Take the Charles Schwab Company, for instance. In 1993, the discount brokerage company chose suburban Orlando as the site of a regional call center and leased 80,000 square feet in Maitland Center, where vacancy rates were starting to drop after reaching a high of 40% in 1989. Since then, Schwab has expanded into a second building, with 130,000 square feet of office space, and added 1,000 new jobs.
"Orlando was chosen because of its southeastern location, quality of life, good employment base - and availability of space," says Bill Moss, executive vice president and Florida regional manager, CB Commercial, Orlando, which represented Allstate Insurance Co., owner of part of the business park, in the transactions. Now, as a result of Schwab's growth and other expansions, the office vacancy rate in Maitland is down to 5%.
Indeed, Florida's office and industrial vacancy rates have fallen back into single digits in many markets because there hasn't been a significant surge in commercial building since the late 1980s, when so much was thrown up that it resulted in a glut. Consequently, the state may be losing one of its most powerful lures to attract businesses here: the ready availability of cheap office space in move-in condition.
"One of the real pluses of high vacancy rates from an economic development standpoint is the multitude of options for relocating companies at rates that are attractive," says Moss. "As markets tighten, you have the double whammy of lower vacancy and higher rental rates."
Lack of space
While real estate is only one of many factors that influence where a company will relocate - labor force, lifestyle, cost of living, tax and financial incentives, and the ability to reach local or international markets are also important - the lack of readily available space may hurt Florida's ability to compete with other states in attracting new companies. In fact, CB Commercial is projecting a slowdown in the rate of commercial space absorption in 1997 simply because Florida has less vacant space available to lease, according to Moss. That suggests fewer relocations and fewer expansions this year.
Tighter office and industrial markets have caused developers and leasing agents to come up with creative alternatives. For example, a former Racal-Milgo manufacturing facility in Miami is now an overflow office for Ryder System Inc. Former grocery stores and discount centers have been turned into telemarketing operations. Now even this type of space is hard to find, according to Rudy Prio Touzet, managing director, Cushman & Wakefield of Florida's Miami office.
Communities with ready space are in the catbird seat. For example, one of the few remaining sites with large amounts of existing space is Blue Lake Corporate Center in Boca Raton, the former site of IBM's personal computer manufacturing facility. Blue Lake Ltd., a locally based limited partnership, this spring purchased the 565-acre site with approximately 2 million square feet of office and research and development space. Leasing rates are 25% to 50% below comparable new buildings. So while Boca Raton was staggered by the exodus of IBM, the space it left behind could give the city a significant advantage in attracting new companies.
Economic impact
In the 1990s, major corporate relocations, such as Merrill Lynch to Jacksonville, USF&G to Tampa and W.R. Grace & Company to Boca Raton, helped pull the state's commercial real estate markets out of recession. Although corporate relocations generally create larger headlines in local newspapers, Florida real estate experts point out that ongoing expansions and retentions of existing companies vastly outnumber relocating companies and consequently have a much bigger impact on local real estate markets. Typically, a small to mid-size company grows, hires more employees, then needs additional office, manufacturing or warehouse space in a nearby building.
But corporate relocations play a key role as barometer of a state's economic health and its attractiveness to other companies. "Relocations provide a broad spectrum of benefits, from higher tax revenues to additional employment to spinoffs," says Prio Touzet. "Corporate headquarters are also important because of the prestige and significance of having the top executives in a marketplace. They tend to be more involved in the local community and can participate to a greater degree than regional or branch office executives."
A major corporate relocation typically stimulates demand for multifamily and single-family homes. Retail shopping centers and restaurants, doctors' offices and other service-oriented businesses are likely to spring up around the new business site or nearby residential neighborhoods - not to mention new schools, churches and greater demand for municipal services.
Florida has enjoyed a particularly positive impact from corporate relocations. In fact, the state's major metropolitan areas today attract different types of companies largely because of relocation decisions made by the "pioneers" of the 1950s and '60s.
For example, Boca Raton's reputation as a center for high-tech industry dates back to 1967 when IBM decided to create the personal computer there. Esso and Dow Chemical opened their Latin American regional offices in Coral Gables in the 1960s, laying the foundation for a multinational business community now numbering more than 140 companies.
"When it comes to corporate relocations, certain markets have become known for trends or specific types of users and industries," says Larry D. Richey, managing director, Cushman & Wakefield's Tampa office. "Since the early '80s, Tampa and Jacksonville have been considered very conducive to telemarketing, customer service facilities and back office support - mainly because of the perception of the local labor force. Now, Orlando is also competing very effectively for those types of uses as well."
