Looking Forward

By Hannah Wallace December 31, 2005

The old saying goes that the only sure things in life are death and taxes. But in 2006, you can also be sure that folks in Sarasota and Manatee counties will be closely monitoring occurrences both natural and unnatural, watching to see what Mother Nature has in store and how sky-high prices for housing and gas will impact the region.

"My bet is that we will see real estate prices falling a little during 2006 in most of Florida's coastal areas," says Dr. David Denslow, an economics professor and economic analysis program director for the Bureau of Economic and Business Research at the University of Florida. "It's going to depend a lot on what happens with interest rates."

"We can't go on getting 15-percent increases annually," concurs Dr. Frederick Strobel, Selby professor of economics at Sarasota's New College of Florida. "But there are a number of unique factors here that, while we may see some slowing, I don't think we're going to see massive price cuts."

One of those factors: continued strong demand from baby boomers, who keep flocking to Florida despite rising home prices and a couple of active hurricane seasons. "Last year, I would have thought that the hurricane season would cool off the housing market here, but it didn't," says Denslow. "There may be some driving up of insurance rates, additions to housing costs, people building tougher residences. But it won't be a big concern."

What will continue to be a major concern is how rising home prices are affecting the area's workforce, making it harder and harder for teachers, police officers and secretaries to buy a residence. "Workforce housing is a real problem," says Strobel. "One way to solve it is to get wages up so that people can afford to buy a house." But even so, expect the area's high cost of living to make it hard for some employers to fill jobs.

Local businesses will also keep an eye on high gas prices and the impact they'll have on tourism, retail and other industries. Because it will be more expensive to drive to work and heat their homes, consumers will have less money for discretionary spending on frills like restaurants and entertainment. And it will cost more for companies to transport goods and services. When you couple that with the fact that "insurance companies are doing all that they can to raise rates," according to Strobel, "there will be a higher cost of doing business, which will place a burden on the consumer."

But plenty of bright spots sparkle on the horizon. We've talked to various local industry leaders to see what they think 2006 has in store.

Larry White, executive director, Bradenton Area Convention and Visitors Bureau

"I'm always optimistic, but there are a lot of challenges," says White, like $3-plus gasoline, problems in the airline industry and high-profile storms. "We seem to be locked in to 15 to 20 or more hurricanes a year, and the Weather Channel is going to make very sure that no one forgets that," he says. "But I'm cautiously optimistic." What will keep drawing visitors to this area? "The beaches, the sunshine, the culture, the Gulf, the museums, the music-it's all still here," says White. Another plus: Many of the area's visitors come from other parts of the state, "and if any group of people understands the psychology of hurricanes, it's Floridians." What's your biggest concern for the year ahead? The airlines. "We're primarily a drive-to destination, but the winter season is so controlled by the airlines," says White. "So the survival of the airlines worries me." Does the bureau have any major plans for 2006? In light of AirTran's new nonstop service from Boston's Logan International Airport and New York's LaGuardia to Sarasota Bradenton International Airport, the Bradenton Area CVB will put extra emphasis on those regions, as well as amplify its marketing work in Germany.

Jay Brady, executive director, Gulf Coast Builders Exchange

Brady expects several factors to impact the building industry in 2006, everything from rising prices for materials to the influx of baby boomers. "I know there have already been stories about some builders using warehouse space to gather and store building materials because of an expectation of shortages later," he says. "And labor continues to be an issue because of a lack of affordable workforce housing. So I think there will probably be a little bit of a slowdown because of those factors." What can be done to address the issue of workforce housing? "We've got to figure out a way to be more efficient in using land in the face of all this demand," says Brady. "The market needs more incentive, less regulation and more density in places to make it work, to help make mass transit work. People want to drive less, but to do so they've got to be in more dense residential developments that are near jobs, shopping and mass transit routes." Are there any areas where the market is showing weakness? "From what I hear, people are trying to finish up current projects because they're not expecting as much commercial and office/industrial demand over the next six to 12 months," says Brady. That's due to factors like rising interest rates and construction costs. "But certainly there is expectation of future demands from the baby boomers, and commercial development's going to follow those rooftops," he says. What other issues are on the Builders Exchange's radar for 2006? "We're definitely concerned about the entire business climate and the overregulation of our industry," says Brady. The group is also continuing to work with local high schools on its pre-apprenticeship program to help draw qualified workers to the industry.

