The multifamily sector was a bright spot in 2010 and that should continue in 2011, while retail is expected to see slow improvement. However, office and industrial — which are highly dependent on the still-ailing job market — will lag. Institutional investors who began making moves on Class A properties this year will likely have fewer opportunities, but distressed properties should continue to bring out what the industry calls bottom-feeders.
“There’s tight competition for core assets, such as multifamily and top hotels in top markets,” said Justin Koveschek, vice president of project management for OR&L Corp. in Winter Park. “There’s still a lot of money on the sidelines.”
Investment sales could grow at least 20 percent nationwide in 2011, while distressed real estate asset sales, which accounted for about 10 percent of all sales this year, could be up to 25 percent of total sales, Colliers International said.
But the construction market is expected to see more distress. The only bright spot will be property owners close to planned SunRail stops moving forward with long-planned surrounding development, said Mark Loeb, manager of the Urban Land Institute Central Florida chapter. “Opportunities that didn’t exist a year ago are now in play.”
Residential real estate
Orlando’s housing market is expected to have pent-up demand in the coming year, but lingering issues with high unemployment, loans and appraisals will continue to hold the market back.Although the area benefited from the federal first-time homebuyers’ tax credit through the first half of 2010, sales lagged in the second half of the year and are expected to continue on a similar path through the early part of 2011 as the overall economy is still affecting potential buyers.
“Until we start getting some job growth out here, we’re not going to sell a lot of homes,” said Beth McGee, executive director of the Home Builders Association of Metro Orlando.
The temporary stoppage in foreclosure sales in late 2010 created more of a glut in distressed properties that also needs to be worked through, said Kathy Llamas, director of business development in Florida for brokerage firm Connect Realty.com Inc. in Orlando.
On the upside, builders are busy again, building and selling new homes. Several area builders have subdivisions in the works, and companies in distress due to the mortgage crisis or the housing bubble bursting have either worked out their financial duress or shuttered operations.
But pricing is still depressed, and much of that is due to the foreclosures still plaguing the market. The Orlando area has to sell off most of those bank-owned or distressed homes, and doing so will help even out pricing in the long run, said Jay Berlinsky, a principal at development consulting firm SC Advisors LLC.
Retail
The retail market seems to have worked out its most severe distress and is expecting a modest upswing in 2011.Large national chain store closures are ending, and most that had failed or were struggling are gone, sources said. In addition, leasing appears to have hit the bottom and is starting to turn the corner, as landlords are less likely to offer aggressive rent relief and other such incentives that had dominated the market through the recession.
“Fundamentals are starting to improve,” said Brad Peterson, managing director of Holliday Fenoglio Fowler LP in Baldwin Park. “It’s not going to be lightning fast or dramatic, but the pain has started to stabilize.”
The state Department of Revenue reported $93.3 billion in gross sales for the Orlando area between January and November of this year, which was 15 percent higher than the $81.1 billion posted in the same period a year prior.
The auto industry is one of the most surprising areas slated to recover, since it suffered severely through the recession with slower sales and dealership closures. Florida saw a 13 percent uptick in 2010 sales versus the same period a year prior.
The industry is anticipating 1 million more vehicle sales next year, totaling about 12.5 million sales by year-end, said Rick Brisson, Orlando regional manager of sales and service for Ford Motor Co. “And the industry is twice as strong locally as it is nationally,” he added.
Meanwhile, discount retailers are expected to continue to lead the pack in expansions, as Dollar General expects to open 625 new stores nationwide in fiscal 2011 as well as remodel 550 locations, and Family Dollar Stores plans to open 300 new locations in its 2011 fiscal year, a 50 percent increase over 2010.
Restaurants
Central Florida’s restaurant industry expects to see some good and bad news this year.The good news is consumer spending improved and more people are dining out again, as same-restaurant sales increases are showing up for most concepts — including four of the five Darden Restaurants Inc. (NYSE: DRI) brands.
However, there has been so much discounting in the restaurant industry that it will be difficult to raise prices back to normal, said Rick Van Warner, principal of Winter Park-based restaurant consulting firm The Parquet Group LLC.
“It’s like a drug — consumers got addicted to discounts,” Van Warner said. “That’s going to be very tough to overcome, especially with casual-dining chains.”
In addition, the industry is projecting higher food costs, which will offset some of the relief restaurant operators have seen in the past couple of years.
But some unusual trends this year are expected to expand. For example, gourmet food trucks are poised to move into more U.S. cities, while traditional restaurants could seek food trucks as a way to expand catering operations and add revenue streams, predicts Chicago-based market research firm Technomic Inc.
Premium content from Orlando Business Journal - by Anjali Fluker , Staff Writer
Date: Friday, December 31, 2010, 6:00am EST - Last Modified: Thursday, December 30, 2010, 10:37am EST
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