Interview: Bowen Arnold

One factor behind the price gains is the inventory crunch in the Tampa Bay market that mirrors what other Florida and Sun Belt markets are experiencing. As of March, the Tampa-St. Petersburg-Clearwater MSA posted a 0.7 months supply of inventory compared to a 2.2-month supply in March 2020, according to data from the Greater Tampa Realtors®. That is a 69.6% decrease year over year, the group noted. For buyers, the inventory crunch creates bidding wars that force them to significantly increase their offers to improve their chances of placing the winning bid. “The residential inventory’s near zero now,” Jonathan Levy, co-founder and managing partner of Redstone Investments, told Invest:. “There’s nothing available in a reasonable price range. At the very high end and at the very low end there’s a little product but you have to be willing to either remodel something or afford a big ticket home. The number of people moving here is great,” he said.

The tight housing market is also influencing professionals in the industry to be more nimble and look for opportunities around real estate, given the tight inventory levels. For example, Katz Capital has focused more on the insurance and servicing of residential and commercial real estate assets. “Thinking back to March 2020 when everything shut down, our biggest fear was that we were going to see a broad-based government shutdown. Fortunately, the economy slowly came back to life between April and July 2020. Our revenues are up over 100% compared to last year, which is remarkable,” Founder & CEO Brian Katz told Invest:. “Over the last year, we have made a number of strategic acquisitions covering insurance agencies, home services businesses and some commercial real estate,” he said.

Still in acquisition mode, Katz Capital bolstered its insurance and asset servicing platforms as it navigated market uncertainty. “Our mindset has been more on the side of servicing real estate assets. Every building, every piece of dirt, needs insurance. If we can be the servicer of that client, that is what we are seeking. All of those buildings need a variety of home services, whether it is AC, plumbing or repairs. We have built up a platform to service the assets by being horizontally integrated through these acquisitions,” Katz said.

Despite the market challenges, many of the trends accelerated by the coronavirus pandemic, namely the influx of in-migration from the Northeast, Midwest and the West Coast, as well as the adoption of work from home capabilities, bode well for the real estate market, which means good news for builders, developers and investors.

The luxury market is directly benefiting from major business expansion and headquarter relocations Bowen Arnold

Manager & Principal DDA Development

What is the focus of the firm?

Our focus primarily is on multifamily developments. We’ve done a little bit of everything, including marketrate housing, some affordable housing and some workforce housing. We did a condo project in St. Pete four years ago. We are also involved in mixed-use projects like the Orange Station in the Edge District of St. Pete. We really like urban deals, primarily in Tampa Bay and St. Pete. We’re at a point now where we don’t want to go to some of the more remote places in Florida. Our main focus is multifamily homes in the core of Tampa and St. Pete.

What is your view of the Edge District?

I think the Edge District is super exciting. If you look back six or seven years ago, there wasn’t much going on out there. Now, you have the new police station and you have restaurants and bars. There are five new multifamily developments that are ready to lease up right now.

We’re going to bring 100,000 feet of office space, 22,000 feet of retail, 30 more workforce apartments, a 600-space parking garage and about 60 upscale condos. The city of St. Pete has recently released its request for proposals for the Tropicana Field site so we’re seeing developers from all over the country coming in. There are some big players coming in and it’s going to be interesting to see how it all plays out. This is all south of the Edge District. There’s huge potential in that area. I think it’s almost become the center of St. Pete.

How are you preparing for the near term?

For us, it’s full steam ahead. We’ll be doing the same thing we did in 2020. We did have to adjust more than in the past but we’ve been pretty fortunate that we were never knocked off our stride. We consider ourselves lucky to be in that position. We’re moving forward with our projects and looking for new deals. We think that the economy in 2021 is going to be surprisingly good. We’re excited and I think our markets are really strong. I think St. Pete is kind of a hidden gem as well as Tampa.

Record-low interest rates and inventory of homes for sale have driven price increases.

happening in Tampa Bay. “There is a tremendous demand for custom luxury homes and Tampa Bay is one of the top markets in the country for this right now,” AR Franchising/AR Homes Jim Rosewater told Invest:. “We’re seeing a steady influx of people from other markets who want to relocate. Furthermore, the whole remote working concept has changed things a lot. Many companies have been re-thinking how they’re going to operate going forward. The need for all employees to commute daily to big corporate offices is evolving, as businesses re-evaluate how to operate,” he said.

Traditionally, the workforce followed the employer; however, the COVID era served as a litmus test for the standardization of remote work, which combined with 365 days of sun and no income tax further fuels the desire to live,work and play in the Tampa Bay market. “Many workers are opting to change their lifestyle. As a result, we’re seeing increased migration from the Northeast and Midwest. People are moving to where they want to live and they’re re-thinking the types of homes that they want to live in. They want to work from home, exercise from home and spend more time in their outdoor spaces,” Rosewater said.

