending and investment.
CONSUMERS OPEN THEIR WALLETS
Sarasota County businesses broke the $1 billion mark in gross retail sales this July, a 6.7 percent increase from 2012 that brought them almost equal to their June 2006 production. Home furnishings and equipment sales rose from $19.7 million in January 2012 to $25 million in January 2013, while apparel and accessory sales grew from $29.1 million to $32 million. In Manatee County, overall gross sales increased 10.7 percent between June 2012 and June 2013. Auto sales are also up in both Manatee (9.7 percent between January 2012 and 2013) and Sarasota (7 percent between June 2012 and June 2013).
Frank Fiedler, a salesman at Builder’s Model Home Furniture, says that while sales haven’t exploded, they have grown steadily. The company sells a good chunk of its furniture to Siesta Key condo owners who are refurbishing their rental units. “We’re doing better than we did last year, and last year was better than the year before,” says Fiedler. “Sales are slow and steady; it’s not leaps and bounds.”
GOOD TIMES FOR TOURISM
Bradenton Area Convention and Visitors Bureau executive director Elliott Falcione says almost everything tourism-related is on a “vertical trajectory.” Resort tax collections grew 10.3 percent in Manatee between comparable 10-month periods in fiscal year 2011 and 2012. The county has seen strong out-of-season numbers, too, thanks to increasing visits from driving and international tourists. The average family income of a Manatee visitor has inched up to $110,000, and the median age is down to 47 from 50 a couple years ago.
“We focus on targeting families and couples in the marketplace since our community attributes mesh well with that particular clientele,” says Falcione. But he thinks the high number of sporting events and tournaments scheduled in the region in the coming years will bring a large number of solo visitors as well.
In Sarasota County, the picture is just as bright. Hotel sales jumped 8.2 percent between July 2012 and 2013, while tourist development tax dollars have been higher every month this year than they were last year, save for one. Collections in March were 6.3 higher than they were in March 2012, and the number in May was 18.5 percent higher than its 2011 counterpart.
SPORTS TAKES THE LEAD IN ECONOMIC DEVELOPMENT
“We're exploding,” says Visit Sarasota County director of sports Nicole Rissler. While luring the 2017 World Rowing Championships to Nathan Benderson Park has grabbed local headlines, that event is the tip of the iceberg. The rowing venue will actually host its first international competition next October, when a group of 2,500 to 3,000 breast cancer survivors from around the world will race in dragon boats at the facility. “They’re going to be painting this entire town pink,” says Rissler.
Other sports venues have seen major upgrades, too. IMG Academy is adding a multi-sport complex and stadium in Manatee County, both spring training ballparks have been given a facelift and the Sarasota Family YMCA completed a $750,000 improvement to its aquatic facility. Those investments are already paying off. The Sarasota Y hosted the Pan-Am Masters Championship in swimming this year, and the venue will host the YMCA Masters National Championship the next two years.
But the biggest project on the horizon could come from an unlikely source: BMX. “We are working hard with the county to secure a Supercross track, which would be one of only three in the country,” says Rissler. In August, the county conditionally approved $1 million for the project, which would be built at the Youth Athletic Complex at 17th and Tuttle. “We would be doing for BMX what we did for rowing,” says Rissler.
The key to the region’s success has been diversity, according to Rissler. When most people think of sports, they think of football, basketball and baseball, but the industry includes everything from spring training to triathlons to paddleboarding.
HEALTH CARE STAYS STRONG
People need doctors even during recessions, and the health care industry remained solid throughout the downturn. The number of those employed in the sector actually grew from 2006 to 2012 in both Sarasota and Manatee counties, and it remains the biggest employment sector in Sarasota and the second-biggest, just after retail trade, in Manatee.
Nationally, health care makes up 17 percent of the gross domestic product, says Kotok, “and that number is rising.” He thinks it could hit 20 percent by 2020.