Frederick Piccolo, president and CEO, Sarasota Bradenton International Airport

"I think we're going to see continued positive growth," says Piccolo, both in passenger traffic and general aviation. "Our business was up 20 percent [in the first half of 2005]. I don't know if we can maintain that level of increase, but I think we will continue to see in the neighborhood of a 5- to 10-percent increase." How will rising fuel prices impact you? "It affects the industry as a whole and it affects our expenses for things like electricity," says Piccolo. But there may be one silver lining: More passengers may opt to fly out of Sarasota Bradenton rather than spending the extra money to drive to Tampa. What is your biggest concern in 2006? "The health of the carriers themselves," says Piccolo. "If they file for bankruptcy or go out of business, it affects our business a great deal, because all of our revenues come from our business activity." What's in the works at the airport this year? "Our major initiative is always trying to attract more carriers and bring more choices to the community," says Piccolo. "That's our No. 1 priority, and we continue to spend a lot of time and effort on that." The airport will also be adding a third fixed-base operator on the general aviation side and will be expanding its security checkpoint in order to handle more traffic.

Scott Sosso, co-owner, Prudential Palms Realty

"I think the real estate industry will have another successful year, but I don't think the market will continue to appreciate at the feverish pace that it has been appreciating," says Sosso. He expects prospective buyers will help drive this easing up by finally refusing to pay such high prices. What's your biggest concern for the year ahead? "Property taxes and the rate of appreciation. We already have clients now, wealthy ones, saying they're not willing to pay $40,000 in taxes. Do they have the money to pay it? Yes. Do they want to pay it? No. As far as appreciation goes, in and of itself it's great, but it's a concern for new people coming into the market." How can the issue of workforce housing be addressed? "I think the government needs to make some changes that will allow for pockets of affordable housing by increasing density in locations that can be pockets," Sosso says. "It's all about density." How do we deal with continued demand from baby boomers and other folks moving to the state? "You can't be anti-growth and then have people still come no matter what," says Sosso. "The area is growing, and instead of fighting that growth, we need to embrace it and make sure we make the right changes to keep the good life and the good environment that we've had for many, many years." What does Prudential Palms Realty have planned for 2006? "We will be a much larger company in the coming year," says Sosso, noting that the firm recently began offering mortgage and title services. He says the company is also looking into some acquisitions and mergers.

Dan Miller, president, 82 Degrees Tech, and partner, Startup Florida

"Technology companies will be affected by generally the same things that most of us are affected by," says Miller. "That includes the costs of infrastructure and real estate and the cost of funds." In addition, as the price of both raw materials and gas increases, companies may be faced with rising costs for supplies and shipping. "Add that to the expectations of overall cost of living increases, and those are the challenges," says Miller. What worries you most in the year ahead? "I think one of the biggest challenges we have is the issue of community or workforce housing, the idea of having available housing for workers within technology companies," says Miller. Is finding workers difficult? "The pool of talent here is not what it is in other markets," says Miller. "So when a company moves here, it has to be concerned at least on some level about being able to find enough talent here to support its objectives. But I think that's surmountable." In fact, that's one issue that will be addressed by 82 Degrees Tech, a new advocacy group for companies creating and developing technology in Sarasota and Manatee counties. What does Startup Florida have planned for 2006? "As a fund, we're projecting in 2006 to invest in two to three additional companies," says Miller. "We're also researching various markets and technology to actually launch new companies. I would expect that we will launch one or two companies in 2006."

