Survey of Emerging
Market Conditions
Quarter 4 2007
Published December 6, 2007
Lead Researcher and Analyst
Dr. Wayne R. Archer, Director
University of Florida Bergstrom Center for Real Estate Studies
Professor of Real Estate and Wachovia Fellow - Warrington College of Business Administration
Editorial Board
Mr. Lewis Goodkin, President
Goodkin Consulting, Miami, FL
Dr. Hank Fishkind, President
Fishkind & Associates, Inc., Orlando, FL
Mr. Chuck Davis, Director
MetLife Real Estate Investments, Tampa, FL
For more information about the survey or the Bergstrom Center for Real Estate Studies, visit our website at
www.realestate.ufl.edu.
© 2007 University of Florida Bergstrom Center for Real Estate Studies
Survey of Emerging Market Conditions
October 2007
Executive Summary & Conclusions
The respondents of our survey continue to present a picture of two real estate worlds. While the
view of Florida real estate from the media is somber, at best, the picture from our survey
respondents remains much more positive. The difference is that the media focuses on homes especially existing homes - while our survey is focused on commercial and rental real estate
markets. Our respondents continue to report stable, healthy conditions in these markets.
Prominent Findings

The outlook for absorption of new single family residences is not expected to decline
further.

Prices on both new single family and condominiums are expected to remain flat or to
decline.

Condo markets are viewed as continuing in poor condition.

Despite continuing growing pessimism about Florida’s housing markets, the outlook for
real estate investment remains neutral and steady.

In contrast to home and condo financing, capital for acquisition of rental and commercial
real estate continues to be regarded as ample.

Respondents own business outlook continued a nine quarter decline, at an increasing rate.

