Commercial real estate roundtable: SouthFloridaCEO magazine assembled leading real estate industry executives for a frank discussion about the state of the commercial real estate market in South Florida

South Florida CEO, Sept, 2004

KINGSLEY: All the retail will follow the residential. Ten years ago, Brickell was a roll-up-at-night part of town. In five or six years you're going to see a mirror image of Brickell but downtown, and in some aspects it might even be more exciting.

SFCEO: Some of you are familiar with markets outside of South Florida. Any lessons learned from outside the state?

BITTEL: One of our other companies has a huge investment in Atlanta, and many people use the metrorail, MARTA, there. I continue to question public expenditures towards fixed parking structures when every major world-class city in the world has very sophisticated capacity to move people around town, and we're not talking about that.

KLEIN: Can I throw something out to the group? What's the impact of office condos? I know some of you are marketing office condo projects.

BITTEL: It's an interesting phenomenon. We clearly have seen it happen here before, and it happens every time interest rates fall. Rates go down and someone says, "I can own cheaper than I can rent." The challenge historically is that the big users of office space are service companies, and service companies tend to either be growing or shrinking. So nationally, office condos have absolutely worked for doctor's offices, because they don't grow and shrink--they just go from working three days a week to four days a week. And now you see law firms and accounting firms talking about it. Part of the issue is they're taking more space than they need so they're going to sublet some to accommodate their [future] growth. I think it's purely an interest rate-driven phenomenon. If I were an office condo developer I'd want to lock in my sales really quick.

[ILLUSTRATION OMITTED]

BLANCA: You guys are discounting the South American and European component here. I'll tell you, they don't care if interest rates are high--they're paying cash. In some cases they're not financing these deals or they're financing a small portion of it. Even if they find leasing is cheaper, they still have this mentality of "I'm going to own my brick and mortar." A lot of the South Americans and Mexicans coming here are investing in businesses and moving their businesses here, and they're entrepreneurial. That's what makes Miami-Dade County pretty special, and diversified from an economic standpoint: we're a very entrepreneurial city.

KINGSLEY: You have to educate them that, no, we lease space here, we don't sell the space.

GALE: There are two office condo projects in Pembroke Pines that have been very successful, and I think in those specialty areas like Aventura and Coral Gables, it could make sense, and on Brickell.

[ILLUSTRATION OMITTED]

BLANCA: In the Airport West market, the warehouse-condo has been going on for years, very successfully, so this is not new. It's been happening.

KINGSLEY: Well, look at Coral Gables. If you want to go get a 5,000- or 10,000-foot building it's $300 or $350 a foot.

BITTEL: Which is what the condos are selling at, too.

KINGSLEY: But if you take a discount off that in a conversion in Coral Gables, you do the math, and it works, and you make a lot of money doing it.