Rory Causseaux: Offices and Development—By the Numbers

Rory Causseaux’s experience spans over 30 years and includes both commercial real estate and engineering. This made him an ideal choice to provide an update on the market for office sales, rentals and development at the 10^th Annual Real Estate Forum.

Rory provided a wide range of statistics documenting the state of offices and development in north and central Florida. Among the areas he covered:

Sales

Inventory is low for office space for sale—which, Rory explained, has increased the price per square foot. What used to sell for $120/square foot could now go as high as $150 or more. Popular developments like Tower Hill, Arbor Greens, and frontage on NW 43 Street is doing well at these rates.

That said, he stated that existing office space is a much less expensive option than new construction. “The price difference between buying a building and building one is more than double. So that gap continues to make buying and remodeling very effective,” he said.

Buying an office pad (land that has been cleared and has infrastructure in place) is also a pricey proposition. Rory estimates that such a space is probably around $70/square foot, and that’s with no building yet. So once again, buying existing office space and adapting it to your needs is likely your best option.

Leasing

Unlike properties for sale, office space for lease is abundant in our area and can easily be placed in one of two categories. “What we’re seeing is a big gap between the traditional—what has been called ‘class A,’ which is glorified residential construction stick built—and some of the newer products that are built like at Innovation Square and at Celebration Pointe,” Rory said.

While the newer spaces for rent might be in the mid- to upper $20s/square foot, class A buildings are in the $15-$16 range. Once again, this offers a cost savings in going for a class A property if the location and facility suit your needs.

The county’s leasing absorption rate for 2019 was just over 300,000 square feet, and new construction in 2018 and 2019 brought about 300,000 square feet due to large projects like Celebration Pointe and Innovation Square (which take more than one year to complete). According to CoStar, no office space projects are under construction today.

Regarding investor sales, there were 94 office complexes sold in 2019 with a cap rate averaging 8% and an average price of $93 per square foot.

Development

Rory cited several statistics regarding development and permits (statistics were as of the time of the form on Feb. 6).

• In 2019, the City of Gainesville issued 8,200 permits, 157 of which were for single family dwelling units.
• Alachua County had 16 new projects, nine of which were for single family developments (with most in the western part of the county). While that might seem small, this activity will likely bring 400 single family lots to market in 2020.
• There are 100 projects in the development queue in the City of Gainesville.
• The City of Alachua also has six single family developments currently in the permitting process that will deliver 800 lots in the coming year.
• The City of Alachua had 42 new residential construction permits in 2019 totaling $8 million, as well as $15 million in nonresidential permits.
• In unincorporated Alachua County, $406 million in single family homes were built, with 450 single family and 458 multifamily units.

Rory also mentioned that development in 2020 and beyond could be impacted by the University of Florida. The school’s framework master plan combines on-campus and off-campus initiatives (as discussed by UF Senior Vice President and COO Charlie Lane)—making UF an important economic driver in the community.

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