MANATEE -- Big indoor spaces, high ceilings, shiny finishes and room to add on. It all sounds like what every new homebuyer seeks in Manatee County.
The thing is, it's also what almost everyone in the commercial real estate market wants to buy, lease or build.
In 2014, the commercial real estate market saw its fourth-consecutive year of increased construction nationwide, with $305.7 billion in new buildings erected in the nation through November, according to the Census Bureau.
Locally, sales and leases of existing properties were more common than new commercial construction projects, with some of the biggest sellers including strip shopping malls in need of redevelopment and big chunks of existing industrial, apartment and office property.
This year promises to be different, with industry players predicting more new concrete and steel.
If that happens, it will be music to Sharon Hillstrom's ears. Hillstrom, the chief executive officer of the Bradenton Area Economic Development Corp., said modern industrial and warehouse buildings and Class A office space is running short in Manatee County. She said companies relocating to the county are generally looking for blocks of 20,000 square feet, though some want far more.
Not finding that space, a few companies looking to relocate to the county have chosen other locations.
"Actually we've missed some opportunities with companies looking for 100,000 square feet or larger in office and manufacturing," Hillstrom said. "We didn't have the space."
But just because manufacturers, retailers and office-based companies want it, won't make it so. Industry watchers say the commercial real estate market is lagging 18 months behind new residential construction, which local homebuilders kicked in to high gear in the second half of 2014. But Manatee County developers, builders and real estate professionals say new inventory is coming.
Investors and buyers played conservatively in the
two-county area last year, buying older income properties with redevelopment potential or, in the case of owner-occupiers, remodeling and expanding.
At the same time, existing properties with redevelopment potential are still selling well. Indicative of that trend was the retail sector, which saw about a half dozen shopping malls sold in the county during the year. Others mall properties underwent renovations or redevelopment. DeSoto Mall, which was the county's largest indoor mall property prior to the opening of the new Mall at University Town Center in October, is being rehabbed after its owner withdrew it from sale at auction. In the strip mall market Cortez Plaza, owner DDR Corp. went so far as to tear down a former grocery at that property to make room for the construction of a new LA Fitness.
Also making use of existing inventory were light industrial manufacturers. Older buildings sold to a number of companies, including a 136,000-square foot former Eaton Aerospace facility on Whitfield Avenue sold to French multinational Safran, and 209,000 square feet of former Wellcraft space sold to Scottsdale developer Cannabis Rx.
Lily Behrends, a commercial real estate agent with Bradenton-based Wagner Realty, said the industrial market is particularly tight when it comes to finding smaller warehouse and flex space.
"Now, there's really no vacancy," she said.
A little unmet demand in the industrial sector is not necessarily a bad thing. Lenders, who have been overwhelmed with demand for apartment construction projects, are particularly interested in seeing more diversity in 2015. Jim Kuhlman, the market president for Stonegate Bank in Manatee, Sarasota and Charlotte counties, said his bank will do little lending for apartment building construction and financing this year because it has already maxed its lending limits in that segment.
Stonegate, which does about 75 percent of its lending in the commercial market, will be looking for other projects, including assisted living facilities, warehouses and even high-end office space.
"If we had the projects, class A office space would be good," he said.
Builders are still waiting for developers to take a risk and go ahead with building projects. Andy Stultz, vice president of Sarasota commercial builder Halfacre Construction, said the majority of his company's work going into 2015 is in the public sector. As the year begins, the $35 million company starts work on renovations to Manatee County's utilities building, is renovating part of the county's historic courthouse and is working on several small projects in the county's school district.
What work Halfacre is seeing in the private commercial sector includes owner-occupied building renovations and doctor's office renovations. Light industrial work, one of the company's strengths, will likely wait until even more vacancies are filled.
"Our biggest competition is the existing warehouse down the street," Stultz said. "We're not seeing the rebound on the private side yet."
At least one local developer is building new commercial property across most sectors. University Park-based Benderson Development, which is one of two partners in the 880,000-square-foot Mall at UTC, continues to construct retail and warehouse properties in Manatee and Sarasota counties. Larry Fineberg, Benderson's executive director of office, industrial and warehouse development, said his company is focusing on bringing new light industrial space that meets the needs of growing local companies and those relocating to the area.
Benderson is building 110,000 square feet of light industrial space at its SRQ Commerce Park in Manatee County and plans to start building up to 500,000 square feet of similar space near the intersection of Fruitville and Coburn roads in Sarasota County. All the space is designated as Class A for its amenities, and most will feature the 30-foot ceilings leasing clients seek in the market. As with its other projects, Benderson is self financing these.
Fineberg said he believes the real estate will lease quickly. The company's 678,000-square-foot Sarasota-Bradenton Commerce Center in Bradenton, which has similar characteristics, is currently 95 percent leased.
"We don't have a lot of existing real estate for them to move into right now," Fineberg said. "That's a problem we're trying to fix on Fruitville and Colburn."
Improvements in the commercial market probably won't make 2015 a breakthrough year for the office sector. While the economic development corporations in Manatee and Sarasota counties tracked a small overall drop in vacancies, gluts of space in downtown Bradenton, Venice and Northport, plus a slow increase in lease rates will likely preclude the construction of new inventory. Stultz said any new inventory build will probably be for owner-occupied use. Fineberg said his company has no plans to build office space this year, noting that many tenants seeking that space are carving it out of the company's new light-industrial real estate.
Matt M. Johnson, Herald business reporter, can be reached at 941-745-7027, or on Twitter @MattAtBradenton.