The continued general stability of cap rates is an important positive indicator of stable
risk in commercial and rental real estate.
The survey
Our quarterly survey, conducted by the Bergstrom Center for Real Estate Studies, Warrington
College of Business Administration, University of Florida is in its ninth fielding. The total
number of participants, at 339, is the most extensive survey of Florida professional real estate
analysts and investors conducted on an ongoing basis. It includes respondents representing
thirteen urban regions of the state and up to fifteen property types.
General Investment Outlook
Our general index of real estate investment outlook, weighted 40 percent for single family and
condo development, 40 percent for apartments and commercial rental property and 20 percent for
developable land, shows notable stability and resilience in contrast to the media picture of Florida
real estate. Expectations continue to be neutral or mixed, and steady.
Single Family & Condominium Development
The outlook for absorption of new single family homes, for the fourth quarter running, is for no
change. While the balance of expectations has become slightly more pessimistic in the last
quarter, their steady pattern over the last year suggests that absorption of new single family
homes is not expected to deteriorate further. The outlook for absorption of condominiums
remains more pessimistic with the balance of opinion expecting a continued downward drift.
Expected prices are a more clearly pessimistic story. Both for new single family and for
condominiums, expectations have moved toward flat or falling prices. Despite this pessimism,
the outlook for investment in single family and condo development turned upward slightly,
suggesting that some respondents are seeing relief for residential development in the months
© 2007 University of Florida Bergstrom Center for Real Estate Studies
2
Survey of Emerging Market Conditions
October 2007
ahead. While single family development is perceived as a mixed opportunity with slight
improvement, condo development remains viewed as more negative, though also slightly
improved.
Apartments
The occupancy outlook for market rent apartments has become less optimistic, declining over the
last four quarters from strong expectations of increases to expectation of no change. Expected
occupancy of apartments targeted for condo conversion is slightly negative, with a minority of
respondents expecting declines. Expectations for market apartment rental rates have declined
over the last year, but remain unchanged from last quarter, expecting increases slightly below the
rate of inflation. Expectations for rental rates in apartments targeted for conversion have been
more volatile, but this quarter are virtually the same as for market rent apartments, at slightly
below the rate of inflation. The outlook for apartment investment remains, on balance, positive.
While it has been declining over the last year, it held steady from last quarter at slightly better
than neutral. The investment outlook for apartments targeted for condo conversion is more
pessimistic, and drifted downward notably from last quarter.
Industrial
The outlook for occupancy in industrial property has declined over the last year from strong
expectations of increases to expectation of no change. Similarly, the outlook for industrial rental
rates has drifted downward to expectations of rental rate increases trailing the rate of inflation.
Despite these weakening expectations, the outlook for investment in industrial property remains
mixed to positive, as it has been for the last year.
Office
The outlook for office occupancy has steadily declined for the last six quarters from strong
expectations of occupancy increases to mixed or neutral expectations. Expectations for Class A
occupancy are slightly more positive than for Class B space. Similarly, the outlook for rental
rates has drifted steadily downward, though expectations still are for rental rate increases very
close to the rate of inflation for Class A, and only slightly weaker for Class B. The outlook for
office investment has been volatile, improving noticeably from last quarter, but still hovering
around neutral or mixed.
Retail
The outlook for retail occupancy has uniformly drifted downward over the last three quarters.
Expectations have gone from a tendency to expect increases in occupancy to expectation of no
change for all but large centers. Expectations slightly favor declines in large center occupancy.
The outlook for rental rates in retail properties has drifted downward over the last three quarters,
but by and large is still for rental rate increases at the rate of inflation. The outlook for
investment in retail has been volatile, but rebounded slightly from last quarter to mixed or neutral.
Land Investment
The outlook for investment in land has continued a slight downward drift for all categories, but at
different levels. While the outlook is mixed or neutral for land with entitlements for hospitality,
warehouse and R and D, and for office, the outlook tends negative for land with entitlements for
residential, for urban renewal or with no entitlements.
© 2007 University of Florida Bergstrom Center for Real Estate Studies
3
Survey of Emerging Market Conditions
October 2007
Capital Availability
In possible contrast to capital for single family mortgages, our respondents see no decline in
availability of capital for acquisition of investment property. With capital for development there
is more pessimism, and respondents continue for the third quarter running to believe the
availability of capital for development has declined.
Cap Rates & Yields
After remaining virtually unchanged for almost two years, cap rates for some properties
(apartments and industrial) show an increase from last quarter. Cap rates for office and retail
remain unchanged. The steadiness of cap rates has been in sharp contrast to the expectations of
respondents, who have uniformly expected all cap rates to increase. Required yields remain
unchanged for all property types.
Own Business Outlook
The own business outlook of our respondents, which has declined in all but one quarter for nine
quarters, took a sharper than ever drop this quarter. The contrast between this outlook and all the
other results of the survey may be because many of our respondents derive a significant portion of
their income from housing transactions.
© 2007 University of Florida Bergstrom Center for Real Estate Studies
4
Survey of Emerging Market Conditions
October 2007
Table of Contents
Executive Summary & Conclusions ................................................................................................ 2
Introduction ..................................................................................................................................... 8
Methodology ............................................................................................................................... 8
Respondents................................................................................................................................. 8
Scope ........................................................................................................................................... 8
About the Bergstrom Center ........................................................................................................ 9
Section 1: Overall Investment Outlook ......................................................................................... 10
Section 2: Residential Development ............................................................................................. 11
Expected Absorption Rates ....................................................................................................... 11
Expected Price Changes ............................................................................................................ 11
Investment Outlook ................................................................................................................... 12
Section 3: Apartments ................................................................................................................... 13
Expected Occupancy ................................................................................................................. 13
Expected Rental Rates ............................................................................................................... 13
Investment Outlook ................................................................................................................... 14
Cap Rates................................................................................................................................... 15
Required Yields ......................................................................................................................... 16
Section 4: Industrial....................................................................................................................... 18
Expected Occupancy ................................................................................................................. 18
Expected Rental Rates ............................................................................................................... 18
Investment Outlook ................................................................................................................... 19
Cap Rates................................................................................................................................... 19
Yields......................................................................................................................................... 20
Section 5: Office ............................................................................................................................ 22
Expected Occupancy ................................................................................................................. 22
Expected Rental Rates ............................................................................................................... 22
Investment Outlook ................................................................................................................... 23
Cap Rates................................................................................................................................... 24
Yields......................................................................................................................................... 24
Section 6: Retail ............................................................................................................................ 26
Expected Occupancy ................................................................................................................. 26
Expected Rental Rates ............................................................................................................... 26
Investment Outlook ................................................................................................................... 27
© 2007 University of Florida Bergstrom Center for Real Estate Studies
5
Survey of Emerging Market Conditions
October 2007
Cap Rates................................................................................................................................... 28
Yields......................................................................................................................................... 29
Section 7: Outlook for Investment in Undeveloped Land ............................................................. 30
Land Without Entitlements or with Residential Entitlements ................................................... 30
Land with Office or Retail Entitlements.................................................................................... 30
Land with Hospitality Entitlements ........................................................................................... 30
Land with Entitlements for Warehouse or R & D ..................................................................... 30
Land for Urban Renewal ........................................................................................................... 31
Section 8: Business and Capital Availability Outlook .................................................................. 32
Capital Availability ................................................................................................................... 32
Outlook of Own Business.......................................................................................................... 32
Section 9: Dominant Investors ...................................................................................................... 34
Section 10: Characteristics of Survey Respondents ...................................................................... 35
Profession of Respondents ........................................................................................................ 35
Markets of Familiarity ............................................................................................................... 35
Property Types of Familiarity ................................................................................................... 36
Section 11: Details of Cap Rates, Yields & Expected Changes .................................................... 37
Section 12: Industry Leaders’ Comments ..................................................................................... 39
Capital Markets ......................................................................................................................... 39
Economic and Market Conditions ............................................................................................. 40
U.S. or Florida Tax Policies, Local Property Taxes .................................................................. 41
Local Community Infrastructure (Roads, Schools, Safety, Social Services) ............................ 41
Other Events / Concerns ............................................................................................................ 42
Section 13: Local Markets:
Treasure Coast ............................................................................................................................... 43
Broward County ............................................................................................................................ 46
Dade County .................................................................................................................................. 50
East-Central Coast (Daytona Beach Area) .................................................................................... 54
Jacksonville ................................................................................................................................... 58
Lakeland-Winter Haven ................................................................................................................ 62
North-Central (Gainesville-Ocala) ................................................................................................ 66
Northwest (Pensacola-Tallahassee) ............................................................................................... 70
Orlando Area ................................................................................................................................. 74
Palm Beach County ....................................................................................................................... 78
