Palm Beach County, Downtown Fort Lauderdale Burnish Reputations As Greener Pastures For Businesses

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A little chest thumping never hurt anybody — especially when business is sizzling during inflationary times.

The economic development agency for Palm Beach County made a splash in Times Square in New York City with some targeted advertising. (PHOTO CREDIT: Business Development Board of Palm Beach CountY)

In a case of “strike while the iron is hot,” or perhaps before it turns cold, the Business Development Board of Palm Beach County just took its decade-old “Wall Street South” campaign to midtown Manhattan with the purchase of one-day ads on giant electronic billboards in Times Square and nearby neighborhoods.

“Wall Street South. Head for Palm Beach, Florida,” said one. “Wall Street South. Your Future Is Bright in Palm Beach, FL.” said another.

Fort Lauderdale’s Downtown Development Authority, meanwhile, is circulating a report declaring that its central business district and Flagler Village are generating as much economic activity as Port Everglades and Fort Lauderdale-Hollywood International Airport. For this, think about amounts for each entity that are north of $30 billion a year.

The heads of both agencies are advocates of maintaining hard-earned momentum in a highly competitive economic development game made more difficult by stubborn rising costs for businesses and households.

Kelly Smallridge, president and CEO of the development board, said in an interview that her nonprofit agency caught a deal that was hard to resist: Color ads in three locations for $20,000 — not only for this past Wednesday, but for the forthcoming New Year’s Eve celebration as well.

“This is probably the boldest strategy from an advertising perspective  we’ve engaged in anywhere in Manhattan,” Smallridge said. “I can’t image the hype that’s going to take place when it airs on New Year’s Eve.”

Development board representatives have been visiting New York for years touting the county’s “Wall Street South” campaign, which is designed to persuade executives from financial firms to locate or relocate offices, including headquarters, in Palm Beach County.

Smallridge said her agency was approached by a billboard ad firm and offered a discount rate designed for nonprofit agencies.

“We got very lucky and took advantage of it,” Smallridge said. “We could no way afford the real cost. They approached us to see if we wanted to buy it. They never would have had us on their radar had not been such a big story already. Every time you go to Manhattan, people say, ‘it’s not if we will move, but when.’”

She said the ads appeared at the Times Square Tower, the 43rd Rotunda, and on the “I Love NY” Board at 1530 Broadway,

In a statement, the Business Development Board says that since 2019, it has helped 100 firms open offices in Palm Beach County, which is home to 57 billionaires and 70,000 millionaires. Over the years, the board has even connected headmasters of local schools with company executives to assure them that their children will receive top-notch educations in the county’s schools.

“The 10-year campaign has yielded great results and has certainly boosted our economy in Palm Beach County from Boca Raton to Jupiter,” Smallridge said. “Among those gains: higher salaried jobs, more philanthropic donations to local nonprofits, and companies “run by very smart people. They want to be ingrained in the community,” she said of the newcomers. “None of them has received any financial incentives to move here. We are definitely becoming a finance hub in the Southeastern United States. It’s going to be a continuous effort and we’re not going away any time soon.”

A Surge In Fort Lauderdale

Jenni Morejon, the DDA president and CEO, said the downtown’s growth has its “building blocks” in the wake of the recession triggered by the housing collapse 15 years ago.

“But that growth has been gradual with a spike triggered by COVID-19 and a growing desire of out-of-state residents to relocate to places such as Fort Lauderdale,” said Morejon.

A report commissioned by the DDA and authored by Walter Duke + Partners, a commercial real estate appraisal firm,  concludes that the downtown area, which is defined as a 2.2-square-mile area that runs north of 17th Street to the central business district, Flagler Village and Sunrise Boulevard, “has an annual economic impact of $35.7 billion, a $6 billion increase from 2019.”

“Clearly, the silver lining to COVID was the 250 residents moving in a month into the downtown core,” Morejon said. “The vibrancy of downtown stayed and people were coming into the office. Businesses saw that and continued to locate here.”

The impact figure rivals Port Everglades and Fort Lauderdale-Hollywood International Airport, the authority says. They combine for more than $105 billion in economic activity such as jobs, generation of tax revenue and business transactions.

“There are 40 new developments “somewhere in the review pipeline, with some approved by a city review committee,” said Morejon. “I think the sustainable growth in downtown Fort Lauderdale is certainly something unique. Not a lot of cities get that. We’ve grown in population about 35% since 2020, a little over 60% since 2018 and almost a complete doubling of population since 2010.”

The downtown area is now roughly 26,000, according to the report.

The DDA, though, has no plans to broadcast highlights of its uplifting report on Times Square billboards. In the past, Visit Lauderdale, the tourism promotion agency for Broward County, has advertised its latest campaigns there.

“I emailed it to all of my peers in public and private leadership roles,” Morejon said. “The message to the private sector is to continue to show how economically successful downtown is and how it’s great place to relocate to. From a political standpoint it can be a real center that can benefit the entire county and region.”

 

Source: SunSentinel

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CRE Lending Could Get Even Tighter If Fitch Downgrades Banks

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The U.S. commercial real estate industry’s ability to get credit and, therefore, fortunes have strong ties to the 4,648 insured banks (according to the FDIC) in the country that provide about 38.6% of CRE loans.

Anything that negatively affects the stability and credit ratings of the banks is an issue for the CRE industry. Despite multiple federal officials and regulators repeatedly saying that the entire banking system is sound, Moody’s recently cut ratings on a number of smaller and regional banks and put some larger ones on notice that they might face potential actions.