Critical mass
When a market successfully attracts one or more major users, it can create a "critical mass" in a certain industry, adds Prio Touzet. The youthful ambiance of South Beach, for example, has attracted entertainment companies like Sony, MTV Latin America and Warner Brothers, which have opened new facilities on Miami Beach.
After Nortel moved its Latin American regional headquarters from Miami Lakes to a 180,000-square-foot facility at Sawgrass International Corporate Park in Sunrise, Honeywell, Outboard Marine and Swiss Industrial Group moved their Latin American divisions up to the park, too, says Thomas R. Kates, president, Stiles Realty Company, a division of the Stiles Corporation, a major Fort Lauderdale-based developer. "They felt that if Nortel moved up there, it may have been the right time for their own moves. It doesn't have to be a 1,000-mile relocation to affect the local market. In this case it was only 20 miles."
As Florida moves toward the year 2000, our firm, Goodkin Research Corp., is forecasting the strongest demand for new commercial space since the late 1980s. This could lead to a new round of commercial construction, which could, in turn, improve the state's ability to bring in new companies - provided Florida developers can successfully match supply and demand. "New construction can have a major positive impact on real estate development and values," says Prio Touzet. "I just hope the state's economy keeps percolating along."
Real Estate Briefs
Snowbirds Buying Cheaper Nests
Winter season second-home and retirement sales around Florida were as mixed as the weather up north. Sales traffic bounced around from week to week, according to major developers. Preliminary reports indicate that sales of lower-priced homes (below $150,000) will be up significantly and luxury homes will be down moderately from last year. More transplants are looking at resales as the number of new luxury community offerings has been modest during the past five years, while there has been a substantial number of lower-priced communities introduced to the market with a great deal of "downbuying" - people buying less than they can comfortably afford.
Meet Me In St. Lucie
The St. Lucie West area on the Treasure Coast has become a hotbed of attractively priced retirement, pre-retirement/second-home and primary housing activity. Single-family deed recordings in St. Lucie County jumped from 2,090 in 1995 to 3,075 in 1996, and the western area enjoyed the lion's share of the increase. One new community, Lake Charles, reported 68 home sales from Jan. 1 to June 15. The PGA, based at The Reserve, should continue to drive demand with its three golf courses, new schools and recreational and shopping facilities, along with some of the state's best housing values.
Head For The Beach
L'Hermitage, a luxury beachfront high-rise complex in Fort Lauderdale, sold 340 units in 15 months at an average price of $472,000, making it the fastest-selling luxury condominium in the state. During the past year, Grand Bay Residences, a super-luxury condominium community on Key Biscayne, sold more $1 million-plus units than any other project in the state, primarily to foreign purchasers. Ocean Club, also on Key Biscayne, sold at twice the pace of Grand Bay, but with product lines that were substantially below its neighbor's. The successes of L'Hermitage, Grand Bay Residences and Ocean Club underscore the pent-up demand that existed in both markets after a 15-year hiatus of oceanfront development activity.
It's Hot, Hot, Hot
Urban retail entertainment continues to heat up as many new projects have been announced in south Florida. With retail developers' propensity to build too much, too fast, there will undoubtedly be some big losers. That's assuming all the announced projects get financed. But with lenders eager to chase deals, that's likely to happen.
Cut Off At The Pass
The great success of Sawgrass Mills in western Broward County has been boosted by domestic and foreign visitors coming by the busload from Dade County to unload their money. Now, a new big-box, retail-entertainment outlet called the Dolphin Mall at the Beacon Tradeport Center is being planned to intercept this traffic and keep at least some of the money in Miami. The center will be a million-plus-square-foot complex with theaters, rides, games and big-name retail tenants.
One Thumb Up
Dade County is attracting considerable retail interests with the redevelopment of the former Bakery Center into the Shops at Sunset in South Miami and a proposed Rouse center with a Neiman-Marcus and Florida's first Nordstrom's in Coral Gables. While the south Miami project is well underway, there is considerable opposition to the Rouse center because of fears it would severely impact the city's current downtown retail mix. Entertainment is an important component of both projects.
Major Expansions & Relocations
September 1996 through June 1997
Company County Projected
Employment
Beneficial Corporation Hillsborough 1,500
Capital One Financial Corp. Hillsborough 1,200
Wellspring Resources LLC Duval 1,000
Citibank Worldwide Securities Hillsborough 1,000
Prudential Duval 1,000
Pan American World Airways Dade 600
Software Support Seminole 500
Georgia Pacific Duval 400
Sony Corp. Lee 350
Willamette Industries Hillsborough 300
Charles Schwab & Co. Orange 300
Banco Popular Orange 300
Source: Enterprise Florida Inc.