Entering into the New Year, Florida real estate analysts and professionals involved in land development and real estate investment are looking at the South Florida commercial real estate market and wondering how it will fare in the upcoming twelve months. All things considered, the future of South Florida Commercial Real Estate looks good as the following factors come into play:
Lack of New Construction Means Tenants Have Leverage in Negotiations
Last week, the Sun Sentinel reported on the state of the South Florida commercial real estate market, concluding that Miami area commercial properties will find a continuing recovery in 2013 but without expectations of any sudden upswings. In an article written by Paul Owers entitled"Commercial real estate market 'bouncing along bottom'," the gist of those experts queried for their opinions seems to be that it's a tenants market right now in South Florida, due in no small part to the lack of new construction of office buildings, warehouses, retail spaces, and the like over the past few years. For businesses looking to lease office or retail or warehouse space, there are deals to be made right now in South Florida.
CMBS Loans Delinquency Rates Falling for South Florida
Meanwhile, for the first time in several years, the delinquency for commercial mortgage-backed securities ("CMBS") loans secured by South Florida commercial properties is under $1 billion dollars ($957 million) and December 2012 saw the delinquency rate at a low 8.2% (compared to the prior year's 9.4%).
According to a South Florida Business Journal report, this translates into South Florida commercial mortgage-backed securities loan delinquencies going in the right direction (down) while the United States as a whole has seen the CMBS delinquency rate stay about the same (9.7% in December 2012, 9.6% in December 2011).
Experts report that CMBS loans in the Miami area are performing well these days because the South Florida real estate market is finding favor with investors and things are happening here.
Major New Commercial Projects Planned for Miami and South Florida
The expansion and re-do of the Miami Beach Convention Center should be finalized and moving forward in 2013; the Convention Center's master plan should be ready to roll by May 2013 according to city planners. This will involve not only the convention center meeting spaces but a convention hotel site as well as the expected commercial properties to compliment these new facilities. It's a major overhaul of the Center which some estimate will take up to $1 billion to complete.
While this isn't the only new, big commercial project being planned for Miami, it is a big deal in considering the future of Florida's real estate market given this overhaul is happening now and the last time the Convention Center had any work done was in the late 1980s.
Perhaps the biggest news in South Florida's future is the international investment and trade influx to our area. As discussed in prior posts, Port Miami is currently being expanded to accommodate the huge sea vessels that will soon be able to move through the renovated Panama Canal. This will not only increase Miami's stature as an international trade center,but it will bring with it the need for extended commercial real estate planning and projects to meet the needs of this increased sea trade traffic.
Miami - Dade County Is First US Foreign Trade Zone Operating Under Alternative Process
Additionally, the Commerce Department of Commerce not only allows Miami-Dade County to operate as a Foreign Trade Zone (Miami is FTZ No. 281) but Miami-Dade is the first FTZ in the country that has been approved to operate under the federal government's new "Alternative Site Framework" which is designed to "streamline" things.
This is very important to the future of South Florida's commercial real estate industry because a foreign trade zone is created in order to help foreign commerce by allowing the FTZ to be exempt from the usual requirements of U.S Customs. How? FTZs are not considered U.S. Customs territory insofar as the payment of duty, and any company that does business in an FTZ can reduce or even erase the usual custom duty payment.
Here is the map of the Miami Dade FTZ, which extends north from SW 8th to the Broward County Line: