My Business Logic

Real estate markets are unbalanced in most parts of the country: vacancy is too high, but construction is too low. That sounds contradictory, because construction should be low when vacancy is high. Looking forward, however, we’ll find insufficient supply when the economy improves.

The current pace of construction is well below net absorption in most parts of the country, pulling the vacancy rate down. Net absorption should pick up in 2012, but the pace of construction won’t keep pace. Most construction planning is going on in cocktail hour chatter, not formal discussions with architects and bankers. Money is still tighter than average, though not quite so hard to come by as a year ago. Many developers lack the equity that their bankers want, especially with so much doom and gloom pervading the country. The key fact to remember, however, is that demand for space can grow much faster than space can be built. Thi

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The media has been quite generous in covering the residential real estate market, but the commercial real estate market functions a bit differently. The good news is that commercial markets are improving, but there are several key factors to take into account when judging just how effective this recovery really is.

The state of the economy

This may be a no-brainer, but it is important. The 2010 Christmas season showed the largest jump in retail sales since 2006, indicating that consumers are slowly expressing more confidence about the future, opening their wallets and checkbooks and businesses are moving to meet that increasing demand. As such, unemployment is slowly falling, creating a net job gain.

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June was the fourth straight month that sales topped the 1,000 mark in the Sarasota-Bradenton market, a level that harkens back to the pace of summer 2005, when the real estate boom was still in swing.

Though posting only a third as many sales in Charlotte County-North Port, the market represented the second-largest percentage gain statewide.

Prices did not show quite the same trajectory, but were still generally positive. The median sales price of $170,400 in Sarasota-Bradenton was a 5 percent increase from a year ago and up 2.4 percent from May, according to data released Thursday by Florida Realtors, the former Florida Association of Realtors.

The median in neighboring Charlotte was showing the effects of low-priced distressed properties, down 27 percent from June 2009.

But the region’s strong showing — and a 17 percent spike in sales statewide — was somewhat overshadowed by a 5.1 percent decline nationally, evidence that the broader housing market is struggling and may drag on the recovery.

That could be true in Florida, too, once the acceleration created by the government’s $8,000 federal tax credit for first-time buyers wears off.

Jack McCabe, a Deerfield Beach-based real estate analyst, thinks the tax credits moved many buyers who would otherwise have purchased a home later this year into the buying spree of the last six months.

“I think it was a rush to get closings done prior to June 30,” McCabe said, referring to the previous deadline for closing on a deal. Full Post…