From her 25th-floor office in downtown Austin, Texas, Carey Gunn Venditti, a partner in the real estate practice group at international law firm DLA Piper, stops talking about the vitality of the city’s economy and glances out the window at the construction cranes dotting the skyline.
“Today, I count eight cranes working on both office and residential high-rise projects,” Gunn Venditti says. “That’s proof that Austin real estate remains strong. Unless there is an unforeseen event affecting the national or global economy, we expect this trend to continue.”
Austin is but one of the cities in states in the U.S. South—Texas, Louisiana, Alabama, Florida, Georgia, the Carolinas, and Tennessee—that are experiencing expanding economies and increasing development. Technology, tourism, education, medical, and manufacturing are among the industries driving the real estate sector in the region.
Technology has become integral to the South’s economic well-being and is becoming a factor in real estate development in areas that had not been known for high tech. Tampa Bay anchors the tech corridor in central Florida and is gaining a global reputation as a hub for innovative research and development in life sciences, manufacturing, and defense and security, says Bradford L. Johnson, senior managing director at the Tampa Bay office of New York City–based Integra Realty Resources (IRR), which provides real estate valuation, counseling, and advisory services.
“Tampa’s MacDill Air Force Base hosts U.S. Central Command and U.S. Special Operations Command as well as 38 additional mission partners,” Johnson says. “A $14 billion military industry has developed in Tampa with specialized security, cyber security, intelligence, information technology, simulation training, and advanced manufacturing firms, making Tampa a top market for defense contractors.”
In New Orleans, tourism continues to be strong, but the city has also witnessed significant movement in the technology field and anticipates new energy around the medical and research sectors, particularly with the opening of two new medical centers downtown—University Medical Center and the Veterans Affairs Regional Medical Center, says Leigh M. Ferguson, director of economic development at the Downtown Development District of New Orleans.
“Our technology sector is growing with recent announcements such as that of Virginia-based DXC Technology, which describes itself as an ‘end-to-end IT services company,’ opening a New Orleans office this year that will eventually employ 2,000 people, ” says Ferguson.
Manufacturing also has become a linchpin in the region, particularly in Alabama, where, along with aviation and technology, it is fueling the state economy and the real estate sector.
“Alabama is very diverse in the products and services it offers,” says Catherine Sloss Jones of Birmingham’s Sloss Real Estate Company. “Investments from outside firms like Hyundai in Montgomery, Mercedes in Tuscaloosa, and recently Toyota and Mazda in Huntsville indicate a climate ripe for job growth in the auto manufacturing sector,” she continues. “Huntsville has the largest concentration per capita of PhDs in America because of NASA, and Birmingham has a vibrant and growing tech scene that is just beginning to impact our city.”
While America’s South continues on a steady course with a growing population and an increasing number of jobs, officials are acting on some challenges, which include traffic, housing affordability, education needs, and the rising cost of labor and materials. Georgia and Atlanta are spending billions to improve infrastructure and drive the real estate market, notes Robert P. Voyles, principal at Atlanta-based real estate firm Seven Oaks Company.
“There is a lot of infrastructure development in and around the city now,” says Voyles. “The state of Georgia is investing some $10 billion in major interstate improvements as well as funding a managed-lane system that will cover the lion’s share of Atlanta’s busiest highways. We are definitely working to improve mobility to attract new business.”
New business and new jobs are essential to real estate expansion. In Florida, economic growth and robust development are being reported from coast to coast. Orlando is seeing a robust real estate market in suburban locations with strong access to job centers including Lake Mary, Lake Nona/Medical City, and Horizon West.
“We also anticipate seeing an increase in the amount of interest from builders and buyers in edge locations to accommodate growing price constraints for both land and home values,” says M. Rebecca Wilson, shareholder and chair of the land use, zoning, and environmental group at Drosdick, Doster, Kantor & Reed, an Orlando-based law firm. “There is still a significant amount of infill demand from consumers, and developers are having a challenging time finding land to accommodate it.”
