Local commercial real estate market remains strong

The Chewy Fulfillment warehouse is shown in the Ocala/Marion County Commerce Park in Ocala, Fla. on Monday, August 31, 2020. [Bruce Ackerman/Ocala Gazette] 2020.

The Chewy Fulfillment warehouse is shown in the Ocala/Marion County Commerce Park in August. [Bruce Ackerman/Ocala Gazette] 

Unlike the residential real estate market, which has remained remarkably healthy nationwide despite the pandemic, the commercial sector has weathered the COVID-19 storm selectively with prospects for future growth varying by sector and geography. 

In Ocala and Marion County, the commercial real estate marketplace has remained much stronger than in other locales.

While the pandemic and the slower pace of global recovery still loom large on the U.S. economic horizon, real estate industry analysts seem in substantial agreement that the near-term outlook for the commercial sector in the United States appears sunny.

According to experts, the light at the end of the tunnel is powered by such factors as federal financial assistance programs, the success of the national vaccination initiatives and pent-up consumer demand.

Locally, certain commercial asset classes — distribution, industrial and multi-tenant housing for example, have continued to perform extremely well. Retail, including restaurants and hospitality asset classes, has been a mixed bag. 

In the traditional office space sector in Ocala, the market remains uncertain. And, not surprisingly, the multi-family segment, which includes apartments and similar developments, mirrors the continued growth in the residential sector.

Distribution sector stays hot

Vicky Bryant Morrison, past president of the Ocala Marion County Association of Realtors and owner of Bricks & Mortar Real Estate & Development, said the commercial real estate sector pretty much mirrors what’s going on in the residential sector. 

“We were seeing lots of activity pre-pandemic. That accelerated during the crisis and is continuing. We’re very limited on commercial inventory with more prospects and buyers looking for space than we have available,” she said.

Bartow McDonald of SVN Commercial Real Estate sees a number of positive signs in the local commercial marketplace. He noted that Ocala has become a highly desirable location for distribution and warehousing. 

Its strategic location on the I-75 corridor halfway between Atlanta and Miami enables distributors to reach more consumer homes more efficiently than any other Florida location. 

Ocala’s reach, combined with its wealth of available land, has attracted the attention of major companies such as Chewy, FedEx, and most recently Amazon, all of which have located distribution facilities here in the past several years. 

Morrison agrees that the logistics of Ocala has a lot to do with such expansion. 

“We’re seeing a lot of interest in the distribution and industrial market segment, including manufacturing,” she said. “Our taxes are favorable. The environment is great. Putting your business here makes good sense. That’s all good for our economy.”

Impact of e-commerce on retail

Another factor has bolstered demand: the enormous spike in consumers’ reliance on e-commerce and home delivery during the pandemic.

According to McDonald, the spike is at least a contributing factor for why several million square feet of distribution space is currently under construction or planned locally. 

“While people stayed home, they learned how to click online and have boxes of stuff show up at their doorsteps,” he said. “For the first time,

a lot of people ordered almost anything for delivery, from groceries to clothes to car parts. This shifted the supply chains globally and has translated to a vast need for distribution and warehouse spaces for companies trying to accommodate the demand.” 

Experts see the trend toward e-commerce continuing post-pandemic.

While a boon to online retailers, the dramatic consumer migration to e-commerce has had a sobering effect on traditional brick-and-mortar retail, especially older malls, nationwide. 

Barrie Scardina of Cushman & Wakefield, a national real estate services provider, said that mall owners and developers will need to address e-commerce trends by rethinking their tenant mix and instituting transformational solutions such as moving away from the traditional focus on apparel and toward new experiential and emerging brands such as Warby Parker, Camp and Polestar.

Restaurants and hospitality set to recover

On a brighter note, restaurants appear to be on the rebound and should bolster fourth-quarter performance for the retail sector. Morrison pointed to the number of new restaurants that have recently opened. 

“Restaurants took a hard hit during the pandemic,” she said. “But those with good business plans are doing well. We’re seeing new restaurants coming in all over Marion County, including some of our more rural areas. Some others that deferred opening because of the pandemic are now going ahead with their business plans.” 

McDonald noted, however, that staffing remains a challenge for Ocala food service establishments but may lessen as pandemic-related unemployment subsidies wane.

The hospitality sector, and hotels in particular, tend to be recovering slower than most others. The number of tourists to the state dropped by more than two-thirds in the second quarter of 2020 compared to the previous year. Indications are favorable that Florida’s $90 billion annual tourism trade seems poised to rebound quickly. 

Morrison said the opening of the World Equestrian Center has “opened up the hospitality door” stimulating additional expansion to accommodate more visitors to the area. According to numbers released by the Florida Economic Estimating Conference, the state should see a sharp increase in visitors in the second half of 2021 with the number rising to near pre-pandemic levels in 2022. 

Impact of remote workforce

In the traditional office space segment, Morrison said that while there’s still a high demand in Ocala, she’s seen some strategic shifts in how employers are using their office space. During the pandemic, many office workers, enabled by technology and online meeting apps, were permitted to work from home. It remains to be seen if this trend will continue post-pandemic. 

Morrison commented that she’s already seen some larger companies downsize their office spaces and others, including health care and personal services, shift to satellite and branch operations. She also pointed to the rise of shared workspace offices for those who require a physical location on an ad hoc basis.

The pandemic-related rise in working remotely may also become a factor in the growth of the multi-family segment of commercial real estate. According to the Wall Street Journal earlier this year, as many as a quarter of the 160-million U.S. labor force may remain working remotely. 

The flexibility this affords has prompted many to consider relocating away from high-cost urban environments to other areas with a lower cost of living or more amenable climates. The newly coined term “Zoom town” refers to this kind of migration with its reference to one of the more widely used virtual meeting apps.

“Not everyone has an appetite for densely populated areas. We’re seeing people coming from all over,” McDonald said, adding that he’s seen a considerable increase in the number of national multi-family real estate development organizations making site visits to Ocala.  

He also pointed to an accompanying challenge.

“How do we accommodate all the people who want to move here and keep the right balance? We have to be careful not to destroy what makes Ocala such a special place.”

Morrison confirmed the trend, noting that multi-family developments will start “popping up, with a couple about to come out of the ground” very soon. 

“We’ve got all the beautiful horse farms, the springs, the waterways, easy access to both coasts as well as the University of Florida nearby and Orlando as a transportation hub,” she said, cautioning that it will be up to city and county governments to make sure Ocala remains “a great place to live.”