No longer only limited to the luxury market, the remote working adoption is now mainstream, almost standard and permeating throughout Tampa Bay. A recent report from SmartAsset ranked two cities in the Tampa Bay market as the best places for remote work.

St. Petersburg ranked as the fifth-best city for working from home in SmartAsset’s 2021 Top 10 Cities to Work From Home report, the only Florida market to crack the Top 10. St. Pete’s high percentage of remote workers as well as low unemployment catapulted the metro to the top of the list. “As of October 2020, the greater Pinellas County unemployment rate was just 5.2%, which is 1.5 percentage points below the national average. Remote work has also grown more popular here over the years: The percentage of the workforce working from home grew by 4.6% in St. Petersburg from 2014 to 2019, the third-highest increase in the study,” SmartAsset noted about the Pinellas County city. Tampa landed a few spots behind St. Pete at No. 28. Like it’s counterpart, Tampa featured a high percentage of remote workers as well as a high percentage that could work from home. The only other Florida market among the Top 35 was Jacksonville, coming in at No. 33.

Commercial Tampa Bay’s geography, waterfront spaces and rising profile as a finance, technology, healthcare, life sciences and professional services hub in West Florida were fueling development activity in the decade leading up to the pandemic outbreak. Anchoring the transformation of Downtown Tampa is the Water Street Tampa development, a vision heralded by both Vinik and Gates thanks to their development company Strategic Property Partners. Five years in the making, the pandemic could not stop construction on the $3 billion project slated to be the centerpiece of Downtown Tampa. Developed in phases, the first phase will include new class-A office towers, hotels, including the first five-star hotel offering in the region, 70 restaurants and retailers and over 1,000 new residential units spread throughout multiple locations across 56 acres. Construction of the first phase is slated for completion in 2022. A project of this magnitude fuels optimism for Tampa‘s future and cements the market’s place as one of the key business destinations in the Sun Belt.

“What’s happening Downtown with Water Street has a lot of promise, and you see all these buildings being done on Bayshore Boulevard that are beautiful and doing very well. The market here is strong and is going to stay strong,” Redstone’s Levy said. “We’re seeing a lot of businesses move here too. Especially with the amount of virtual businesses, Tampa becomes a much better option. Why work from home in a place like New York or Chicago where you are paying a fortune to live in

Stevens Tombrink

Managing Director – Tampa – LandQwest Commercial Real Estate

We are going to be in “Orlampa” soon, Orlando and Tampa being all one place. It just keeps going farther and farther east. I’ve been doing this since 1985, and I actually live in the I-4 Corridor area, so I’m familiar with it. It used to be the industrial market in Tampa, went to 50th Street and then to Highway 301 and I-75. Now it’s out to the County Line Road. It just exploded to County Line Road and from Orlando they are coming west, and it just keeps coming. Companies are going farther and farther out, and they’re going farther and farther north and south of the interstate. You’re starting to see warehouses being developed on Frontage Road, such as the Lakeland Interstate Commerce Park. Early on, people wanted to be at the interchange. But that barrier seems to be dropping and warehouses are being built farther and farther from the hardcore node intersection. That’s going to continue.

a small apartment and you’re working from home. This has provided a lot of opportunity for places like Tampa. The pandemic will ultimately pass but this has given Tampa a clear opportunity to grow,” he said.

As one of the largest downtown development projects in the United States, Water Street Tampa is the tip of the iceberg in an active commercial development and construction market. The sudden jolt of the stay-athome measures and move away from the office space undoubtedly impacted the local office market. Deeming construction essential was a silver lining for the construction and development sector in a year marred by massive disruption.

As of May, total vacancy for office space hovers at 16.5%, according to JLL’s Q121 office report. A year into the pandemic, optimism is rising, JLL notes. Currently, there are just over a million square feet of new office space construction in the Tampa Bay market. According to the report, direct and sublease asking rents have remained flat at $30.38 p.s.f and $25.97 p.s.f, respectively. The first half of 2021 is slated to be characterized by a rise in total vacancy in the market due to new construction delivered projected in either Q2 or Q3. Industry optimism is geared toward the second half of 2021. “Interest in the Tampa Bay area is at an all-time high as out-of-state tenants look for more cost-effective real estate options. While fundamentals may be strained over the next three-to-six months, confidence is rising for the latter half of 2021 going into 2022,” the report stated.

Though Tampa Bay is one of the best markets in the nation for remote working, commercial real estate leaders believe that office space will continue to evolve while remaining an integral part of the business climate. “We have had a few tenants who have chosen to stick to remote working. We are firm believers that office spaces will not go away, although many companies may move toward a hybrid model,” Cardinal Point Management Principal Gregory Williams told Invest:. “Many companies benefit from having a dynamic workplace. It feeds their culture. We believe that office space in Florida is here to stay so we continue to own these assets and we will continue to invest in these assets.”

The historic low interest rate environment bolstered development deals in this cycle though underwriting ( )