The most dramatic evidence can be seen in Sarasota Memorial Hospital’s new nine-story courtyard tower. The $250 million project debuted in September after nearly a decade in the making. The majority of construction took place in the very depths of the recession.
Biotech firms are also making moves. Rapid Pathogen Screening announced plans to double its square footage this year amid reports that earnings had grown 200 percent to 300 percent in just one year. Osprey Biotechnics, meanwhile, opened a new division, One Biotechnology, and announced its best year ever in volume, sales and profits.
BANKING LOOKS BRIGHTER
New residents mean new construction, new services and new opportunities for community banks. Banks may have tightened their lending standards for mortgages, but Hudgins says it’s the best time he can remember for a small business owner to sign a loan, and there’s a “huge opportunity” out there for entrepreneurs.
Hudgins is concerned about the fine print of the federal government’s Dodd-Frank financial regulations, created to protect consumers after the 2008 Wall Street crisis, but he says the banking industry is simply going to have to live with new realities like the federal Consumer Financial Protection Bureau. “I don’t rail against the CFPB,” he says. “We brought it on ourselves.” Regulations like the qualified mortgage rule, which requires banks to document borrowers’ ability to pay back a loan, are a direct result of “predatory” practices.
“I understand that every business wants to make more money than less,” says investment adviser Elizalde. “But if these regulations are in place, will that create a problem for the banking system? Absolutely not.” He points to the low number of banks that have failed this year compared to 2011 as evidence that the financial sector is doing just fine.
Hudgins is watching for warning signs banks missed the last time around. Are new construction permits out of whack with population growth? Will median home prices rise to more than four times the median income? “These are the things that banks have to guard against,” he says.
HELP WANTED IN MANUFACTURING
Manatee Technical Institute director Mary Cantrell says you can tell local manufacturers have rebounded by what her students want to learn.
During the depths of the recession, applicants were signing up left and right for the school’s nursing program because, while the rest of the economy was reeling, the health care sector remained strong. Welders and machinists weren’t in hot demand like they were during the real estate boom, when companies would “rip students out of their chairs,” says Cantrell.
But that’s changed. The number of students enrolled in MTI’s precision machining program, for example, has jumped from 15 to 30, and welding enrollment has more than doubled. The school has expanded its staff, too, hiring four more automotive teachers and two more air-conditioning instructors.
Cantrell points to new ventures like Air Products’ manufacturing facility at Port Manatee. The company will be hiring a minimum of 10 welders each month for the next 11 months, she says. Skilled workers who left the area during the recession are now returning to apply for those positions.
According to a 2012 survey commissioned by Bradenton’s CareerEdge Funders Collaborative, 72 percent of manufacturing firms had open positions, with production machinists, craft workers and the like in particularly high demand. Fifty percent of the companies surveyed had increased their overall employment during the previous year. New state legislation that eliminated the sales tax on manufacturing equipment is expected to provide a jump-start for Florida’s sector.
EMPLOYMENT IS MIXED
The impact of all these rising indicators hasn’t yet fully reverberated through the economy. The good news is that between 2012 and 2013, wages ticked up 19 percent, and the unemployment rate declined from 8.6 percent to 7 percent between July 2012 and July 2013. (Unemployment was above 12.2 percent in July 2010.) But a fair portion of our region’s falling unemployment rate is still attributed to people dropping out of the labor force, says Snaith. Sarasota County lost 1,000 workers between 2012 and 2013.
Snaith also says employment growth around Florida has been centered around “lower-paying jobs,” but there are some positive signs in higher-wage fields. In Sarasota County, the number of people employed in the professional and technical services field ticked up slightly through 2012, while in Manatee County the number of manufacturing jobs seems to have rebounded from its 2010 nadir. Both sectors pay significantly better than retail and accommodation jobs.
Workers shouldn’t think they can go to their bosses insisting on raises. “It’s still a buyer’s market,” says Snaith.
But as the economy expands and population grows, demand for high-paying jobs in fields like health care will only get stronger.
Florida lost a lot of talent during the recession, says Hudgins. He asks “Can we attract them back?”
