Build it as they come: a growing population ensures the future of Broward County's construction and real estate industry, even as supplies of land continue to shrink - Real Estate

South Florida CEO, June, 2003 by Rochelle Broder-Singer

The war on terrorism demands enhanced security at Port Everglades, and Centex Rooney has stepped in to help provide it. The Plantation-based construction company (a subsidiary of Dallas-based Centex Corp.) is busy building exit and entrance gates, camera surveillance facilities and walls around the port's fuel tanks. Public-sector work is helping the company grow, in spite of a slowdown in new private-sector construction brought on by economic uncertainties.

"The public sector has kept our volume up," says Gary Glenewinkel, Centex Rooney's COO. "The money is there, and it doesn't move as quickly up and down with the affects on the economy as the private work does."

What is driving much of the public sector work is basic population growth, both permanent and transitory. "There's a lot of airport work, a lot of school work," notes Tom Miller, CEO of Fort Lauderdale-based commercial construction firm Miller Construction Company, which employs 110. "The people in the public sector all seem to be doing pretty well."

In the private sector, population growth is also driving what construction there is. One area of Miller's business that's growing rapidly is the health care sector, including projects at Holy Cross Hospital, University Hospital and Plantation General. "The strongest area this year seems to be health care," Miller says. "As South Florida grows, health care is going to grow with it."

Outside of hospitals and a spurt of condo building, however, there are few large-scale private-sector developments. "This year is probably not going to be as much volume as we have done in the last couple of years -- but the last two have been the two best years for the company," Miller says. "We're probably doing more small projects this year."

Scott Skidelsky, vice president of Dallas-based Turner Construction, agrees that certain sectors have been slowing down. "Residential, I think, is peaking. Hotel work, obviously, hasn't been around since 9/11," he says. Diversification is key, he notes. Turner does everything from health care work (with projects in progress for the North Broward Hospital District), to office construction, to high-rise condominiums (the Las Olas Grand in downtown Fort Lauderdale). It saw a 17 percent rise in revenue from their South Florida office in 2002, and expects a similar increase this year. The company currently has 250 employees working in South Florida, about half on Broward projects, and expects to hire more in the coming year.

One of Broward's largest employers in the industry, the 450-strong Stiles Corp., has divisions for realty, property management, construction, development, architecture, landscaping and financing. "The volume of work is increasing significantly, because we've diversified to the point where, in addition to office and industrial, we've done a lot of retail development, and we've also gotten into residential construction," says Tom Kates, president of the Fort Lauderdale-based company's Stiles Realty Company division. Stiles is set to break ground on downtown condominium building 350 Las Olas Place early this summer, and is busy constructing several neighborhood shopping centers and area automobile dealerships.

So what's missing? "What you do not see are speculative office buildings being built," says Skidelsky. Turner's main office work these days is building out or renovating office interiors for current tenants. With new leasing activity in Q1 of 2003 at just 644,000 square feet, down 100,000 square feet from Q1 2002, vacancies in Broward hit 20 percent. "The most activity is in the smaller office market, between 1,000 and 5,000 square feet," says Scott Brenner, president of 25-employee commercial real estate firm Brenner Real Estate Group. "In the warehousing, it's definitely smaller bays, from 1,500 to 5,000 square feet." And, says Brenner, "The tenants out there have sharper pencils than ever. We've seen some rent depreciation. They're also making more demands."

Still, leasing at Stiles' recently opened Bank of America Plaza at Las Olas City Centre is showing positive indicators. "The market in office space started to slow down in 2001 and 2002, and has really just started to perk up since the first of the year," says Kates. "There has been a noticeable difference." He expects vacancies to decrease throughout South Florida in the next year. "People have been waiting to see things turn around, and I think then you're going to see the floodgates open and see them doing what they haven't been doing -- which is expand."

Centex's Glenewinkel agrees. "Our backlog is increased slightly, and we're starting to see a lot more private-sector work get into the discussion stages," he says. "The retail market has shown signs of picking up a little bit, and maybe a little bit in the hospitality sector." He expects to keep the company's 480 Florida employees busy, and hire more in the next six to 24 months. He projects more than $200 million in South Florida construction for his firm in the fiscal year that ends March 31, 2004, up from around $170 million in the last fiscal year.