© 2007 University of Florida Bergstrom Center for Real Estate Studies
6
Survey of Emerging Market Conditions
October 2007
Sarasota-Bradenton ....................................................................................................................... 82
Southwest Coast ............................................................................................................................ 86
Tampa-St Petersburg ..................................................................................................................... 90
© 2007 University of Florida Bergstrom Center for Real Estate Studies
7
Survey of Emerging Market Conditions
October 2007
Introduction
The Survey of Emerging Market Conditions targets the experienced leadership of Florida’s real
estate development and investment community to gain insights and market intelligence on matters
of fundamental importance to real estate practitioners and policy-makers across Florida. A full
report, including comments from respondents and analysis of specific geographic markets, will be
available online by early September at www.realestate.ufl.edu.
Methodology
This Survey is the only Florida-centered survey of leaders and professional advisors in the real
estate industry. It analyzes prospective data to produce extensive forecasting information
pertinent to 37 of the state’s 67 counties. The survey is administered by the Bergstrom Center for
Real Estate Studies at the University of Florida.
With the highly fragmented nature of real estate, no survey can encompass all aspects of the real
estate industry. To face this challenge, our Survey employs a quarterly sounding from multiple
groups of market leaders and professional groups advising them.
Respondents
Our respondent group boasts some of the most impressive credentials in the industry. Members of
the 140-member UF Real Estate Advisory Board are some of our most prominent and valuable
resources, providing years of experience and unparalleled success in every geographic area of
Florida, and in every market type. Other participants include members of the Florida Chapter of
the CCIM (Certified Commercial Investment Member) Institute, Society of Industrial and Office
Realtors© (SIOR), Appraisal Institute Chapter X, and leadership from the International Council
of Shopping Centers (ICSC).
Scope
Like virtually all surveys of investment real estate markets, this survey gathers opinion. Thus, it
distills complex judgments, and amounts to a carefully controlled and structured conversation
with truly qualified real estate experts. The survey asks questions carefully designed to avoid
ambiguities, a major problem in collecting complex information.
The Survey of Emerging Market Conditions screens respondents at two levels of refinement to
assure truly expert opinions. First, only persons with established real estate credentials are invited
to participate. Second, each respondent is asked to respond only for those localities and property
types where he or she is an active expert.
The result is that all the data collected can be regarded as authoritative, no matter how small the
sample of responses for a property type-locality “cell.” (We maintain a minimum of at least four
respondents for any market cell to guard against response mistakes.) In short, even data from the
least actively covered markets that we report have value as an additional expert opinion. In the
more actively reported market cells, our data represent an extraordinary consensus of the experts.
Survey results are anecdotal findings about required returns and investment objectives of owners
and investors contemplating acquisitions or deciding about the timing of dispositions. Therefore
the survey is a measure of current and prospective market perceptions, including the confidence
levels exhibited by leading real estate professionals and market participants. In other words, the
Survey of Emerging Market Conditions is a report of anticipated returns, business outlook and
other forecasting views, rather than an analysis of actual or historical performance. The most
© 2007 University of Florida Bergstrom Center for Real Estate Studies
8
Survey of Emerging Market Conditions
October 2007
valuable benefit for many may be interpretation of survey results over time to better comprehend
market trends and shifts.
About the Bergstrom Center
For more than 30 years, the Bergstrom Center for Real Estate Studies at the University of Florida
has been cultivating synergy between research, academics, students, and industry leaders who
drive the real estate marketplace. The Bergstrom Center supports the UF real estate courses and
degree programs housed in the Warrington College of Business Administration’s Department of
Finance, Insurance, and Real Estate.
© 2007 University of Florida Bergstrom Center for Real Estate Studies
9
Survey of Emerging Market Conditions
October 2007
Section 1: Overall Investment Outlook
The general outlook for investing in property in Florida seems to defy the dominant tone of media
reports on real estate. Despite the increasingly pessimistic picture of Florida’s housing markets,
the outlook for investment in rental property and developable land remains mixed but stable..
Since this investment index is weighted 40 percent on single family and residential condominium
development, 40 percent on rental property of all types and 20 percent on undeveloped land, it is
at least fifty percent driven by the residential development outlook. Thus its stability is
particularly noteworthy as a contrast to media images of Florida real estate.
© 2007 University of Florida Bergstrom Center for Real Estate Studies
10
Survey of Emerging Market Conditions
October 2007
Section 2: Residential Development
Expected Absorption Rates
Following a notable improvement in the first quarter of 2007, the outlook for residential
absorption rates in single family development appears to have leveled off over two of the
last three quarters, as a return to neutral expectations appears to have occurred. The most
recent quarter’s results, though, indicate potential for rate decreases in the near future.
Not surprisingly, expectations for condo absorption rates are more pessimistic than those
for single family, and are continuing to show signs of potential rate decreases over the
next quarter.
Expected Price Changes
Expectations for new residence prices continue to weaken as results depict an even
deeper downward trend. Despite a notable move toward stability in the first quarter of
2007, expectations over the subsequent three quarters indicate that prices may be headed
toward a period of declines. Once again, the outlook for condominium prices is more
pessimistic than that for single family.
© 2007 University of Florida Bergstrom Center for Real Estate Studies
11
Survey of Emerging Market Conditions
October 2007
Investment Outlook
After declines in the second and third quarter, the outlooks for investment in both single
family and condominium development appear to be settling toward neutral expectations.
However, it is worth nothing that the outlook for condominium development continues to
be less optimistic than for single family.
© 2007 University of Florida Bergstrom Center for Real Estate Studies
12
Survey of Emerging Market Conditions
October 2007
Section 3: Apartments
Expected Occupancy
Over the last four quarters, average expectations for market rent apartments have moved
away from the positive expectations of rising occupancy observed in the fourth quarter of
2006. Survey respondents appear to be settling towards expectations of no change.
Expectations for condo conversion occupancy continue to display some volatility with
the most recent quarter’s results indicating potential for rate decreases in the future.
Expected Rental Rates
Following dramatic movements over the previous seven quarters, expectations for market
rent apartments in Florida appear to have stabilized at a level that indicates rate increases
will either lag inflation or occur at the rate of inflation. For apartments considered to be
potential condo conversions, expectations of rental rates have weakened considerably,
representing a sharp contrast from just a quarter ago.
© 2007 University of Florida Bergstrom Center for Real Estate Studies
13
Survey of Emerging Market Conditions
October 2007
Investment Outlook
Despite indications in the previous quarter of a convergence toward neutral expectations
for both classifications of apartments, this quarter’s results indicate a significant
difference in their respective outlooks. While the outlook for investment in market rent
apartments appears to hold true to last quarter’s expectations, the most recent quarter’s
outlook for condo conversions reveals increased pessimism. Thus, indications are that it
may soon be a bad time to buy in the condo conversion market.
© 2007 University of Florida Bergstrom Center for Real Estate Studies
14
Survey of Emerging Market Conditions
October 2007
Cap Rates
Cap rates are particularly significant as an indicator of fundamental condition in real
estate markets. The fact that apartment cap rates in Florida have remained relatively
stable over the past four quarters signals that investors have remained steady in their
confidence and risk perceptions of apartments during that time. In the most recent
quarter, however, there has been a notable increase in cap rates, as predicted in the
previous quarter’s expectations. Despite the relative stability in cap rates, expectations for
changes in cap rates have continued to show volatility. While the most recent quarter’s
results indicate expectations for a continuation of cap rate increases in market rent
apartments, expectations for condo conversions appear to be reverting towards neutrality.
© 2007 University of Florida Bergstrom Center for Real Estate Studies
15
Survey of Emerging Market Conditions
October 2007
Required Yields
Required yields for condo conversions have understandably run higher than those of
market rent apartments. In the most recent quarter, the divide between the two appears to
have widened, as required yields for condo conversions have increased and those for
market rent apartments have decreased. Expectations for future changes in required yields
appear to be headed in separate directions for the two classifications of apartments. This
quarter’s results indicate that expectations for condo conversion yields are expected to
revert toward neutrality, while those for market rent apartments are expected to increase.
© 2007 University of Florida Bergstrom Center for Real Estate Studies
16
Survey of Emerging Market Conditions
© 2007 University of Florida Bergstrom Center for Real Estate Studies
October 2007
17
Survey of Emerging Market Conditions
October 2007
Section 4: Industrial
Expected Occupancy
The expectation for industrial occupancy has stabilized over the past quarter, after
declining significantly in the previous two quarters. There appears to have been a
dramatic movement away from the optimism of the first quarter of 2007 and
subsequently towards more neutral expectations of no change.
Expected Rental Rates
Expectations for rental rate increases have continued to weaken in the most recent
quarter, with indications that rate increases may lag inflation. Currently, rental
expectations for warehouse and distribution properties appear to be rising at the rate of
inflation while expectations for flex space appear to be more pessimistic.
© 2007 University of Florida Bergstrom Center for Real Estate Studies
18
Survey of Emerging Market Conditions
October 2007
Investment Outlook
Following a decline in expectations during the second quarter of 2007, it appears that the
outlook for investment in industrial property has settled around neutral expectations. As a
result, it appears that respondents believe that it is currently a mixed time to buy.
Cap Rates
Over the last eight quarters, actual cap rates for industrial properties have remained
relatively stable. However, expectations over the same period have not been as
© 2007 University of Florida Bergstrom Center for Real Estate Studies
19
Survey of Emerging Market Conditions
October 2007
consistent. While the volatility of expectations in 2006 appears to have stabilized in 2007,
there appears to be some indication that respondents believe cap rates may increase in the
near future.
Yields
The overall trend in required yields for warehouse and distribution, as well as flex, R & D
and office-warehouse appears to be relatively stable over the past eight quarters, though
there has been some slight volatility from quarter to quarter. While the expectation for
© 2007 University of Florida Bergstrom Center for Real Estate Studies
20
Survey of Emerging Market Conditions
October 2007
yields changed notably in the first quarter of 2007, declining from strongly expected
increases to expected stability, results from the past two quarters indicate expectations for
potential yield increases in the future.
© 2007 University of Florida Bergstrom Center for Real Estate Studies
21
Survey of Emerging Market Conditions
October 2007
Section 5: Office
Expected Occupancy
While occupancy expectations for office properties were positive for most of 2006, there
has been a dramatic decrease throughout 2007. Optimism has weakened significantly and
it appears that expectations have continued to approach neutral territory.
Expected Rental Rates
Expectations for office rental rates have continued to decline from levels reported in late
2006. Previous expectations for rising rental rates have given way to a more neutral view,
forecasting rental rate growth either at inflation or slower than the rate of inflation.
© 2007 University of Florida Bergstrom Center for Real Estate Studies
22
Survey of Emerging Market Conditions
October 2007
Investment Outlook
The outlook for investment in offices has been scaled back consistently over the past
three quarters from the more bold predictions of early 2007. The solid positive
expectations for investment that were apparent through the first quarter of 2007 appear to
have weakened significantly though the third quarter of 2007. Current expectations
appear to have reverted back to a more neutral interpretation of this market.
© 2007 University of Florida Bergstrom Center for Real Estate Studies
23
Survey of Emerging Market Conditions
October 2007
Cap Rates
Over the past eight quarters, actual cap rates for offices have remained relatively stable.
While expectations have not been as free of volatility over this same period, the past four
quarters seem to indicate a more stable picture for Class B offices, and an expected
increase in cap rates for Class A offices.
Yields
While perceptions of required yields for offices have shown some volatility throughout
2006, there appears to have been more stability in 2007. As might be expected, Class B
© 2007 University of Florida Bergstrom Center for Real Estate Studies
24
Survey of Emerging Market Conditions
October 2007
yields have been slightly higher than those of Class A, reflecting more perceived risk in
Class B. However, the two appear to have converged in the third quarter of 2007. In the
first two quarters of 2007, expectations of changes in required yields appeared to exhibit
a decreasing trend, gravitating toward a neutral outlook for the future. However,
respondents currently indicate that yields for Class A offices may increase in the future.
© 2007 University of Florida Bergstrom Center for Real Estate Studies
25
Survey of Emerging Market Conditions
October 2007
Section 6: Retail
Expected Occupancy