UNCERTAINTY FACTOR STILL A DRAG
One possible factor in the lag in job growth and a “really slow-paced” recovery: uncertainty.
Snaith tracks the Economic Policy Uncertainty index, put together by a team of economists and based on a statistical analysis of media stories, Congressional Budget Office reports and surveys of economic forecasters.
You’d think uncertainty would have decreased steadily as the recovery has strengthened, but no. Uncertainty kept on growing after the recovery began.
Snaith argues that federal legislation like the Affordable Care Act and Dodd-Frank have created a “foggy” future for businesses.
“It creates a lot of unknowns for someone,” he says, unknowns that were perhaps made even foggier by the federal government’s shutdown and decision to delay some pieces of Obamacare. Snaith says businesses now won’t truly know the effects of the law until the end of 2014.
That mixed picture becomes a theme. Everyone agrees things are getting better, but their optimism is shadowed by still-fresh memories of economic catastrophe.
“We’re moving ahead,” says Hudgins, “but not at breakneck speed.”
HOW WE'RE DOING
GLOBAL ORGANIC SPECIALTY SOURCE
(Sarasota) Farmer-owned organic produce distribution company serving the Southeast. In July 2012, Global Organic moved into a new 80,000-square-foot space, more than three times larger than its previous headquarters.
2013 PROJECTED SALES
“The organic industry is booming, nationwide. We’re getting calls from people interested in stocking organics in areas throughout the Southeast, which traditionally weren’t big markets before. We were cautious [about the economy], but we continued to grow regardless, as people become more aware of food and food safety.”—Ronni Blumenthal, vice president of administration
WILLIS A. SMITH CONSTRUCTION
(Sarasota) Specializes in arts and cultural, health care and education construction.
PRESIDENT AND CEO
David E. Sessions
2013 PROJECTED SALES
“It certainly seems that we, as a country and an industry, are moving forward again, and every economic indicator seems to tell us that that trend is continuing. It’s not at the pace that we experienced in the mid-2000s, but I would not want to be in that kind of overheated marketplace again. A steady trend is easier to plan for.”—David Sessions, CEO/president
DENTAL CARE ALLIANCE
(Sarasota) Provides dental management and consulting services to 150 dental practices in eight states.
Mitch Olan and Dave Nichols
2013 PROJECTED SALES
2,035; 235 locally
“Effective Jan. 1, we acquired Towncare Dental Partnership, a practice of roughly 50 offices, so we now have about 150 offices total. Included in that acquisition are about 20 pediatric specialty offices, so we’re now a big leader in pediatric dentistry in Florida. We really want to be a one-stop specialty place—go get your teeth cleaned, see the periodontist, etc.—so we don’t have to refer out as much.” –Erin Spiccia, senior marketing coordinator
GETTEL AUTOMOTIVE GROUP
(Manatee) New and used automobiles, retail and auto repair.
2013 PROJECTED SALES
“Car sales are at one of the highest levels they’ve ever been in history. Interest rates are at an all-time low, and people have held off making big purchases for years. Back in ’08 and ’09, it was really tough, and every year after that it’s gotten a little better. Last year was our best year ever. The things that concern us are oil prices and gas—if they go up, that could change a lot of people’s driving habits and slow down pick-up truck deals. The truck business has fueled the [increase in] purchases. Now that businesses are coming back, they’ve gone ahead and bought that truck or fleet of commercial vehicles.”—Jim Gettel, CEO
(Manatee) Designs and manufactures high-performance, screw-in hydraulic cartridge valves and manifolds.
PRESIDENT AND CEO
2013 PROJECTED SALES THROUGH Q3
“We’re bringing on stream our third manufacturing plant in the area. We continue to expect that we will grow. That’s dependent on a lot of factors, some of which are outside of our control. But part of [expecting growth] is positioning ourselves to have enough capacity to handle the business that comes at us, and that’s where the new facility comes in.”—Allen Carlson, president and CEO
PREMIER SOTHEBY’S INTERNATIONAL REALTY
(Sarasota) A leading luxury real estate brokerage firm in Florida and the second-largest affiliate in the Sotheby’s International Realty brand.
