Florida garners plenty of international attention for its southernmost cities, but institutional investors and real estate developers are increasingly looking farther north for new investment opportunities. Tampa and its surrounding cities—communities like Sarasota, Bradenton, and Clearwater—are quietly attracting millennials and young families. With lower land prices and a relatively underdeveloped real estate market, the Tampa Bay area is betting on a boom as many young professionals get priced out of markets like Miami, Fort Lauderdale, and West Palm Beach.
Three of the Tampa Bay area’s largest landowners and property developers gathered at the recent ULI Florida Summit to discuss Tampa Bay’s changing landscape and the unique approach required for developing large master-planned communities in Florida. J.D. Porter, the chief executive officer (CEO) of family-owned Wiregrass Ranch, notes that real estate development in Tampa is evolving at an unprecedentedly fast rate. “If you had asked me five years ago whether 5,000 acres [2,000 ha] would be enough land, I would have said yes,” he says. “But now you’re seeing a definitional change, with Tampa becoming one of America’s best cities.”
Florida, after all, remains relatively unfazed by the marked slowdown in key development industries across the United States. A plateau in U.S. retail sales and tourism and hospitality spending has not yet affected the Sunshine State, which each year breaks record tourism figures and continues to report healthy retail sales and continued retail development. In Tampa, developers are building mixed-use developments, focusing on providing a mix of residential, office, retail, and lifestyle elements to attract both retired buyers and a younger market.
Tim Johnson, the CFO of Strategic Property Partners, says that building a truly mixed-use community is a top priority for his firm, which remains a relatively new player in the Tampa market. Compared with Porter and Lakewood Ranch developer Rex Jensen, Johnson’s approach is decidedly urban, since Strategic Property Partners—a joint venture between Tampa Bay Lightning owner Jeff Vinik and equity firm Cascade Investments—has chosen to develop on prime downtown Tampa waterfront.
“This is a very transformative project, controlling 50 acres [20 ha] in Tampa with a total investment in excess of $30 billion,” says Johnson. His team is planning $200 million worth of infrastructure improvements, including a reconfiguration of the street grid and the addition of a district cooling facility, an innovative and sustainability-focused amenity that creates significant value for residential owners. Strategic Property Partners plans to build roughly 3,500 units of residential product, along with a 157-room hotel and 2.5 million square feet [232,000 sq m] of office space, which will be anchored by the newly relocated medical school of the University of South Florida (USF).
“It’s a true mixed-use project, not heavily weighted in any one use. We believe in diversity of product and use and people,” Johnson says.
The site of USF’s new medical school campus is a gift from Strategic Property Partners, a philanthropic move that panelists noted has long-term potential for a significant return on investment. Early on, Jensen invested in a preparatory school in Lakewood Ranch that proved to be a major investment driver for the development. “The dividends from donating 88 acres [36 ha] to the school spurred sales early on,” he says. “Something that accelerates the velocity of the project and allows you to have uses early on is what I could call a worthwhile investment.”
As a family company, Porter agrees. “Whether county or state, incentivizing and being able to recognize and step up to the plate and do something that creates jobs or education—like a county park or a hospital deal—can often be the right thing for the area,” he says. “It’s very fortunate we have a family that works together.”
Wiregrass Ranch, a property the Porter family has owned since the 1930s, has played a large role in Tampa’s community-driven development. Porter is currently in the throes of expansion planning, and has received approval to build an additional 10,500 residential units, 2.7 million square feet [251,000 sq m] of retail space, and 2.5 million square feet [232,000 sq m] of office and medical properties.
Perhaps more so than Johnson, Porter and Jensen realize that obtaining financing for long-term development projects presents a unique challenge for their projects, which have been in the works for the last decade.
“One of the biggest financing problems you can encounter is taking a long-term asset and financing it with short-term money,” Jensen says. “Lenders can’t be defined by the long term.” Lakewood Ranch, a massive, master-planned development community that spans 50 miles (80 km), has so far created 12,000 residential units and has managed to stay buoyant by being thoughtful about its social fabric and development pace.
That is especially true with Lakewood Ranch’s office product. Though the region’s vacancy rate exceeds 10 percent, Lakewood Ranch has managed to maintain just under 5 percent vacancy by metering the supply.
“Our typical customer is a small office user; we don’t get big corporate relocations,” Jensen says. “We’ve also metered the supply as we go forward. Our office vacancy rate is 4 to 5 percent, which is well under half of the market rate in the region.”
Interestingly, all three developers are including substantial office development in their projects, despite a fairly high vacancy rate citywide. While Jensen insists that his meter-down strategy keeps his vacancy rates at a minimum, Johnson says that his decision to build more office space is tied to future projections for city growth. “We’re focused on long-term growth and not as concerned about the market today,” he says. “We’re delivering a diversity of product with different floor plans and prototypes, and want to accommodate a lot of users. We think we have a number of solutions across multiple buildings to address multiple demand types for future office development.”
Lakewood Ranch, Wiregrass Ranch, and Strategic Property Partners are continuously building and releasing new development products to market.