For all four types of retail — large centers, neighborhood centers, strip centers and free
standing — the outlook for occupancy has been fairly volatile since early 2006. However,
it appears that over the past two quarters the outlook for each type of retail continues to
settle towards an expectation of no change in occupancy.
Expected Rental Rates
While expected rental rates for retail had been mixed throughout 2006, there appeared to
be a consistent expectation for rental rates to increase at the rate of inflation. However, in
the fourth quarter of 2007, the outlook appears to have weakened and is moving towards
rate increases that lag inflation for the majority of retail types.
© 2007 University of Florida Bergstrom Center for Real Estate Studies
26
Survey of Emerging Market Conditions
October 2007
Investment Outlook
Despite the optimistic rebound that occurred in the second half of 2006, the investment
outlook continued to weaken for all four retail types throughout the first three quarters of
2007. It appears that expectations have settled around neutrality in the most recent
quarter, and as a result, it remains a mixed time to buy within this market.
© 2007 University of Florida Bergstrom Center for Real Estate Studies
27
Survey of Emerging Market Conditions
October 2007
Cap Rates
Over the past eight quarters, expected changes in cap rates have experienced a great deal
of volatility. Despite these fluctuations, results from the first four quarters of 2007 have
shown mostly strengthening support for all retail cap rates to increase. However, actual
cap rates have remained virtually constant throughout the past year.
© 2007 University of Florida Bergstrom Center for Real Estate Studies
28
Survey of Emerging Market Conditions
October 2007
Yields
Though required retail yields appear to have been quite volatile throughout 2006, 2007
has produced a more stable pattern. Required yields over the past three quarters appear to
have leveled off around ten percent. While expectations of yield changes have been just
as volatile over this same time period, they appear to be moving towards neutrality in the
most recent quarter’s results.
© 2007 University of Florida Bergstrom Center for Real Estate Studies
29
Survey of Emerging Market Conditions
October 2007
Section 7: Outlook for Investment in Undeveloped Land
Land Without Entitlements or with Residential Entitlements
The outlook for investment in land without entitlements or with residential entitlements
has continued to weaken throughout 2007. Despite a brief indication of an improved
outlook in the first quarter of 2007, the following three quarters indicate a predominantly
downward sloping trend. Currently, it remains a mixed time to buy within this market,
with indications of future pessimism not too far in the distance.
Land with Office or Retail Entitlements
While the outlook for investment in land with office or retail entitlements remained
positive and steady throughout 2006, it appears that it has weakened throughout 2007.
Expectations appear to be reverting towards neutrality, thus making it a mixed time to
buy within this market.
Land with Hospitality Entitlements
The outlook for land with hospitality entitlements appears to have remained relatively
neutral over the past eight quarters. It appears that the present quarter’s results reinforce
that it is a mixed time to buy within this market
Land with Entitlements for Warehouse or R & D
While fairly volatile throughout 2006, the outlook on land with entitlements for
warehouse or R&D is settling toward neutrality in the fourth quarter of 2007. Thus, it
appears that it remains a mixed time to buy within this market.
© 2007 University of Florida Bergstrom Center for Real Estate Studies
30
Survey of Emerging Market Conditions
October 2007
Land for Urban Renewal
While 2006 exhibited a weakening outlook for investment in land for urban renewal, it
appears that expectations have leveled off at neutrality as 2007 comes to a close.
© 2007 University of Florida Bergstrom Center for Real Estate Studies
31
Survey of Emerging Market Conditions
October 2007
Section 8: Business and Capital Availability Outlook
Capital Availability
On a quarterly basis, there continues to be some volatility in expectations of capital
availability. However, for the fourth quarter of 2007, it appears that respondents expect
that there will be no significant changes in available capital for acquisitions or
development.
Outlook of Own Business
The survey respondents’ perception of their own business’ outlook has continued its dramatic
decline over the past eight quarters, yet again experiencing a significant decrease in the latest
quarter.
© 2007 University of Florida Bergstrom Center for Real Estate Studies
32
Survey of Emerging Market Conditions
© 2007 University of Florida Bergstrom Center for Real Estate Studies
October 2007
33
Survey of Emerging Market Conditions
October 2007
Section 9: Dominant Investors
Respondents indicated which of five investor groups they perceived to be the most active
for their types of property. For eleven of fifteen property types, private investors were the
most dominant. The exceptions included hospitality – business, neighborhood retail
centers, large retail centers, and Class A offices. REITs were perceived to be the most
active in neighborhood centers and warehouse and distribution. Institutional investors
played a large part in Class A offices and large retail centers. Foreign investment was
perceived to remain limited, though it did appear to play a more significant role in large
retail.
© 2007 University of Florida Bergstrom Center for Real Estate Studies
34
Survey of Emerging Market Conditions
October 2007
Section 10: Characteristics of Survey Respondents
In the latest survey, approximately 60 percent of the 339 respondents reported being an
appraiser, just under half with designations of MAI, SREA or SRPA. The next largest
groups, representing about ten percent and nine percent of respondents respectively, were
consultants and brokers.
Profession of Respondents
Markets of Familiarity
Each respondent selected up to four regional markets with which they are familiar.
Altogether, in the latest survey these choices accumulated to 645 observations. Every
region, with the exception of Gainesville-Ocala, was represented by a minimum of 20
observers, with five of the regions having over 60 observers. The highest number of
responses was for the Broward market with 87 representatives. The lowest was
Gainesville-Ocala with 19.
© 2007 University of Florida Bergstrom Center for Real Estate Studies
35
Survey of Emerging Market Conditions
October 2007
Property Types of Familiarity
Each respondent selected up to three property types with which they were familiar.
Altogether, 795 selections were made in the latest survey round. Single family
development was selected by 141 respondents while condominium development was
selected by 96. Ten property types were selected by at least 40 respondents, and two
more had at least 20 respondents.
© 2007 University of Florida Bergstrom Center for Real Estate Studies
36
Survey of Emerging Market Conditions
October 2007
Section 11: Details of Cap Rates, Yields & Expected Changes
Table 1 summarizes estimates of cap rates and yields for twelve property types over the
last four quarters of the survey. In addition, it shows the distribution of expectations for
changes in each reported cap rate and yield. For expectations, the table reports the percent
of respondents expecting each cap rate and yield to either rise or fall in the future.
Excluded from this table is the percentage of respondents whom are expecting no change.
This third percentage can be computed as 100 less the two percentages reported. Since
prior sections discuss the content of Table 1, further comment is not given here. The table
is simply provided as a reference to facilitate application of the survey results.
© 2007 University of Florida Bergstrom Center for Real Estate Studies
37
Survey of Emerging Market Conditions
October 2007
Table 1: Detailed Cap Rates, Yields and Expectations for Change
© 2007 University of Florida Bergstrom Center for Real Estate Studies
38
Survey of Emerging Market Conditions
October 2007
Section 12: Industry Leaders’ Comments
The UF Survey of Emerging Market Conditions receives input from a number of leaders and
professionals in Florida‘s real estate industry. The following comments come from members of
the UF Real Estate Advisory Board, leadership from the International Council of Shopping
Centers (ICSC), as well as membership of the Appraisal Institute‘s Region X, SIOR/NAREIT,
and CCIM.
Capital Markets
In a response to the subprime residential mortgage market, lenders have tightened lending
standards. However the market is still actively searching and willing to fund good commercial
projects. International Investors are injecting more Capital into US real estate markets as the
dollar declines.
“There is ample capital available; it is the borrower's credit that has to improve.”
Name withheld
“Currently the lack of capital appears to be more of a psychological problem rather than a
weakening of underlying fundamentals.”
Name withheld
“The fallout and ensuing publicity regarding the subprime mortgage market has affected
most capital markets concerning real estate. This is primarily a physiological reaction
which isn't related to any fundamental change in most commercial real estate.”
Gregory A. Brown, MAI, SRA; Brown Valuation Services, Inc.; Ft. Lauderdale, FL
“While debt is currently limited, it is due to a more cautious approach by lenders and
investors, not a lack of capital. In 2008, I anticipate that this capital (debt and equity) will
be aggressively placed back in the market.”
Name withheld
“Lenders are looking at each deal much more carefully to determine the financial
feasibility. Lenders are very interested in absorption rates for new development and in
overall rates for existing properties.”
Name withheld
“If the interest rates continue to decline, there will be more funds for home loans. Also,
with the declining dollar we are seeing more foreign investments especially near the
beaches and near the Orlando attractions.”
© 2007 University of Florida Bergstrom Center for Real Estate Studies
39
Survey of Emerging Market Conditions
October 2007
Name withheld
“Obviously, equity buyers fueled by attractive debt are sidelined, resulting in an increase
in the number of equity players. We are definitely seeing a flight to quality, both in terms
of assets and companies.”
Paul Ellis,* President, CNL Real Estate Services; Orlando, FL
“I think there will be a flight to quality in any given property type and more prudent
underwriting requiring REAL equity and a declining availability of non-recourse
financing.”
Name withheld
“As long as I build institutional grade product with solid credit tenants, the institutions
want the centers.”
Name withheld
Economic and Market Conditions
The economic outlook differs between residential and commercial properties. While many
respondents noted the excess supply of residential properties in some areas of Florida, the
consensus is for strong commercial prospects. Respondents feel that income producing properties
are in strong demand and continue to be viable investment opportunities. Conflict in South
America is helping to support the South Florida Real Estate market by injecting much needed
capital and stability.
“I believe that current property taxes and insurance rates are at extremely high levels that
will not be sustained. These high levels are causing lower than normal NOIs resulting in a
deflated property value for numerous commercial properties. At the current time, there is
a large upside potential in property values. As these high tax rates and insurance rates
begin to lower NOIs will increase. Additionally, with interest rates decreasing cap rates
will also decrease. These two conditions lend themselves to large upside potential value
increases in the future.”
Name withheld
“The decline of the dollar is a primary concern along with instability of insurance rates
and property taxes on non-homestead property. Until such times as governmental
budgets/staffing are cut there will be a high degrees of uncertainty/instability with risk
rates increasing accordingly.”
Name withheld
© 2007 University of Florida Bergstrom Center for Real Estate Studies
40
Survey of Emerging Market Conditions
October 2007
“The shadow condo rental market will continue to hold down rent growth in many
markets along with higher than normal concessions. In addition, cap rates will edge up
higher going forward as a result of higher financing costs. This will cause capital sources
to be a lot more selective in what deals they put their money in. This environment will
make it more challenging for developers over the next couple of years in my opinion.”
Name withheld
“As long as population growth continues in South Florida, the industrial real estate
market will continue to thrive. Latin America is also an important catalyst and the
economies there appear poised for continued growth which will benefit our industrial
market.”
Name withheld
“Years ago when we (the economy) would go through a cycle, the process from
beginning to end was longer. Because of computers and efficiency of information, the
downturns and upturns are more sharp and the period of time in which is occurs or the
cycle is shorter or more compressed.”
Name withheld
U.S. or Florida Tax Policies, Local Property Taxes
Tax and Insurance policy continues to be at the forefront of the real estate market. Many
respondents commented on increasing Taxes and insurance costs, and how they affect the cost of
occupancy.
“The lack of clear direction from the legislature about real estate taxes will continue to
result in instability within the market.”
Howard Klahr, Easthill Valuation and Consulting; Hollywood, FL.
“Stabilization in rising property tax and reductions in property insurance will spur sales
volume and prices overall, but particularly in multi-family as many office and retail rents
are based on a NNN basis.”
Name withheld
Local Community Infrastructure (Roads, Schools, Safety, Social Services)
“Increased demands placed upon new development to pay the true impacts on
infrastructure will have a substantially positive impact on existing properties either
entitled or existing properties suitable for re-development.”
Name withheld
© 2007 University of Florida Bergstrom Center for Real Estate Studies
41
Survey of Emerging Market Conditions
October 2007
“Infrastructure, particularly schools, is a major issue in the area. Some impact fees are
arguably needed, but huge increases in permitting and impact fees at this time would be
counter-productive, as it would lead to a decrease in the already slow construction
industry.”
Name withheld
Other Events / Concerns
“Florida Legislature has got to develop a fair tax plan and get the insurance mess cleared
up! Infrastructure cost are going up-- local governments need to develop solid plans for
new developments that will allow developers to make a profit, but also ease the
complications – in-migration is not going to stop and most new permanent residents will
not settle for poor housing. Someone needs to set up better programs with the Corps of
Eng. They are really causing a lot of problems that may come back to haunt us – look at
Lake Okeechobee!”
Robert Strickland, CCIM, Prudential Commercial Real Estate; Tampa, FL
*Member, UF Real Estate Advisory Board
© 2007 University of Florida Bergstrom Center for Real Estate Studies
42
Survey of Emerging Market Conditions
October 2007
Treasure Coast

