Even with the headwinds of crushing inflation and steadily rising interest rates the Sarasota commercial real estate market remains strong. Downtown properties continue to receive attention as buyers flock to Sarasota from all over the USA and Europe. The velocity of sales surprises even the most seasoned real estate professionals and our market consistently eclipses historic sales prices with record sale after record sale. In September, a vacant 8,179 SF vacant DTC zoned lot between Main St and Ringling Blvd on Osprey Ave sold for $230 per SF to the adjacent property owner. The Rosemary District is also receiving frenzied attention as demonstrated by the sale of the 10,500 SF vacant lot at Central Ave and 4th St purchased for $2,000,000 or $190 per SF, a record for DTE zoned Rosemary District land. Many of the sales prices are driven by money looking for a place to reside rather than a clear analysis of the development potential. While development sites garner significant attention, it is income producing properties that are most in demand. We are seeing sales of cash flow properties in the low 4% cap rate provided there is a realistic upside. User buyers are paying over $450 per SF for well-located office and retail properties and then investing in renovations. It seems everyone wants to own a piece of Sarasota. Will time validate these purchases as smart investments or will we view this exuberance as a portent of a market downturn.
Still lagging the pace of property sales, leasing activity has also picked up in most sectors. Industrial/warehouse rental rates have increased to $12-$15 per SF and finding available warehouses is difficult. Class A office space availability rate remains in unimpressive double digits however most of the choice spaces are leased and full-service rental rates have steadily inched upward and now consistently exceed $30 per Sq Ft. Harshman & Co. believes that the increase in the leasing market is the most positive single indicator of a healthy state of the market.