By Bob Andelman
April 2009
Maddux Business Report

The most remarkable characteristic of commercial real estate professionals in today’s market is that they’re not jumping out of any of those tall, empty office buildings’ windows.

Or maybe it’s just that since the Great Depression, they don’t make windows like they once did and they’re harder to get open.

Either way, commercial real estate is a tough, tough business to be in these days.

“My first question,” says Bill Eshenbaugh of Eshenbaugh Land Co. in Tampa, “is, is there an outlook?”

We’ll ask the questions here, if you don’t mind.

“This is a year of some real reckoning in terms of seeing it get worse,” Eshenbaugh says. “Retail developers are probably an oxymoron. How are you in retail and development these days?

“I had a bumper sticker the last time that said, ‘Lord, give me one more cycle and I promise I won’t piss it away like I did the last one.’ This last cycle had a 15-year run. We thought the parade was going on for a while. Look at how many homes were sold! We were down to 3 or 4 percent unemployment. You’ll find very few who made it to the sidelines safely because it was so much fun.”

You know it’s true. And so does Bruce Erhardt, executive director of Cushman & Wakefield in Tampa.

“I get guys who call me and say, ‘I got this land for 30 cents on the dollar!’” he says. “And I say, ‘Oh, you paid market?’ And there’s silence on the line. They don’t want to hear that.”

That said, there is still no reason to have hope according to seasoned professionals such as Erhardt, Eshenbaugh, Lee Arnold, Larry Richey, Robin Bishop and Dan Woodward. They’re all doing exactly the opposite of giving up.

Of course, they’re doing it while trimming staff and overhead, expanding their leasing and property management operations… and crossing fingers that they’re not overly optimistic.

“There are only three land buyers today: investors, land users and the government,” says Erhardt. “Developers are not in the market, for two reasons. Reason one: financing. Reason two: there is no need to deliver new product to the market today – retail, industrial, office or hotels. Maybe apartments, but those other products don’t need to be built.”

That said, there will be land deals done in ‘09 that are bank deals. There are some deals that have legs, Erhardt says–from education, medical and government and users. “We know of two federal government deals in the market right now that have a good chance of closing this year and I know of an education deal. But if you think somebody is going to buy office or suburban retail, that’s on the edge. Remember years ago when Publix went to Van Dyke at Dale Mabry, far out on what was the edge? We’re not seeing retailers take that risk now.”

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