The Drotos Ryals Group Mid-Year Report 2015

    Drotos Ryals Group
    Dan Drotos (left) and Mike Ryals (right)

    By: The Drotos Ryals Group

    The heat of the summer is upon us in Gainesville which means we have hit the mid-way point in our year. Each year around this time, we like to take the opportunity to reflect upon the past 6 months and compare the projections from our year-end report with recent market conditions. Industry-wide activity indicates to us that the real estate market has been heating up along with the weather. Many of the trends we described in our 2014 year-end report are holding true- now the question is how long this wave of increased activity will last.

    In our 2014 year-end review we mentioned that the strength and activity in the CRE market was attributable to factors such as increased consumer confidence, a slight/slow uptick in pricing, interest rates remaining at all-time lows (although a vast majority of our deals are still cash deals), and a lack of other investment opportunities yielding a moderate to healthy return.

    This quote from our 2014 report has held true over the last 6 months:

    Location, condition and proper pricing remain the strongholds of the activity today. Seller’s that are trying to hang on to yesterday’s inflated prices are still struggling to see activity while those that have recognized and accepted today’s market values as a reality are back in business.

    Although pricing is on a slight up-tick across the board, properties in prime locations are rebounding the quickest, with prime “A” quality locations commanding top dollar.

    A few comments about specific market segments:

    Office: The office market has seen some bold changes in the past 6 months. Below you will find our thoughts from December:

    While we didn’t see a single vacant office lot transaction between 2008 and early 2013, almost all office lots listed in MLS have sold in the past 12-14 months. This is primarily due to (1) the market beginning to recover and (2) inventory of existing office buildings being either leased or sold and available inventory being reduced. What a change. Probably a good time for some new office development! We are currently working on Phase 2 of an Office Park in Jonesville that can accommodate this strong demand for office lots. Demand to purchase offices is very strong and deals are being converted at the right market price. The sweet spot for offices seems to fall into the $90-$100/SF range with that number being slightly higher in prime locations.

    This statement holds true, however we have seen an even further decrease in the office inventory for sale. Demand for offices is robust however listings are depleted. For example, our team usually holds approximately 10-12 Office listings For Sale in rotation. We are now down to 2 with one under contract and an LOI in on the second. Currently we have 8 Buyers’ Rep assignments looking for offices ranging from 3,000-10,000 SF. Because of the low inventory our team has had to manufacture non-listed deals to satisfy our Buyers’ requirements. If you are thinking of potentially selling or would like a professional opinion of value please reach out to our team, we would be happy to assist.

    On the flip side, supply of Offices for Lease is very high, which is keeping rates stagnant and/or depressed. Landlords are facing hefty competition and are being forced to reduce rent and provide concessions to secure Tenants.


    Since we have now absorbed many of the large Warehouse/Industrial/Flex properties in the market (20,000 SF+), we are seeing traditional levels of available inventory in this sector. With that being said, there are still some quality products out there for larger Tenants and Buyers. A few examples include: 1) a 100,000 SF state of the art Industrial/Office space in Phoenix Commercial Park fronting 441 in Alachua, and 2) a 50,000 SF climate controlled Warehouse on Waldo Road near the airport, home to Iron Mountain in the adjacent 50,000 SF, available for sale or lease. Small inventory (4,500 SF and below) is in high demand and can be leased or sold relatively quickly. In general, smaller properties require less marketing time for all asset classes.


    This market sector continues to improve, but at price points well below several years ago. Tenant interest also seems to be very location sensitive. Better locations are showing more positive improvement, while B and C locations are still slow to move. The newest Publix anchored retail center, located in Alachua on 441 next to Santa Fe High School, will be completed in late 2015. Pre-leasing of this center has been strong in both demand and price. It has been a long time coming, but the City of Alachua is very excited for this new addition! We do have a few 1,300 SF in-line suites left, so please contact us if you are interested.

    A real success story over the past 18 months has been the 13th Street corridor just north of campus. This is an older section of town, traditionally anchored by Lowes and Walmart. When Walmart vacated and opened up their new super center on NW 34th Street, this area was hit hard. Recently this area has rebounded to become a thriving blue collar retail area due to the new additions of Lucky’s Market, Burlington Coat Factory, Ross, Goodwill, Dollar General, Big Lots, and Rooms to Go. In addition, smaller retail centers are under construction with Tenants such as Chipotle and Mattress One committed. What was once a declining area with a lot of big box vacancies has now completely turned around which is nice to see.

    Vacant Land:

    Vacant Land interest has strengthened and our team has assisted in putting a sizeable amount of properties under contract. Multifamily and Assisted Living (ALF) developers are constantly calling looking for new opportunities, which is a trend we hadn’t seen until recently. Some of the recent land interest (Multifamily specifically) is due to synergy from the new Butler Plaza Expansion and Celebration Pointe projects.

    Investment Properties:

    Quality investment properties with solid, sustainable investment returns (and quality tenants) are definitely in high demand, but are hard to find. A great time for companies to do a “sale-lease back”! We have had several clients recently take advantage of sale-lease back opportunities.

    Tenant/Buyer Representation:

    One trend we have seen in 2015 is a strong demand for our services on the Tenant/Buyer representation side of the transaction. We believe this is due to a few key factors. Many of the Buyers we deal with are very sophisticated and come to us with a tremendous amount of knowledge about the properties from online sources like Loopnet and the property appraiser’s website. With inventory so low, Buyers are turning to us to flush out unlisted opportunities through our contacts and the brokerage community. On the Tenant rep side, we are seeing a variety of retailers reaching out for assistance in securing their next location. These Tenants are looking for prime locations that fit their business model, and are looking to us to assist with their initial entry or further growth in the market. With upcoming projects such as Butler, University Corners, and Celebration Pointe, excitement has spread through the retail community and Gainesville has become a very desirable area. We anticipate this demand to continue for the next few years as these large scale projects progress.

    2015 has been very strong locally and we anticipate that to hold true at least through the end of the year. Please call us today if we can assist you with your Commercial Real Estate needs.

    Mike Ryals
    Senior Vice President, Commercial and Land Division
    (352) 371-7111 ext. 329

    Dan Drotos, CCIM
    Vice President
    (954) 551-9846

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