Cap Rates in the Treasure Coast area are, on average, lower than that of the state (0.55
percentage points) and range from 6.5% (Large Retail) to 7.7% (Strip Centers)

Cap rates movements over the past quarter are mixed across property types. The largest
changes have occurred in Condo Conversion (+0.88% change) and Office: Class A (0.50% change).

Cap rate outlooks for this quarter indicate potential rate increases, with Neighborhood
Centers, Strip Centers, Apartments, and Flex Space receiving the highest response for
increases.

Required yields for the Treasure Coast area are lower, on average, than that of the state,
9.3% compared to 10.82% statewide.

Required yields are highest for Condo Conversion at 12.6% and lowest for Apartments
at 8.4%.

Required yields have fallen across property types, with the largest shifts occurring in
Condo Conversion (-3.54% change) and Flex Space (-3.46% change).

For available property types, the investment outlook is mixed. The most positive
expectations appear to be for Apartments, while Condo Conversion carries the most
frequent indication of a negative outlook.

The outlook for Land Development is again mixed across several classifications. It
appears that the most negative outlook occurs for Land with Residential Entitlements
and Land without Entitlements.

For available property types, sentiment on future occupancy is mixed. Respondents
indicate that Warehouse and Dist. and Strip Centers are the most likely to witness
occupancy rate increases while Condo Conversion is more likely to see occupancy
decreases.

For available property types, rental rate expectations are mixed across property types.
Respondents indicated that rates are expected to increase slower than inflation in
Apartments and Flex Space, and faster than inflation for Office: Class A and Large
Retail.

Future absorption rates are expected to be lower in Condominium Development and
more neutral in Single Family Development.

Future price increases are expected to be slower than inflation in both Single Family and
Condominium Development.
© 2007 University of Florida Bergstrom Center for Real Estate Studies
43
Survey of Emerging Market Conditions
© 2007 University of Florida Bergstrom Center for Real Estate Studies
October 2007
44
Survey of Emerging Market Conditions
© 2007 University of Florida Bergstrom Center for Real Estate Studies
October 2007
45
Survey of Emerging Market Conditions
October 2007
Broward County

Cap rates in Broward County are, on average, lower than the rest of the state (6.8%
compared to 7.66%) and range from 6.2% (Large Retail) to 7.4% (Strip Centers).

Cap rates increased across the majority of property types, with the largest changes
appearing in Condo Conversion (+1.22% change) and Apartments (+0.85% change).

Cap rate outlooks are neutral to positive this quarter, with Condo Conversion and
Neighborhood Centers receiving the highest response for future rate increases.
© 2007 University of Florida Bergstrom Center for Real Estate Studies
46
Survey of Emerging Market Conditions
October 2007

Required yields for Broward County are, on average, lower than that of the state, 9.7%
compared to 10.82% statewide.

Required yields are highest for Condo Conversion at 13.1% and lowest for Apartments
at 8.9%.

Over the past quarter, required yields have decreased across property types, with the
largest shifts occurring in Condo Conversion (-1.45% change) and Flex Space (-1.38%
change).

The investment outlook across property types is primarily neutral, with the most notable
negative outlook occurring for Condo Conversion.

The investment outlook for Land Development appears to be negative for Land without
Entitlements and Land with Residential Entitlements. However, there is a more
neutral outlook for the four remaining land classifications.

In Broward Country, expectations over the next quarter for future occupancy rates remain
neutral.

Rental rate expectations are mixed across property types. Strip Centers received the
highest response for rental rate increases faster than inflation, while Flex Space received
the highest response for increase slower than inflation.

Future absorption rates are expected to be lower in both Single Family and
Condominium Development.

Future price increases are expected to be slower than inflation in Single Family and
Condominium Development
© 2007 University of Florida Bergstrom Center for Real Estate Studies
47
Survey of Emerging Market Conditions
© 2007 University of Florida Bergstrom Center for Real Estate Studies
October 2007
48
Survey of Emerging Market Conditions
© 2007 University of Florida Bergstrom Center for Real Estate Studies
October 2007
49
Survey of Emerging Market Conditions
October 2007
Dade County

Cap rates in Dade County, on average, are lower than that of the state (0.84 percentage
points) and range from 6.2% (Large Retail) to 7.4% (Strip Centers)

Over the past quarter, cap rates have increased across most property types with Condo
Conversion (+1.24 percentage points) and Apartments (+0.87 percentage points)
representing the largest changes.
© 2007 University of Florida Bergstrom Center for Real Estate Studies
50
Survey of Emerging Market Conditions
October 2007

Cap rate outlooks for the next quarter appear to favor rate increases, with Condo Conversion
and Flex Space receiving the highest response from respondents for increases.