Thomas Quale, president and CEO, LandMark Bank

"I think business will continue to be fairly strong in the area," says Quale. "A couple of eyebrows have been raised over the rapid appreciation of real estate, the increase in gas prices and the increase in the cost of construction. But overall I think the local economy should continue at more of a measured pace." Where are interest rates heading in 2006? "I think they are going to continue to increase slightly in the near term and hopefully level out for the year 2006," says Quale. "I don't envision a big impact for the real estate market." Do you worry that people may have gotten in over their heads in the real estate market? "Nothing goes up in a straight line forever," says Quale. "So real estate prices can't continue the escalation they've experienced over the last three or four years. But as long as there's not a significant decline in valuation, over-purchasing should not be that big of an issue." Any changes ahead at LandMark Bank? "We're expanding our residential lending area to provide better services and products for our customers," says Quale. "We're doing that because demand has been so strong and we've received many requests from our customers saying that we needed to provide the product."

John Rice, president and CEO, DeSears Appliance & Home Entertainment

"All in all, I feel like there's a bright outlook for 2006," says Rice. But he adds that he'll be keeping an eye on things like high gas prices and disaster relief, "which have the potential of impacting any source of expendable income consumers might have." Does the active local real estate market have an impact on sales of appliances and home entertainment systems? "Of course," says Rice. "If somebody's buying a new home, remodeling or rebuilding, that certainly creates a need." What are you most concerned about in the year ahead? "Fuel costs and the availability of fuel, which really drive the wholesale costs of many of the products we sell," says Rice. "Interest rates also have a great deal to do with our industry as well as with the economy in general." What's on the drawing board for 2006? The company is expanding its Bradenton facility, creating a 50,000-square-foot retail space and distribution center.

Brian Flynn, chief executive officer, Manatee Healthcare System

"We're excited about the upcoming year," says Flynn. "It's fun to be part of a robust and growing economy." In Manatee County, hospital usage rates have actually dropped over the past few years, which Flynn attributes to more young people moving here, the fact that people are living healthier lifestyles, and advancements in medicine. What is your biggest worry for 2006? "As healthcare costs continue to rise, more and more people are unable to pay rising insurance premiums," says Flynn. "So we see a rising level of uninsured patients coming to our hospital. It's a difficult balancing act; we still expend the resources to care for them, but we don't get any reimbursement." What can be done about uncompensated care? "It's an issue for all the hospitals in this county, how we fund those patients who don't have the ability to pay," says Flynn. He's optimistic about the fact that Manatee County is putting together a committee to study the problem and discuss solutions. What's in store for Manatee Memorial Hospital in the year ahead? The hospital is in the process of building a new 124-bed patient tower, scheduled for completion in the fourth quarter of 2006. It will contain mostly private patient rooms. Manatee Memorial also recently opened a stroke center to care for stroke emergencies.

Teri A. Hansen, president and CEO, Gulf Coast Community Foundation of Venice

"We have an ambitious agenda for the year ahead," says Hansen. In addition to its development of a neighborhood for working families near the intersection of Laurel Road and I-75 in south Sarasota County, the foundation will be spreading the word about its new capacity to accept gifts of complex assets like commercial real estate and art. What is the foundation's biggest concern for 2006? "Workforce housing," says Hansen. "Teachers, first responders, employees at nonprofit agencies and other workers critical to community health are being forced out of the area by escalating real estate values." Another concern is the region's ability to attract and retain businesses due to land values that preclude businesses from expanding or even considering the region in the first place. Do things like rising gas prices and insurance rates affect the foundation? "Rising expenses do affect the foundation," says Hansen. "But we live in a very affluent area and sometimes donors who are able will give more in difficult years." She also notes that while the community has responded generously to recent national disasters, "sometimes local nonprofit organizations suffer when charitable giving is redirected. We think it's important to continue to give locally, even if the gift is smaller." How will the continued influx of baby boomers affect the foundation? "The retiring boomers are healthier, wealthier and better educated than any previous generation, and we hope to engage them in the community," says Hansen. "Boomers tend to focus their philanthropy for impact, and we are seeing neighborhoods organize to collectively participate in charitable giving."

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