2013 PROJECTED SALES
$2.3 billion in total sales volume
$1.9 billion in total sales volume
“Over last year, we’re up 20-something percent in closed transactions, and we’re up almost 35 percent in pending contracts. Part of that is due to the market, and also that we’ve extended our footprint and opened offices in other markets. For the Sarasota market, clearly today versus a year ago, our posture is different. We are recognized and called to the table for the luxury market
like we’ve never been before.”—Judy Green, CEO
SERIOUSLY BIG: A ROUNDUP OF RISING MULTIMILLION-DOLLAR DEVELOPMENTS.
THE MALL AT UNIVERSITY TOWN CENTER Set to open Oct. 16, 2014, this 880,000-square-foot upmarket mall will change the region’s retail landscape. The mall is one of only two to be built nationwide in the last two years, and experts say the $315 million project will generate $440 million a year in local consumer spending.
NATHAN BENDERSON PARK Sarasota County has contributed $19.5 million and the state gave $10 million to build this park’s international rowing facility, which will host the 2017 World Rowing Championships, a precursor to the Olympic games. Forty thousand spectators are expected to attend, and the event will be broadcast to 130 million.
LONG BAR POINTE While locals are happy about growth, they still want to preserve natural space. Developers Larry Lieberman and Carlos Beruff had to scrap the marina portion of their ambitious 463-acre west Bradenton project, but 250 homes and 150,000 square feet of retail space already have been approved.
IMG ACADEMY The Bradenton sports academy is in the midst of a major expansion, adding a five-story residence hall, a sprawling new multi-sport complex and stadium, and a product fitting and testing center. The school wants to grow its student body by more than 50 percent in the next few years. The Legislature this year kicked in $2.3 million for the expansion.
UNIVERSITY OF SOUTH FLORIDA SARASOTA-MANATEE USFSM welcomed its first freshman class this fall, part of a transition into a full-fledged four-year university. The college plans to add student dorms by 2016 and is spending $50 million to expand over the next four years. Officials hope the expansion helps create more of a college town vibe to retain young graduates.
FELD ENTERTAINMENT The company that owns Ringling Bros. and Barnum & Bailey Circus, Disney on Ice and other family-oriented shows has been moving its global corporate offices to Ellenton for the last year. The transition is expected to create 235 high-skill, high-wage jobs in Manatee County. The enormous new facility sits on 47 acres and will house the company’s scene, costume, sound and lighting design operations.
GRAND PALM When built out, Neal Communities’ new Venice neighborhood will encompass 1,999 homes, a park, rec center, two pools and a 39-acre lake. Its master plan is rooted in the county’s Sarasota 2050 principles of sustainability and low-impact design, and it is the first major project to break ground under the ambitious regulations.
UNIVERSITY GROVES, UNIVERSITY GROVES WEST, UNIVERSITY VILLAGE The Manatee County Commission approved changes to 242 acres just north of University Parkway this year, paving the way for offices, 341 new homes, a hotel and more. The hotel is expected to help house tourists visiting the region for the World Rowing Championships.
HAMPTON INN & SUITES Once a swanky hotel known as the Pink Palace in downtown Bradenton, this 1920s building will open this month as a Hampton Inn & Suites after a massive renovation. The 119-room hotel, which has retained some of its original features, is targeting business travelers and tourists who enjoy staying in historical properties.
SIESTA KEY Already named the No. 1 beach in America, Siesta Key’s public facilities will soon see major improvements thanks to $16.7 million in upgrades approved by the Sarasota County Commission. The project includes new concession and restroom facilities, as well as a complete restoration of the historic pavilion, designed by architect Tim Seibert in 1960.
