During most conversations, I usually hear “it’s a tough market isn’t it? How’s the commercial real estate business?” My response starts “pretty good, other than some segments.” On a whole the commercial real estate market in the Destin, Florida and surrounding areas has been affected much less than the residential market. Retail in prime areas is still pretty strong. Secondary locations have dropped some.
Lease rates for office space have taken the largest hit, due to the small lending companies, title companies and real estate associated businesses that have closed. I’ve seen rates drop from $30 per SF in December of ’06 to $20 per SF in December of ’07 with vacancies. Another area affected has been development parcels; some have dropped in value drastically. Most of these are residential related. Retail parcels have dropped in value some, but have held their own generally. Location and need are the driving forces. “Fair Share” fees have been more of an issue in South Walton County.
Development basically stopped in this area for a couple years because of these substantial fees. Fortunately we’re seen these fees drop in price. At this time banks are making loans difficult for many, discounting values. Commercial real estate in general slowed down the last quarter of ’07 through the first couple months of ’08.
It’s not as bleak as it may sound. Out of state investors are coming in and activity is picking up. It’s “business as usual.” It’s an incredible time to buy. We’ll see the discounted deals go away as these new investors keep coming into the market.
