Real Estate Forum - January 2013

NEWS FRONT
Multifamily Still Selling Strong Across Southeast

ATLANTA—Multifamily is still selling strong in Florida, Georgia, the Carolinas and Tennessee. Indeed, the year-end deal flow saw apartments making headlines.

Locally based RADCO, for example,
went on a spending spree, acquiring seven
“There is liquidity in th sector, and
the fundamentals make value-add mul-
tifamily the perfect fit for us today,”
says RADCO CEO Norman Radow.
“Our reputation has allowed us to raise
equity privately, without resorting to
institutional equity.”
Blue Rock Partners is another active
multifamily buyer in the Southeast. In a
joint venture with Konover South, Blue
Rock in December snapped up three multi-
family properties for $66 million in
December. That gives Blue Rock more than
6,000 multifamily units in the Tampa Bay
and Orlando areas—and the firm isn’t
done investing yet. Blue Rock plans to
invest another $9 million to improve the
multifamily portfolio
a $154-million multifamily portfolio that
includes assets in Jacksonville. Cortland
CEO Steven DeFrancis says the demo-
graphic population growth for Florida is
undeniable, and he points to job growth
and infrastructure improvements begin-
ning to manifest in Jacksonville.
“The completion of the 295 loop
across northern Jacksonville essentially
relocates this sector closer to jobs and
entertainment venues and may have a
similar effect on this portion of the city
as the completion of GA 400 had on
the Atlanta MSA,” DeFrancis says.
“The port of Jacksonville and dis-
tribution infrastructure stand to have
ample gains as larger freighters are
allowed through the expanded Panama
Canal and the Shands hospital expan-
sion, coupled with a robust growth in new
retail centers bodes well for Jacksonville’s
economy.”—Jennifer LeClaire

“There is liquidity in the sector,
and the fundamentals make
value-add multifamily the perfect
fit for us today.”

—Norman Radow, RADCO

“Blue Rock’s accelerated investments in the Tampa Bay and Orlando markets underscore our confidence in the region,” says principal Randy X. Ferreira.

And, marking its entry into the Florida market, Cortland Partners recently acquired

Obamacare Fuels Potential & Uncertainty for Tampa Healthcare

The Supreme Court’s validation of the Affordable Care Act, coupled with President Obama’s reelection, ensures Obamacare will be implemented as it was originally intended over the coming years. The new law has implications that stretch far beyond the healthcare sector, and early signs indicate that Tampa Bay’s real estate market may be a big winner.

Tampa has long been a hub for the healthcare and insurance industries, thanks in large part to the availability of a skilled and trainable labor force. All told, about 30% of the net new jobs created in the past year have come from this industry.

Now there are signs that the healthcare sector’s share of the office market is growing following the 2010 passage of Obamacare, which will extend insurance coverage to more than 30 million additional Americans and expand the operations of healthcare providers and the third party administrators that serve them.

Jones Lang LaSalle research shows that healthcare-related tenants have nearly doubled their presence in the Tampa Bay region, from around 12% historically to more than 23% of total leasing volume today. This growth in market share should continue given that healthcare users account for more than 20% of all active requirements in the region’s office market.

Managed care providers and third-party administrators account for the bulk of this volume, including some of the largest leases of the past year: Medco Health Solutions’ 143,000-square-foot renewal, Amerigroup Insurance’s 95,000-square-foot lease and WellCare Health Plans’ 66,000-square-foot expansion.

By Chad Rupp

But the extent to which these users will continue scaling up their space requirements as the law takes effect will remain unknown until final enrollment numbers are determined. This has left some of the Tampa market’s largest companies in “wait-and-see” mode less than one year before enrollment under the new law begins on Oct. 1, 2013. Case in point: one major third-party administrator in the Tampa market plans to hire anywhere between 250 and 1,600 new employees depending on enrollment volume next fall.

Complicating this lack of predictability is the need for training employees 30 to 60 days prior to open enrollment, which will force tenants to lease space before knowing their long-term office requirements. This uncertainty is leading users and their brokers to get creative.

“Plug and play” office spaces offering large, flexible floor plates that can accommodate scalable call centers are in high demand. Tenants are also evaluating the benefits of multiple site operations. And some users are willing to pay a premium for office product adjacent to empty space, with the option to expand in 2014. We also expect to see instances of adaptive reuse that converts vacant retail product with ample parking capacity into functional office space.

Anticipation leading up to next fall is fueling high hopes for healthcare companies, and all indications point to the Tampa office market being a primary beneficiary of business growth. This surge of activity is making a measurable impact in a city and state still rebounding from the recession.

Chad Rupp is managing director for Jones Lang LaSalle in Central Florida. He can be reached at chad.rupp@am.jll.com. The views expressed here are the author’s own.