Required yields for Dade County (9.9%) are, on average, lower (.92 percentage points) than
required yields throughout the state (10.82%).

Required yields have fallen, on average, over the last quarter from 10.55% to 9.9%.

The largest shifts in required yields occurred in Condo Conversion ( -1.37% change) and
Flex Space ( -1.30% change)

The investment outlook across property types is mixed, with the most notable information
being conveyed in the Condo Conversion sector. The investment outlook for Condo
Conversion can be viewed as neutral to negative.

The investment outlook for Land Development appears to be negative for Land without
Entitlements and Land with Residential Entitlements. However, there is a more neutral
outlook for the four remaining land classifications.

Expectation of future occupancy rates in Dade County are generally mixed across property
types. The Apartment and Condo Conversion property types show the broadest expectation
for lower future occupancy rates.

On average, rental rates are expected to increase either at the rate of inflation or faster than
inflation. It is worth noting that Free Standing and Apartments, however, appear to be the
exception.

Future absorption rates are expected to be lower in both Single Family and Condominium
Development.

Future price increases are expected to occur slower than inflation in both Single Family and
Condominium Development.
© 2007 University of Florida Bergstrom Center for Real Estate Studies
51
Survey of Emerging Market Conditions
© 2007 University of Florida Bergstrom Center for Real Estate Studies
October 2007
52
Survey of Emerging Market Conditions
© 2007 University of Florida Bergstrom Center for Real Estate Studies
October 2007
53
Survey of Emerging Market Conditions
October 2007
East-Central Coast (Daytona Beach Area)

Cap rates in Daytona Beach are, on average, lower than that of the state (0.24 percentage
points) and range from 6.8% (Large Retail) to 8.0% (Strip Centers)

Cap rates have increased over the last quarter across most property types, with the
exceptions being Large Retail and Office: Class A. The largest movements in cap rates
have occurred in Condo Conversion (+1.15% change) and Apartments (+0.79%
change).
© 2007 University of Florida Bergstrom Center for Real Estate Studies
54
Survey of Emerging Market Conditions
October 2007

Cap rate expectations are neutral to positive over the next quarter for most property types.
Large Retail, Office: Class A, and Apartments have the most respondent indication of
expected rate increases.

Required yields for Daytona Beach are, on average, higher than that of the state, 11.4%
compared to 10.82% statewide.

Required yields are highest for Condo Conversion at 14.8% and lowest for Apartments
at 10.6%.

Required yields have increased significantly across all property types over the past
quarter. The largest shifts occurred in Strip Centers (+2.08% change) and
Neighborhood Centers (+2.29% change).

For available property types, the investment outlook is mostly neutral to positive, with
the most frequent positive view occurring in Free Standing.

The outlook for Land Development is again mixed across several classifications. It
appears that the most negative outlook occurs for Land with Residential Entitlements
while the most positive outlook occurs for Land with Industrial Entitlements.

Future occupancy expectations are mostly neutral to negative across available property
types.

For available property types, respondents indicate that rental rates are expected to
increase slower than inflation over the next quarter. This view is most common for
Apartments, Flex Space, and Neighborhood Centers.

Future absorption rates are expected to be neutral to lower in Single Family and
Condominium Development.

Future price increases are expected to be slower than inflation in both Single Family and
Condominium Development.
© 2007 University of Florida Bergstrom Center for Real Estate Studies
55
Survey of Emerging Market Conditions
© 2007 University of Florida Bergstrom Center for Real Estate Studies
October 2007
56
Survey of Emerging Market Conditions
© 2007 University of Florida Bergstrom Center for Real Estate Studies
October 2007
57
Survey of Emerging Market Conditions
October 2007
Jacksonville

Cap rates in Jacksonville are, on average, lower than that of the state (0.33 percentage points)
and range from 6.7% (Large Retail) to 7.9% (Strip Centers)

Cap rates have decreased across the majority of property types in the last quarter, with the
largest decreases being seen in Office: Class A (-0.66% change) and Large Retail (-0.56%
change). However, a notable increase in cap rates did occur in Condo Conversion (+0.72%
change).
© 2007 University of Florida Bergstrom Center for Real Estate Studies
58
Survey of Emerging Market Conditions
October 2007

For the majority of property types, cap rates are expected to rise over the next quarter. The
most significant respondent indication of cap rate increases appears to be occurring in Condo
Conversion and Office: Class A.

Required yields for Jacksonville are, on average, significantly higher than that of the state,
12.0% compared to 10.82% statewide.

Required yields are highest for Condo Conversion at 15.3% and lowest for Apartments at
11.1%.

Required yields increased significantly across all property types in the last quarter. The
largest shifts occurred in Neighborhood Centers (+2.89% change) and Strip Centers
(+2.68% change).

The investment outlook is neutral to positive across most property types this quarter.
Warehouse and Dist. shows the most respondent support for a positive outlook.

The outlook for Land Development is again mixed across several classifications. It appears
that the most neutral to negative outlook occurs for Land without Entitlements while the
most neutral to positive outlooks occur for Land with Industrial Entitlements and Land
with Commercial Entitlements.

For the majority of available property types, future occupancy rates are expected to either
remain neutral or increase. The most frequent respondent indication of future occupancy rate
increases occurs in Apartments.

Rental rate expectations are mixed across property types. Rental rates are expected to
increase faster than inflation in Large Retail, and slower than inflation in Office: Class B.

Future absorption rates are expected to remain the same or increase for Single Family
Development and remain neutral or decrease for Condominium Development.

Respondents expect future prices to increase at a rate slower than inflation for both Single
Family and Condominium Development.
© 2007 University of Florida Bergstrom Center for Real Estate Studies
59
Survey of Emerging Market Conditions
© 2007 University of Florida Bergstrom Center for Real Estate Studies
October 2007
60
Survey of Emerging Market Conditions
© 2007 University of Florida Bergstrom Center for Real Estate Studies
October 2007
61
Survey of Emerging Market Conditions
October 2007
Lakeland-Winter Haven

Cap Rates in Lakeland-Winter Haven are, on average, lower than that of the state (0.30
percentage points) and range from 6.8% (Office: Class A and Large Retail) to 7.9% (Strip
Centers)

For the majority of available property types, cap rates rose over the last quarter, with the
largest changes occurring in Warehouse and Dist. (+0.64% change) and Flex Space
(+0.41% change).
© 2007 University of Florida Bergstrom Center for Real Estate Studies
62
Survey of Emerging Market Conditions
October 2007

Cap rate outlooks over the next quarter indicate expectations for rates to either remain neutral
or increase. Significant respondent support for expectations of rate increases is apparent in
Apartments.

Required yields for Lakeland-Winter Haven are, on average, lower than that of the state,
10.2% compared to 10.82% statewide.

Required yields are highest for Strip Centers at 10.9% and lowest for Apartments at 9.6%.

For all but one of the available property types, required yields have increased over the past
quarter. The largest shifts occurred in Neighborhood Centers (+1.37% change) and Strip
Centers (+1.16% change).

For available property types, the investment outlook is mixed across property types. The most
frequent respondent indication of a positive outlook occurs in Apartments, while the most
most frequent indication of a negative outlook appears in Neighborhood Centers.

The outlook for Land Development is again mixed across several classifications. It appears that
the most negative outlook occurs for Land without Entitlements while the most positive
outlooks occur for Land for Urban Redevelopment and Land with Industrial Entitlements.

For the majority of available property types, future occupancy rates are expected to remain
the same or decrease over the next quarter. One exception occurs in Strip Centers, where the
outlook is leaning more towards rate increases.

