Revenge of the suburbs

Apartment sales dominated commercial real estate transactions along the Gulf Coast in 2016 as investors scrambled to capitalize on the region's rising rental rates and job and population growth.

Of the top 15 transactions in the Gulf Coast's three submarkets — Tampa Bay, Sarasota/Manatee and the three Southwest Florida counties of Charlotte, Lee and Collier — over the past year ranked by price, six involved sprawling multifamily projects in suburban locations.

In Sarasota and Manatee counties and Southwest Florida, apartment sales accounted for the majority of each region's commercial real estate superlatives.
Combined, investors such as TGM Associates of New York, Passco Cos. LLC of Irvine, Calif., and Starwood Capital Group of Greenwich, Conn., among others, plowed more than $300 million into acquiring the ParkCrest Landing, Tuscany, Gulfstream Isles and other complexes.

That equates to one quarter of the total $1.22 billion spent on the top 15 sales of 2016 along the Gulf Coast.

“We think of our Florida properties as long-term assets,” says John Gochberg, TGM Associates' managing principal and COO.

“We believe they will be materially better and more valuable in five to 10 years than they are today because they are all in major job growth locations,” Gochberg adds. “And over the past several years, Florida has had incredible job and population growth.”

TGM bought a trio of high-profile apartment communities along the Gulf Coast in the past year: The Ibis Walk and Bay Isle complexes in St. Petersburg and the Tuscany Apartments in Sarasota. The trio of complexes cost $232.3 million, and contain 1,369 units collectively.

Suburban office projects also garnered considerable interest this past year, especially in the Tampa area, reversing a taste for more urban assets in 2015.

High-profile sales included the five-building Renaissance Center, in Tampa's Westshore business district; a six-building campus occupied by Citigroup's global shared services operations center, also in Westshore; and a 34-building portfolio owned by Liberty Property Trust spread throughout Hillsborough County.
Combined, the three assets fetched $398 million.

Investors say they were drawn to the Tampa area because of the region's job and population growth, and because while vacancy rates have dropped steadily since 2012 and rental rates have edged upward during that time, no new significant inventory has been added.

“From a growth perspective in Tampa right now, you can still buy properties at below replacement cost, so it's much more cost effective to buy than to build,” Workspace President and COO Roger Thomas told the Business Observer following the company's Liberty purchase, in October.

Not to be overlooked, however, were the spate of hotel sales that occurred in Tampa and Sarasota this year fueled by tourism gains, macro-economic improvement that has spurred discretionary spending and higher room rates.

A trio of major lodging properties — the Hyatt Regency Clearwater Beach Resort and Spa, the Hyatt Regency Sarasota and the Tampa Hilton — traded in
2016. At $101 million, the Tampa Hilton deal ranked sixth in major sales for the Tampa Bay area for 2016.

“We believe the market is strong and will only get stronger for the foreseeable future,” says Jebco Ventures' owner Jim Bridges, who is developing a 180-room Embassy Suites & Spa, has plans for a Hampton Inn & Suites that will begin next year and recently was part of a group that acquired the 95-room Indigo
Hotel, all in downtown Sarasota.

The same could be said of Gulf Coast commercial real estate markets overall.

Although 2016's top 15 transactions combined were down 20% from 2015's $1.54 billion, it's notable that some $425 million in 2015 was concentrated in just two extraordinary Southwest Florida sales.

Together, transactions for the Mercato office and retail complex and the LaPlaya Beach Resort & Club, both in Naples, represented two-thirds of all Southwest Florida's Top Deals in 2015.

Tampa Bay's 2016 top five deals totaled $622.1 million, a 5% gain from 2015, while in Sarasota/Manatee, dollar volume for the top five sales increased 9%, to $317.05 million.