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Signing contracts and selling commercial real estate during coronavirus slowdown

An aerial view of Orlando's downtown.
An aerial view of Orlando's downtown. (Red Huber/Orlando Sentinel)

A new food hall is scheduled to open in Avalon Park this summer with nearly a dozen eateries.

Marketplace at Avalon Park just announced two of the 10 anticipated tenants: Bowigens Beer Co. and local southern-style food catering business BBQ50.

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Mara Hunt, president and manager of the food hall, was in talks with the tenants before Florida reported its first case of the novel coronavirus in late February.

Now, it’s a whole new ball game. Agreements for the 8,000-square-foot venue will be signed and announced over the next several weeks during the thick of the coronavirus pandemic.

“When there are extenuating circumstances beyond our control, it is important to be flexible,” Hunt said. “We have been working closely to create win-win situations for each vendor that wants to come into the marketplace.”

According to Avalon Park Group spokesperson, Stephanie Lerret, most businesses in the town center remain open and are complying with government regulations regarding the COVID-19 virus.

Businesses are at the epicenter of the community, she said. “That is one of the main things that sets Avalon Park apart from other commercial centers.”

A photo of the downtown town center of Avalon Park in east Orange County taken May 2017.
A photo of the downtown town center of Avalon Park in east Orange County taken May 2017. (Joe Burbank/Orlando Sentinel)

For the most part, commercial real estate brokers and leasing agents are still active in the field, but it’s not business as usual for those like Hunt who are moving forward with multi-million dollar deals and projects.

The landscape they’re used to operating in is being altered by the coronavirus pandemic.

Active brokers in Central Florida told GrowthSpotter they’re seeing a decreased number of bids placed on properties. Industry insiders also claim hotel sales are frozen and LOIs for retail-focused properties are being retracted due to fears of how the coronavirus may impact the economy.

At the same time, deals are getting done and the buyer pool hasn’t dried up yet.

Luke Wickham, a director at Institutional Property Advisors, said he’s conducted about a dozen property tours since the beginning of last week.

The deals took place across three separate transactions that combined amount to nearly $150 million.

“We’re not shaking hands and we kept our distance,” Wickham said. “Next week I expect zero. Maybe two, as people are reluctant to get on an airplane.”

He specializes in multifamily sales and said the asset class is still receiving interest from investors, just fewer than before.

“On large apartments we’re working with about eight final offers,” he said. “In a normal situation we’ve been getting 20 to 30 offers.”

The industrial market is another sector in commercial real estate where deals are expected to continue.

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“Supply chains have become even more critical given the difficult challenges we all face,” CBRE’s David Murphy said.

“The most important thing we are stressing to clients at this time is that while there will be some short term uncertainty in the industrial sector, the long-term impact will be net positive,” he said.

Murphy anticipates e-commerce to continue and manufacturing to return. At the moment, much of his time is spent reaching out to clients to advise them on what they are seeing.

“It tends to change on a daily basis," he said.

The foresight into the future is a little more grim for hotel brokers and investment advisors.

In the world's most visited city, the economy is booming and tourism numbers are off the charts. So why aren't hotels in Orlando selling?

The temporary closures of Central Florida’s primary demand drivers like Disney World and Universal Studios, coupled with the travel bans and health agency instructions to practice social distancing have hit the hospitality industry directly.

“Not surprisingly, the hotel transaction market is now in a state of suspension,” HREC vice president Paul Sexton said.

“Post-crisis, the challenge for hotel investors and lenders will be how to peg the value of a particular hotel asset in light of what will hopefully be a short-term, but significant interruption to the business.”

Over the last year, the number of hotel sales have decreased in Central Florida, thanks in part to a large amount of new hotel development.

Sexton said he expects to see a decrease in new hotel construction as well until the economy starts recovering.

“This will hopefully allow some elbow room for existing hotels to refill their rooms before more inventory comes online,” he said. “Given that many spring break vacations were interrupted, hopefully, there will be pent up demand for Central Florida vacations.”

Have a tip about Central Florida development? Contact me at arabines@GrowthSpotter.com or (407) 420-5427, or tweet me at @amanda_rabines. Follow GrowthSpotter on Facebook, Twitter and LinkedIn.

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