For the majority of available property types, rental rates are expected to increase either at the
rate of inflation or faster than inflation. One exception is Strip Centers, for which
respondents indicate that rental rates are expected to increase at a rate slower than inflation.

Future absorption rates are expected to be lower in both Single Family and Condominium
Development.

Future price increases are expected to be slower than inflation for both Single Family and
Condominium Development.
© 2007 University of Florida Bergstrom Center for Real Estate Studies
63
Survey of Emerging Market Conditions
© 2007 University of Florida Bergstrom Center for Real Estate Studies
October 2007
64
Survey of Emerging Market Conditions
© 2007 University of Florida Bergstrom Center for Real Estate Studies
October 2007
65
Survey of Emerging Market Conditions
October 2007
North-Central (Gainesville-Ocala)

Cap rates in Gainesville-Ocala are, on average, higher than that of the state (0.63 percentage
points) and range from 7.7% (Office: Class A) to 8.8% (Strip Centers)

For available property types, cap rates increased over the last quarter, with the largest
changes occurring in Condo Conversion (+1.61% change) and Apartments (+1.25%
change).

For the majority of available property types, cap rates are expected to increase. Respondents
provide the most support for expected rate increases in Office: Class A and Strip Centers.
© 2007 University of Florida Bergstrom Center for Real Estate Studies
66
Survey of Emerging Market Conditions
October 2007

Required yields for Gainesville-Ocala are, on average, lower than that of the state, 10.1%
compared to 10.82% statewide.

Required yields are highest for Condo Conversion at 13.3% and lowest for Apartments at
9.1%.

For the majority of available property types, required yields decreased over the past quarter.
The largest shifts occurred in Condo Conversion (-1.04% change) and Flex Space (-0.97%
change). The two exceptions are Neighborhood Centers and Strip Centers, which
experienced yield increases of 0.42% and 0.21% respectively.

Data regarding the investment outlook is only available for one property type in this region.
Respondents indicate a neutral to positive outlook for Apartments.

The outlook for Land Development is again mixed across several classifications. It appears
that the most negative outlook occurs for Land without Entitlements while opinions on
most of its counterparts remain neutral to positive.

Expectations are uncertain for future occupancy rates in Apartments and Office: Class B.
Data is unavailable for other property types.

Expectations are uncertain for future rental rates in Apartments. Data is unavailable for other
property types.

Future absorption rates are expected to either remain neutral or increase in Single Family
Development and either remain neutral or decrease in Condominium Development.

The rate of future price increases is uncertain for both Single Family and Condominium
Development.
© 2007 University of Florida Bergstrom Center for Real Estate Studies
67
Survey of Emerging Market Conditions
© 2007 University of Florida Bergstrom Center for Real Estate Studies
October 2007
68
Survey of Emerging Market Conditions
© 2007 University of Florida Bergstrom Center for Real Estate Studies
October 2007
69
Survey of Emerging Market Conditions
October 2007
Northwest (Pensacola-Tallahassee)
Pensacola-Tallahassee

Cap rates in Pensacola-Tallahassee are, on average, higher than that of the state (0.39
percentage points) and range from 7.5% (Office: Class A and Large Retail) to 8.6% (Strip
Centers)
© 2007 University of Florida Bergstrom Center for Real Estate Studies
70
Survey of Emerging Market Conditions
October 2007

Cap rates have increased over the past quarter for all but one of the available property types.
The largest cap rate movements have occurred in Condo Conversion (+1.17% change) and
Apartments (+0.80% change).

Cap rate outlooks indicate potential increases across property types over the next quarter. The
most frequent respondent indication of expected cap rate increases occurs for Condo
Conversion and Large Retail.

Required yields for Pensacola-Tallahassee are, on average, higher than that of the state,
11.4% compared to 10.82% statewide.

Required yields are highest for Condo Conversion at 14.7% and lowest for Apartments at
10.5%.

For available property types, required yields have increased significantly over the past
quarter. The largest shifts occurred in Strip Centers (+2.45% change) and Neighborhood
Centers (+2.65% change).

For available property types, the investment outlook is mixed. Apartments show the most
respondent support for a positive outlook, while opinions in Office: Class B, Neighborhood
Centers, and Strip Centers appear to be more uncertain. Data is unavailable for other
property types.

The outlook for Land Development is again mixed across several classifications. It appears
that the most negative outlook occurs for Land without Entitlements.

For available property types, future occupancy rate expectations are mixed. The most
frequent respondent indication of occupancy increases occurs in Warehouse and Dist.

For all but one available property type (Office: Class A), rental rates are expected to increase
at a rate that is faster than inflation.

Future absorption rates are expected to either remain neutral or decrease in Single Family
Development and to either remain neutral or increase in Condominium Development.

Future price increases are expected to occur at a rate slower than inflation for both Single
Family and Condominium Development.
© 2007 University of Florida Bergstrom Center for Real Estate Studies
71
Survey of Emerging Market Conditions
© 2007 University of Florida Bergstrom Center for Real Estate Studies
October 2007
72
Survey of Emerging Market Conditions
© 2007 University of Florida Bergstrom Center for Real Estate Studies
October 2007
73
Survey of Emerging Market Conditions
October 2007
Orlando Area

Cap Rates in Orlando are, on average, lower than that of the state (0.39 percentage points)
and range from 6.7% (Large Retail) to 7.8% (Strip Centers)
Cap rates have risen over the past quarter for all but one property type, with the largest
changes being seen in Condo Conversion (+1.36% change) and Apartments (+0.99%
change).

Cap rate outlooks appear to signal expectations for an increase in rates over the next quarter,
with this view most common for Condo Conversion, Large Retail, and Neighborhood
Centers.
© 2007 University of Florida Bergstrom Center for Real Estate Studies
74
Survey of Emerging Market Conditions
October 2007

Required yields for Orlando are, on average, lower than that of the state, 10.5% compared to
10.82% statewide.

Required yields are highest for Condo Conversion at 13.8% and lowest for Apartments at
9.6%.

The largest shifts in required yields occurred in Neighborhood Centers (+0.94% change)
and Strip Centers (+.73% change).

The investment outlook is mixed across property types. It is worth noting that negative
outlook is broadly held for Condo Conversion.

The outlook for Land Development is again mixed across several classifications. It appears that
the most negative outlook occurs for Land without Entitlements while the most positive
outlooks occur for Land with Industrial Entitlements.

Future occupancy expectations are primarily neutral to negative across property types.
Respondents indicate that there is potential for lower future occupancy rates in Condo
Conversion.

Future rental rate expectations are mixed across property types. The majority of respondents
believe that rental rates will increase at a rate that is slower than inflation in Condo
Conversion, and at a rate faster than inflation in Large Retail.

Future absorption rates are expected to be lower in Condominium Development and neutral
to lower in Single Family Development.

Future price increases are expected to be slower than inflation in both Single Family and
Condominium Development.
© 2007 University of Florida Bergstrom Center for Real Estate Studies
75
Survey of Emerging Market Conditions
© 2007 University of Florida Bergstrom Center for Real Estate Studies
October 2007
76
Survey of Emerging Market Conditions
© 2007 University of Florida Bergstrom Center for Real Estate Studies
October 2007
77
Survey of Emerging Market Conditions
October 2007
Palm Beach County

Cap Rates in Palm Beach County are, on average, lower than that of the state (0.84
percentage points) and range from 6.2% (Large Retail) to 7.4% (Strip Centers).

Changes in cap rates from last quarter are mixed across property types, with the largest
changes being seen in Condo Conversion (+1.03% change) and Apartments (+0.67%
change).

Cap rate outlooks for this quarter reveal expectations of rate increases, with Strip Centers
and Neighborhood Centers showing the highest response for increases.
© 2007 University of Florida Bergstrom Center for Real Estate Studies
78
Survey of Emerging Market Conditions
October 2007

Required yields for Palm Beach County are, on average, lower than that of the state, 10.1%
compared to 10.82% statewide.