SARASOTA MEMORIAL HOSPITAL The hospital started moving patients into its new 225,000-square-foot, nine-story tower in September, the culmination of almost a decade of work. The $250 million facility includes a state-of-the-art orthopedics floor with comfortable recovery rooms and a specialized physical therapy gym. Also highly anticipated: the tower’s labor and delivery and mother-baby floors, with spacious birthing suites and improved post-delivery amenities.
THE Q Construction has started on this modern, 39-townhome development on Ringling Boulevard just west of Osprey Avenue.
Units start in the $300,000s.
WILL THEY OR WON'T THEY?
Developers are back, but will they build? Take a look at what's being proposed.
A 17-story condominium with 18 units priced in the millions.
WHERE: Corner of Main Street and Gulfstream Avenue
DEVELOPER: Tom Manaussa
“YOUNG PROFESSIONALS” APARTMENTS
A 10-story apartment building with 168 units.
WHERE: 1445 Second St.
DEVELOPER: Jesse Biter
A 10-story project with a 148-room hotel and 147 apartments in two separate towers.
WHERE: 240 S. Pineapple Ave.
DEVELOPERS: Dennis McGillicuddy, John Meshad, JWM Management Inc., and iStar Financial of New York City.
150-room Kimpton hotel with restaurant, meeting spaces, retail and rooftop nightclub.
WHERE: Main Street and U.S. 301
DEVELOPER: Rod Connelly of Civix LLC
An 18-story, 200-room Embassy Suites hotel with a 4,000-square-foot restaurant and a 4,000-square-foot ballroom/conference area on top of a six-story, 200-space parking garage.
WHERE: 202 N. Tamiami Trail (currently occupied by Lube)
DEVELOPER: Jim Bridges of Jebco Ventures
PALM AVENUE HOTEL
Independent hotel brand adjacent to Palm Avenue parking garage.
WHERE: North Palm Avenue
DEVELOPER: Angus Rogers of Floridays.
A five-story, eight-unit condominium designed by Sarasota architect Guy Peterson.
WHERE: Golden Gate Point
DEVELOPERS: Michael Adams and Jonathan McCague
Tentative plans for apartments on vacant 6.5 acres.
WHERE: Between 10th Street and Boulevard of the Arts and between Cocoanut Avenue and Florida Avenue.
DEVELOPER: Bruce Weiner, Longboat Enterprises LLC.
WESTIN HOTELS & RESORTS
Two towers on 2.9-acres: one for a 144-unit condominium and one for a 275-room hotel.
WHERE: Gulfstream Avenue and U.S. 41
DEVELOPER: Kolter Group of West Palm
Real estate sales and prices are way up, but who's buying all those homes?
Jack McCabe, the founder of McCabe Research & Consulting in Deerfield Beach, has been calling the increase in home prices "artificial." According to him, 40 percent to 50 percent of sales in 2013 have been to hedge funds or high-net-worth investors. A year ago, he says, funds were buying only those being sold at "bargain basement" prices. Now they're buying short sales and MLS properties, and even overpaying in some cases. "The funds are directly causing prices to go up," he says.
What long-term effect those investments might have is up for debate. Interest rates are likely to increase and banks will eventually loosen their lending rules, and when that happens, McCabe argues, hedge funds will begin to deploy their "exit strategies." Average buyers will be purchasing homes at "top-of-the-market prices," using mortgages with higher rates, right when prices decline again.
Hudgins disagrees. He acknowledges that hedge funds are playing an outsized role in the housing recovery, but he contends those hedge funds won't sell their holdings on the cheap. "When they sell, it will be at a market price," he says.
Snaith contrasts today's real estate investors with the "flippers" of the boom-and-bust. In those days, investors relied on mortgages to finance their deals, while today's hedge funds have enough capital to buy properties outright. They're implementing a long-term strategy, not just trying to make a quick buck.
While Hudgins sees "potential" for a real estate downturn, McCabe insists it will happen—by 2017 at the latest.
"We're still in the midst of perhaps the most historic foreclosure crisis that has ever happened, not just in Florida but in the United States," says McCabe.