Development Pull Back-Clearwater Beach

An article in the St Pete Times yesterday continues a growing pattern of scaled back, delayed or withdrawn real estate development projects in the Tampa Bay area. This analyst's recent blogs have continued to examine market conditions dating back to early 2006 and even late 2005 with concerns about the nature and strength of market fundamentals and the growing inevitability of of market disarray.

According to the article developers announced that they are refunding deposits in the condo-hotel project but apparently not giving up the site. There are numerous potential pitfalls in this segment of the market cycle including the cost and availability of funds and the obvious truth that the investor-buyers who largely fueled this "boom" are no longer there. That leaves users, people who intend to live or actually use the real estate for its apparent purpose as the potential buyers and there are as we have suspected less of these than the former (flipper-investors). Ultimately "booms" end with either a whimper or a thud and in this case it may best be described as the whimper phenomenon. The developers who these days must allow lots of time and cost to just obtaining entitlements are betting just as hopefully as the individual investor that prices will keep increasing enough to justify the time, money and risk. The longer the cycle lasts the more costly it is to join the game as everyone wants a piece of the action and the costs of raw material, especially land soar upward. Developing is not a game for the faint of heart with the uncertainty that always exists and the survivors who do profit are those who have in done just that, survived.

My recent posting titled "The Real Estate Law of Gravity" provides some of the context for the conclusions here. Municipalities and local government are largely eager to support development and especially redevelopment to build tax base and the investment in approvals has certainly paid off well for the local governments whose budgets are brimming with new projects paid for the ad valorem taxes collected as a result of the incredible price increases (not necessarily value, but that is another blog subject). As widely quoted as the adage "location, location, location" may be location does not in the near term trump oversupply and uncertainty. It seems that the direct point to be made about this project at this time is the delicate factor exposed in the saying "timing is everything".