Required yields are highest for Condo Conversion at 13.4% and lowest for Apartments at
9.2%.

Required yields have decreased across property types over the last quarter. The largest shifts
occurred in Condo Conversion (-1.57% change) and Flex Space (-1.50% change).

The investment outlook is primarily neutral across property types. One exception appears to
be Condo Conversion, for which respondents indicate a negative outlook for the next
quarter.

The outlook for Land Development is again mixed across several classifications. It appears
that the most negative outlooks occur for Land without Entitlements and Land with
Residential Entitlements.

Indications of future occupancy rate decreases are appearing in several property types
including Flex Space and Free Standing. On average expectations are neutral to negative
for the upcoming quarter.

On average, rental rates are mixed across property types. Respondents indicate that rental
rates may increase slower than inflation for Apartments, Flex Space, and Free Standing,
and faster than inflation for Large Retail and Neighborhood Centers.

Future absorption rates are expected to be lower in Single Family and Condominium
Development.

Future price increases are expected to be slower than inflation in both Single Family and
Condominium Development.
© 2007 University of Florida Bergstrom Center for Real Estate Studies
79
Survey of Emerging Market Conditions
© 2007 University of Florida Bergstrom Center for Real Estate Studies
October 2007
80
Survey of Emerging Market Conditions
© 2007 University of Florida Bergstrom Center for Real Estate Studies
October 2007
81
Survey of Emerging Market Conditions
October 2007
Sarasota-Bradenton

Cap rates in the Sarasota-Bradenton area are, on average, lower than that of the state (0.29
percentage points) and range from 6.8% (Large Retail) to 7.9% (Strip Centers)

Cap rate movements over the past quarter were mixed across property types, with the largest
changes occurring in Apartments (+0.75% change) and Condo Conversion (+1.11%
change).
© 2007 University of Florida Bergstrom Center for Real Estate Studies
82
Survey of Emerging Market Conditions
October 2007

Cap rate outlooks appear to be neutral to positive for the majority of property types, with
Warehouse and Dist. and Free Standing having the most frequent respondent indication of
rate increases.

Required yields for Sarasota-Bradenton are, on average, considerably lower than that of the
state, 9.71% compared to 10.82% statewide.

Required yields are highest for Condo Conversion at 13.0% and lowest for Apartments at
8.8%.

Movements in required yields over the past quarter were mixed across property types. The
largest shifts occurred in Condo Conversion (-0.76% change) and Neighborhood Centers
(+0.70% change).

The investment outlook for this quarter is mixed across available property types. Worth noting is
that Flex Space and Neighborhood Centers have significant respondent expectation for a
negative outlook.

The outlook for Land Development is again mixed across several classifications. It appears
that the most negative outlook occurs for Land without Entitlements.

For available property types, future occupancy rate expectations appear to remain neutral.

For the majority of available property types, rental rates are expected to increase at a rate
faster than inflation. Notable exceptions are apparent in Condo Conversion and Warehouse
and Dist., for which respondents believe rate increases will occur slower than inflation.

Future absorption rates are expected to be lower for Condominium Development.
Respondents are more neutral, however, in regards to Single Family Development.

Respondents indicate that future prices will increase at a rate slower than inflation for both
Single Family and Condominium Development.
© 2007 University of Florida Bergstrom Center for Real Estate Studies
83
Survey of Emerging Market Conditions
© 2007 University of Florida Bergstrom Center for Real Estate Studies
October 2007
84
Survey of Emerging Market Conditions
© 2007 University of Florida Bergstrom Center for Real Estate Studies
October 2007
85
Survey of Emerging Market Conditions
October 2007
Southwest Coast

Cap Rates in the Southwest Coast area are, on average, lower than that of the state (0.58
percentage points) and range from 6.5% (Retail Large) to 7.6% (Flex Space and Strip
Centers)

Cap rates have increased across most property types during the last quarter, with the
largest changes being seen in Condo Conversion (+1.17% change) and Apartments
(+0.80% change).
© 2007 University of Florida Bergstrom Center for Real Estate Studies
86
Survey of Emerging Market Conditions
October 2007

Cap rate outlooks for this quarter indicate potential for rate increases across property
types, with Condo Conversion and Large Retail receiving the most respondent support.

Required yields for the Southwest Coast are slightly lower, on average, than that of the
state, 10.7% compared to 10.82% statewide.

Required yields are highest for Condo Conversion at 14.0% and lowest for Apartments
at 9.8%.

The largest shifts in required yields occurred in Neighborhood Centers (+1.28% change)
and Strip Centers (+1.07% change).

For available property types, the investment outlook is mixed. Respondents appear to be
leaning toward positive expectations for Free Standing and negative expectations for
Neighborhood Centers.

The outlook for Land Development is again mixed across several classifications, with
the largest proportion of respondents often taking a neutral position. It appears that a
more negative outlook is expected for Land without Entitlements than its counterparts.

Future occupancy expectations are neutral to negative across property types, with the
most frequent indication of occupancy decreases occurring in Warehouse and Dist. and
Large Retail.

Rental rates are expected to increase slower than inflation for the majority of property
types, with the most notable exception being Apartments.

Future absorption rates are expected to be lower for both Single Family and
Condominium Development.

Future price increases are expected to occur at a rate slower than inflation in both Single
Family and Condominium Development.
© 2007 University of Florida Bergstrom Center for Real Estate Studies
87
Survey of Emerging Market Conditions
© 2007 University of Florida Bergstrom Center for Real Estate Studies
October 2007
88
Survey of Emerging Market Conditions
© 2007 University of Florida Bergstrom Center for Real Estate Studies
October 2007
89
Survey of Emerging Market Conditions
October 2007
Tampa-St Petersburg

Cap rates in the Tampa-St. Petersburg area are, on average, lower than that of the state (0.32
percentage points) and range from 6.8% (Office: Class A and Large Retail) to 7.9% (Strip
Centers)

Cap rate movements over the past quarter were mostly positive, with the largest changes
occurring in Condo Conversion (+1.11% change) and Apartments (+0.74% change). The
exceptions to this positive trend were Office: Class A, Office: Class B, and Large Retail.
© 2007 University of Florida Bergstrom Center for Real Estate Studies
90
Survey of Emerging Market Conditions
October 2007

Cap rate outlooks indicate that rates are expected to increase over the next quarter, especially
with Office: Class A.

Required yields for Tampa-St. Petersburg are lower, on average, than that of the state, 10.6%
compared to 10.82% statewide.

Required yields are highest for Condo Conversion at 13.9% and lowest for Apartments at
9.7%.

The largest shifts in required yields occurred in Neighborhood Centers (+1.09% change)
and Strip Centers (+0.89% change).

The investment outlook is mixed across property types this quarter. Warehouse and Dist.
garners the most frequent positive outlook.

The outlook for Land Development is again mixed across several classifications. It appears
that the most negative outlook occurs for Land with Residential Entitlements and Land
without Entitlements while the most neutral to positive outlook occurs for Land with
Industrial Entitlements.

Future occupancy rate expectations are mixed across property types. The most frequent
respondent indication of occupancy increases occurs in Apartments.

Rental rate expectations are also mixed across property type, with a great deal of uncertainty
evident in Free Standing, Neighborhood Centers, and Office: Class B.

Future absorption rates are expected to be lower for Condominium Development.
Respondents exhibit more uncertainty, however, in regards to Single Family Development.

Future price increases are expected to occur at a rate that is slower than inflation in both
Single Family and Condominium Development.
© 2007 University of Florida Bergstrom Center for Real Estate Studies
91
Survey of Emerging Market Conditions
© 2007 University of Florida Bergstrom Center for Real Estate Studies
October 2007
92
Survey of Emerging Market Conditions
© 2007 University of Florida Bergstrom Center for Real Estate Studies
October 2007
93
Survey of Emerging Market Conditions
© 2007 University of Florida Bergstrom Center for Real Estate Studies
October 2007
94