While Orlando—home to the Walt Disney World Resort, the Universal Orlando Resort, and others—historically has benefited from the hospitality industry, the region is now experiencing a more balanced distribution of job growth.
“The development of the University of Central Florida downtown campus and expansion of the airport reinforce the opportunity for Orlando to continue diversifying its job core and creating a solid economic foundation,” Wilson says.
Already, a new employment center, NeoCity, is emerging in Osceola County, south of Orlando. Lisa Dilts, principal at Compspring in Orlando, an independent real estate advisory firm, says,“The employers being attracted to NeoCity are focused on the research of micro and nano electronics, semiconductors, and photonics. Job projections for this employment center are in the thousands over the next five to ten years and are ultimately projected to rival the employment numbers of Disney,”
Clouding the area’s sunny skies, however, are the availability of labor and the rising cost of materials. Along with much-needed construction projects throughout central Florida, the $2.3 billion I-4 Ultimate, a 21-mile (34 km) makeover, is absorbing much of the area’s labor and building supplies such as steel and is pushing up the cost of materials.
“Many local governments also are contemplating or have adopted large increases to impact fees,” says Wilson. “This is another cost added to new construction not borne by existing development.”
To the west, continued job growth is also encouraging development in Tampa.
“We’re seeing stability in all real estate sectors thanks to new employment in industries such as technology,” says Barry Karpay, chair of ULI Tampa Bay. “Biotechnology giant Amgen has opened a facility in Tampa with promises to create as many as 450 jobs here by 2018. We’re riding a nice, steady wave. Not one real estate sector is reporting a slowdown.”
One of the major projects in the city is Water Street Tampa, a $3 billion mixed-use development of Strategic Property Partners, the real estate firm backed by NHL Tampa Bay Lightning owner Jeff Vinik and Bill Gates’s Cascade Investment. Water Street Tampa is expected to include 2 million square feet (186,000 sq m) of office space, 3,500 rental and for-sale residential units, 1 million square feet (93,000 sq m) of retail, and two hotels totaling 650 rooms, Karpay says.
Other large-scale developments either in the planning stages or under construction in Tampa include Lafayette Place, a proposed three-parcel, mixed-use development on the west side of the Hillsborough River with residential, hotel, office, and retail space totaling some 1.7 million square feet (158,000 sq m), and Riverwalk Tower, a high-end project that should break ground this year, says IRR’s Johnson.
“Riverwalk Tower is a 1.47-acre [0.6 ha] site with over 350 linear feet [107 m] along the Tampa Riverwalk,” Johnson continues. “It will be developed with a 52-story luxury office and residential building, which will include ground-level retail, two waterfront restaurants, and a seven-story parking garage. The 14-story office component will contain 215,000 square feet [20,000 sq m] and the residential component will include 210 luxury condominiums. More than 4,100 residential units in 13 buildings are under construction or in the planning stages within a mile [1.6 km] of the urban core.”
A surge in residential development is also occurring in downtown St. Petersburg.
“Nearly half a billion dollars of construction is either underway or expected to start later this year,” Johnson says. “The top five residential projects will add more than 1,500 rental units to the 1,340 units finished in the last three years. One noteworthy project is One St. Petersburg, a luxury condominium tower under construction and expected to be completed later this year, with an average price per unit of $1 million.”
In southern Florida, international tourism is forecast to be stronger this year as the dollar weakens and the Miami Beach Convention Center reopens following a $620 million renovation and expansion.
“South Florida’s economy is diversifying,” says Anthony M. Graziano, senior managing director at the Miami office of IRR. “The core banking, finance, and real estate sectors for the Southeast are based in south Florida. The region’s medical universities and infrastructure and emerging technology employment base are also expected to expand. A major factor in the area’s economy is constructionm and the service sectors that support it. A lot of this construction activity is expected to turn toward affordable housing and mixed use in 2018–2020. Infrastructure spending favors south Florida’s major contractors and engineers, so a federal push in infrastructure funding will propel this sector through a dip in commercial and residential construction activity.”