Leading Question

By Kim Cartlidge  September 30, 2010

Commercial real estate broker John Harshman says he sees a speck of light at the end of the tunnel—although it’s still a long tunnel. Despite consumer caution and entrepreneurial angst, his Sarasota office phone is ringing with investors and end users. Some are bargain hunters from New York, Boston, Chicago or Philadelphia. Others are cash buyers ready to scoop up bank-owned properties, especially on Sarasota’s Main Street, where the retail vacancy rate has dropped to the single digits.

According to Harshman’s third-quarter analysis, the vacancy rate for downtown Sarasota’s 1.1 million square feet of retail space is eight percent. “That’s a real bright spot,” says Harshman. “When I ask people what they think the vacancy rate is, they say 30 to 35 percent. I’m amazed at the number of inquiries I’m getting for the few vacant spaces that we have.”

The queries are ranging from the restaurant owner who knows the market and wants to try a new concept to the Naples and Punta Gorda investors who like what Sarasota’s downtown has to offer. The urban core’s 3,000 residential units and 2.4 million square feet of office space provide a good market for retail and restaurant establishments, Harshman says. The downtown office vacancy rate, however, hovers around 14 percent.

Brand-new openings on the west end of Main Street include Coquillage, a home decorating store; clothing store Eileen Fisher, which will open this fall; the Southeastern Guide Dogs Discovery Center; Gymmey’s Fitness Wear; and the Sarasota Ballet of Florida’s dance school.

Across town, Brian Kennelly echoes Harshman’s sentiment—but he is bullish on Lakewood Ranch’s Main Street. Following a dry spell, five new businesses opened there this spring and summer, including the Fish Hole miniature golf course, Knot Awl Beads, Main Street Bazaar and two new restaurants—Eduardo’s Cantina and Main Street Trattoria.

Kennelly, who is president of Lakewood Ranch Commercial Realty and chairperson of the Sarasota EDC’s Real Estate Oversight Committee, says shoppers are dropping more dollars on LWR Main Street as well. “Year-over-year sales on Lakewood Ranch Main Street are up across the board, even over the summer,” Kennelly says. “I find it encouraging that entrepreneurs in the market are willing to invest their dollars with the right landlord.”

There’s another bright spot in the region’s commercial real estate: The overall net absorption rate is positive again. For the past two years in Sarasota and Manatee, vacancy rates were climbing, and the square footage being leased was in the red. Vacancy rates are still 20 percent to 30 percent in most areas, but this year, “We’re seeing positive absorption, and the strongest area is industrial,” says Janet Robinson, chair of the Manatee EDC’s Manatee Office Vacancy Exchange and regional director for Coldwell Commercial Banker CRT.

Prices have fallen, so business owners are renegotiating leases or expanding. Potential buyers are querying, which is encouraging as well. “Normally, it’s a neighbor,” Robinson says. “Neighbors are calling on the properties next door when they see a ‘for sale’ sign.” Apparently, as is the case with downtown Sarasota, some local business owners are now in a position to seize an opportunity.

Still, the market can’t be described as rosy, Robinson says. Local business owners are still anxious and wary of debt, even if they can secure financing. But Robinson says those clouds will eventually part as well. “Because banks are willing to lend to owner-users, there is SBA financing available with 10 percent down,” says Robinson. “As businesses feel more confident in the economy, it will progress.”

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