Now Fitch Ratings analyst Chris Wolfe warned in a CNBC interview that the current financial state of banks couldn’t be taken for granted. It is possibly that a slight change in conditions for the industry, with an overall rating drop like the one Fitch instituted in June, could force a reconsideration and credit downgrade of some major banks, including JPMorgan and Bank of America, because an individual bank can’t have a credit rating higher than the industry as a whole.

In June, Fitch downgraded banks’ “operating industry” score from AA to AA- “because of pressure on the country’s credit rating, regulatory gaps exposed by the March regional bank failures and uncertainty around interest rates,” as CNBC wrote.

A second downgrade would leave the industry at A+. Currently, JPMorgan and Bank of America, among some other of the largest banks, have an AA- rating from Fitch.

JPMorgan said that it did not have a comment in reply to a GlobeSt.com request. Bank of America also said it wouldn’t comment, but did send a copy of Moody’s May 3, 2023, upgrade of the “long-term debt and deposit ratings, counterparty risk ratings and counterparty risk assessments of Bank of America Corporation” and its rated subsidiaries and the baseline assessment of its principal bank subsidiary, Bank of America, N.A.

However, in today’s quickly changing economic environment, the date of that upgrade is close to four months old. Downgrades would have serious implications for banks and for CRE lending. With a lower rating, banks have higher credit costs and more concerned investors and depositors. That could drive banks to polish up their balance sheets even more, which in turn could mean reductions in CRE lending and selling off of existing loans, which would drive down their value and that of existing loans, undermining valuations going forward.

 

Source: GlobeSt

Industrial Market May Be Flooded With Yellow-Owned Properties

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Looking for an industrial site with lots of truck parking? You could be in luck if real estate assets owned by the trucking company Yellow come on the market.

The company filed for Chapter 11 bankruptcy on Aug. 6, and the shutdown is expected to put hundreds of industrial properties up for sale or lease, according to CoStar Group’s August 2023 real estate data update.

“Even though most of Yellow’s properties were built before 1985, one key advantage is that they offer abundant truck parking, which is in short supply in major U.S. markets,” CoStar noted.

With truck terminals in most major U.S. cities, Yellow or its subsidiaries have “at least seven facilities” in each of New York, Chicago, and Los Angeles.

In total, CoStar tracks more than nine million SF of industrial space that is either owned or leased by Yellow or its subsidiaries in more than 240 U.S. cities. Yellow’s 2022 annual report refers to more than 300 properties across North America.

While Yellow’s bankruptcy may increase the supply of industrial space, Amazon may be ready to do the opposite. Each month from May through July, Amazon put 600,000 SF of warehouse space up for lease, CoStar noted. However, CoStar believes Amazon’s strong second quarter earnings report suggests that strategy could change.

“The company may be returning to a more offensive strategy when it comes to growing its distribution space,” CoStar commented. It cited the second quarter’s 9% boost to Amazon’s net sales from online stores and third-party seller services compared to 2Q 2022, as well as Amazon’s plans to double the number of same-day delivery facilities it operates.

 

Source: GlobeSt

The Pursuit Of Unclogging The U.S. Supply Chain Has Helped Industrial Investment Outperform The Rest Of CRE

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If there’s one thing the pandemic shed a spotlight on, it is how the global supply chain was not ready for an influx of consumerism.

Ships were backed up at some of the world’s largest ports, meaning that hardware, car parts and furniture were absent from retailers’ usual inventory.

Richard Thompson, international supply chain director at JLL,  summed it up earlier this year when he said, “The pandemic exposed how fragile our global supply chain was when reliant on one region. A more regionalized model allows companies to be nimbler when problems arise.”

Industrial real estate investors have benefitted from the pivot to a regional supply chain focus. The asset class has outperformed almost all other commercial sectors. During the past two years, JLL found that industrial investment activity picked up across the entire spectrum as automotive companies continued diversifying their footprint. And as supply chain logistics move to nearshoring and reshoring, investors are snatching up regional industrial space opportunities, especially near busy ports.

For example, Miami-based real estate and investment firm Black Salmon, in partnership with InLight Real Estate Partners, this week announced the $103 million disposition of Hicks Transload Facility, a Class A truck terminal and trans-loading warehouse in the Port of Savannah, the country’s third busiest port, as well as the disposition of Rex Distribution Center in Atlanta, Georgia.

“There was a tremendous amount of volume in Savannah and the state has invested billions into the port, so we found there was a lot of opportunity for us and it was just a matter of finding the right property,” Black Salmon Managing Director Stephen Evans told Benzinga. “The site in Savannah was perfect for a truck terminal. This wasn’t about warehousing. The trucks come in on one side, empty their containers and then transfer the materials to the next destination.”

According to a June report from Motley Fool, industrial commercial real estate has grown 10.3% in the past 12 months, led by demand for logistics space and limited available real estate. The vacancy rate for industrial is also the lowest in commercial real estate (CRE) at 4.3%. That performance, which is outshining the multifamily and office sectors, is fueling the present and future investment strategies of companies like Black Salmon and InLight.

“Our firm focuses primarily on industrial real estate, although it’s a type of CRE which has a different set of fundamentals that we’ve been working with since the beginning of the company,” InLight Principal Matt DiLeo said.

DiLeo also noted that industrial investors for specific property uses aren’t necessarily looking for new, high-end properties.

“We are building a value add and bridging the gap with the older facilities who need a tenant that doesn’t necessarily need all the bells and whistles,” DiLeo said.

As for the future of industrial investment, Evans is bullish and says he has already raised funding for the next year of targets.

“If I were to pick one single product type today to invest in, it would be industrial,” Evans said. “E-commerce has been the huge disruption in the industrial supply chain, and capitalizing on that disruption and how it impacts the space, has allowed us to reap the benefits.”

 

Source: yahoo!finance