Central Florida 2010

Difficult Central Florida market conditions will continue in 2010, but there should be less bad news ahead, according to Bill Moss, senior managing director of the Florida region for CB Richard Ellis.

ORLANDO - Difficult Central Florida market conditions will continue in 2010, but there should be less bad news ahead, according to Bill Moss, senior managing director of the Florida region for CB Richard Ellis.

Florida Real Estate Journal recently spoke to Moss about what we might see this year in the Orlando area and how CBRE plans to capitalize on it.

FREJ: I’m interested in your perspective on the current commercial real estate downturn. Have you seen anything like this before?

Moss: “Well, the commercial real estate business - and many others - are certainly cyclical in nature. The idea of us having a very positive time in the middle part of this decade followed by a downturn is not a surprise. The severity of this downturn has caught most people by surprise. Comparatively speaking, this would be similar - and maybe in some ways worse - than the early 1990s. It is certainly not unprecedented.

“The difference between now and what played out almost 20 years ago in the late 1980s and early ‘90s is that we were much more involved in an overbuilding of commercial real estate. That led to significant increases in vacancy rates and a big overhang on the supply side. Now - if you leave out the condominium business - we have not seen an overbuilding of commercial space. What we have gotten into is an over-leveraged situation on existing projects.

“Now we have seen a significant decrease in leasing demand, which is exacerbated by the over-leveraged situation. It’s been a very difficult last 24 months. Better days are out there, but we’ll need to see improvement on the employment front.”

What are some of the things CB Richard Ellis has done in the Orlando area to weather this storm?

“We, like everyone else who’s been under duress, have been trying to create a more efficient operational model. Which, to some degree, has involved reducing expenses where we could without sacrificing client service. I think we’ve been successful at that.

“That’s certainly been part of the puzzle, along with trying to make sure we keep our eye on the ball for opportunities that are out there. A lot of clients need good advisors now due to the uncertainty that’s going on. Hopefully we’re still providing that advice and counsel on the best strategies for them to employ in a difficult marketplace.”

What do you see for the Orlando area in terms of a general economic recovery in 2010?

“I don’t think we’re going to see a spike in economic activity. I would look at the job numbers as being critical to the creation of a sustainable recovery. I don’t think there’s been any significant improvement in the job data. Until we see a better job market and positive job growth, we’ll continue to be in difficult times. There’s more bad news behind us than in front of us, but I think we’ll still have some difficult market conditions with which to contend in 2010.”

What employment sectors might lead an Orlando-area recovery?

“The big losers have been in the construction area and probably the financial services area. If you look at the macro statistics, I don’t know that either of those will pull us out.

“This whole new medical city taking shape south of the airport is going to create, in time, a very new and needed employment sector. That’s probably two to five years away, but it will be a good play.

“Another sector has been the private colleges and universities. Many of them are expanding and seeing increased enrollment as people go back to school to better hone their skills for when the recovery comes. That world is probably unique in that it’s been able to almost prosper in this difficult time.”

How do you expect to approach your various service lines in the Orlando area in 2010?

“In general, we’ll continue our push into our outsourcing services - what we call asset services. Management of investor-owned office, industrial and shopping center properties. As a sister to that, we’ll be increasing our push into the corporate services area - facilities management, lease administration, transaction management.

“In more of the transactional environment, we’ll continue to monitor the trends in the marketplace so we can appropriately advise our clients in making the best decisions.

“I think we’ll also expect to see a strong demand for our valuation and appraisal business, which is one of the largest in the state, as lenders and various partnerships try to assess the value of their properties.

“Regarding tenant representation, for those tenants who have a clear direction, we’ll help them take advantage of the market and secure a long-term occupancy strategy. If you know your plan for the next six to 10 years, you can secure an occupancy cost today that would be better than you could find a couple of years ago.

“This is a tough market, but it’s cyclical. The good times are followed by the tough times, and those will be followed by a recovery and a much more positive environment for the many stakeholders in our business: investors, tenants and practitioners. Neither the optimism of 2006 nor the pessimism of 2009 is really validated by history and what I would expect to see going forward.”