So, it’s finally happened! We’ve reached that point in the Commercial Leasing Continuum in the Bradenton, Florida area, where market conditions are finally encouraging Tenants to think “long term” in their commercial leasing strategies. The effects of the Great Recession…compressed commercial lease rates and the resulting lack of commercial development…has pretty much been over for quite some time. Starting in about mid-2014, those conditions slowly began to fade from the commercial landscape and by mid-2015, were replaced by a somewhat general “consistency” in the commercial leasing market.
Landlords have been asking rates approaching $25 NNN for the really prime properties, i.e. those in areas intersected by I-75, more specifically the area around I-75 and University Parkway. Those areas are beginning to fill up with longer term leases, so the asking prices have increased, as well. Another market factor we’re finally seeing is the return of the mid-level investors back into the commercial real estate market in the Bradenton area. When you have the big leasing partners such as WaWa and others lining up for prime locations, the investors are sure to line up as well, despite somewhat compressed cap rates.
Now, it’s worth noting that the sales side of the equation is also applying pressure to market lease rates as well. With big property owners such as Publix and WalMart on the prowl to gain market share for their respective companies, many prime commercial locations are being quickly gobbled up before other institutional investors can even make an offer to purchase. This tends to drive up lease rates because Publix anchored centers, by nature, tend to produce more daily trips, thus more value for the tenants therein, thus producing or justifying higher lease rates. Another tacit factor is that the center owners, whether it be Publix or not, often prefer national tenants who are able to pay higher lease rates, thus making it more difficult for local or independent companies to compete.
So what is the take-away for Tenants? Well, there’s good news and perhaps, not so good news for Tenants. As stated above, lease rates have increased for the prime properties. If Tenants want to compete for those locations, they’re going to have to step up to the plate by offering longer term leases to Landlords, at a minimum of 5 – 7 years in duration in contrast to shorter terms of say 2 - 4 years. However, by nature, Landlords are always looking for great Tenants, so if your Tenant’s Agent has packaged and structured your lease deal correctly, you should still be able to get Landlords to compete for your business. Maybe you could trim the lease term down to say…six years. There are other perks that may be on the table as well, such as parking considerations, Tenant Improvement Cash and signage rights, the latter being essential to getting your business noticed on the street. Landlords sometime afford Tenant Improvement (TI) cash or credit. Many Tenants take care of the build out themselves in exchange for free rent from the Landlord sometime during the lease. Some Tenants prefer a lower lease rate instead of free rent, but your accountant may be quick to tell you that it’s still money in your pocket, no matter how you get it!
In closing, I have to mention the SR 64 East Corridor. This is the real sleeper area for future development in Manatee County! With the opening of the Fort Hamer Bridge from the Parrish area in late 2017, this area is prime for commercial development! Residents by the thousands from the area north of the river will be able to travel south for all things commercial in relatively short order! Many commercial giants are already positioning themselves to expand to this corridor in the near future. If you are contemplating a move out to East Bradenton in the future, SR 64 E is worth a look!