5 minute read
Right Place, Right Time
Northwest Florida’s Booming Commercial Real Estate Sector
By Justin Beck, President, Beck Partners
The wheels were first set in motion several years ago, as our community made pivotal decisions to invest in ourselves, our quality of
life and our infrastructure. Community parks, enhanced walkability and pro-business governments are just a few examples of the infrastructure improvements made over the past several years. Make no mistake, the job isn’t done; but given societal and economic forces that have shifted in the last two years, Northwest Florida has proven itself to be in the right place at the right time.
IN MY SEVENTEEN YEARS
working in the Northwest Florida real estate industry, there has never been a time where so much demand has been met with so little supply across so many different property types. Furthermore, with record amounts of capital, investors are seeking outlets to invest at unprecedented levels.
At the forefront of this growth is housing. Typically, all other sectors of real estate (industrial, retail or office) follow housing growth, whether that housing is rental apartments or single-family residential. Since there’s been so much reported on singlefamily residential, we’ll focus on multifamily apartments. According to Costar data (a nationally recognized authority on real estate information), rental rates have increased more than 14 percent within the past year in the Pensacola metropolitan statistical area and 16 percent in the Destin and Fort Walton Beach markets. All the while, absorption rates are approaching 1,000 units on a 12-month average.
The industrial sector has followed multifamily trends, the darling of the real estate sector, closely. While Northwest Florida isn’t known as a logistical hub, we have benefited greatly from the need for “last mile” industrial space. Furthermore, due to significant growth in the construction industry, suppliers’ and contractors’ space demand has increased significantly. Unlike many larger markets that have benefitted from consistent, measurable industrial demand, the Northwest Florida market has had spotty demand over the years. This situation has meant that our area has never had significant speculative development, meaning developers rarely build a building without it already being pre-leased to a tenant. The result is mind-boggling occupancy rates. The occupancy rate across northwest Florida for industrial space is currently at 97 percent. A healthy market would typically be anything above 90 percent.
While much has been made about the work-from-home phenomena as a result of the pandemic, Northwest Florida has once again bucked the national trend. In larger urban markets, demand for office space continues to lag compared to typical rates as large employers have been slow to bring workers back to the office, and in many cases, employers have downsized their office space needs. Once again, Northwest Florida’s lack of speculative development has proved beneficial, and has also been buoyed by pro-business decisions made by political leaders. Office vacancy rates have, therefore, hovered right around 4 percent for our market, indicating a very strong demand.
Retail has been the surprise winner in a post-COVID-19
world. While the days of the big-box store are likely gone forever, consumers’ desire to get out and spend money after the lockdown has proven to be a boon for retailers. Vacancy rates are a surprisingly low 2.5 percent across our region and annual rental rates have increased at 5 percent, according to Costar. Our booming tourism market has no doubt assisted in these positive retail numbers as a record number of tourists continue to flood our region, ready to spend money at restaurants, bars and shops.
While every property sector appears to be healthy and growing, our region is large, and some submarkets are proving to be in higher demand than others. Based on my firm’s work in the region, here are the hottest submarkets in Northwest Florida:
Beulah – Driven by growth from Navy Federal and the associated single-family residential boom, retail and multifamily have followed suit.
Tiger Point and Navarre –
Great schools and the ability to work in either Pensacola or Ft. Walton have made this area one of the most sought after in the region.
South Walton and Bay
Counties – The phenomena that are 30A and Destin have spread northward and created demand for a lifestyle coveted by many. The next big thing in the area is St. Joe’s Latitude Margaritaville, a massive development designed for seniors 55 and older, with the first phase consisting of 3,500 homes.
Downtown Pensacola –
Northwest Florida’s urban center has flourished for years, but we are now seeing unprecedented demand for apartments, with three large Class A projects planned or under construction.
2021 proved to be a record year across all sectors and submarkets for our region, and by all accounts the trend is continuing as we enter the second quarter of 2022. There are, no doubt, headwinds to our economy that investors and business owners should keep at the forefront. Inflation is, of course, the most obvious, along with the threat of global conflict that could have significant negative impacts on our economy. Despite these risks, Northwest Florida’s broadbased economy, coupled with world class quality of life and relative affordability greatly enhance our region as a longterm investment opportunity.
About the Author: A graduate of the University of Alabama at Birmingham with a bachelor’s degree in business management, Justin began his career at Beck Partners as a sales associate and in 2009 was named President of the company. Justin is a CCIM designee, certified property manager, and licensed real estate broker in Florida and Alabama. Justin’s responsibilities include the dayto-day operation and strategic planning of Beck Partners. Justin has a commitment to strong partnerships, a talent for attracting talented professionals and an ability to mastermind solid commercial real estate strategies. Justin has completed more than 400 transactions in the eight years he has been with the company and is consistently ranked as the top commercial producer in the area. Justin continues to grow the most dynamic commercial real estate brokerage firm on the Gulf Coast.
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