A New Project NOW?

The announcement of exciting and ambitious plans for development of the now vacant Tropicana Block with an impressive mixed-use development prompts several important thoughts as well as questions. It is clear that the City of St. Petersburg has a vested interest in encouraging tax-base building development and with the impressive developer’s track record is eager to line up in support of the proposed development. It is equally clear that there is much promise in this historically well located and desirable downtown location. Truly quality project concepts and locations can overcome obstacles other possible development proposals cannot get past. There is evidence of this in the aftermath of the apparent investor driven downtown market boom fueled by much speculation, abundant capital and pro-development municipal encouragement. The approval for development of many more projects than are currently being built is near term evidence that fundamental market components are still lacking.

St. Petersburg’s history of development and Winter residency shows demand for residential and commercial development especially during parts of three decades beginning in the Florida golden era of the 1920’s and extending into the two decades following. In large part what we now know as “downtown” was built up and prospering through the 1950’s. There was little land for development and the area was widely known and desirable. Urban decay resulted because of a shifting of residential patterns and like many other older Tampa Bay area towns the result was in some cases benign neglect. This phenomenon while marked with some significant historic building losses also had the positive effect of dampening any significant enthusiasm for demolition and renewal and thus saving a number of treasured buildings.

Southeast Market Analysts recently updated a 2-year old market analysis report of the Downtown St. Petersburg Condominium market with interesting results. Significant and successful development marked the early phase of the recent 4-5 year “boom-let” most especially water-view and east-northeast urban core locations. All markets of this type have sub-markets defined by existing uses, infrastructure and potential and the area described was the best of the submarkets. Numerous projects announced, both large and small were approved but never funded and in many cases, never started. Those that were funded with “pre-sales” did start and the secondary submarket locations will face a test of the will of non-user-resident investors to close and wait for a future opportunity to sell or walk away and wait for another day.

The latest uncertainties of the market conditions affect the consumer buyer who has the least information available as well as the more informed developers. The same fundamental demand factors dictate market potential now as they have for the last 5-years (and frankly always have). Condominium sales success depends upon current and forecasted future growth of qualified buyers, either users or investors. To be sure, for a time there will be fewer investor risk-takers especially at higher price points and until some amount of confidence and semblance of order is restored to the “Market”. This is now the classic “Field of Dreams” dilemma; “if you build it will they come”? Current forecasts of residential population growth do not support the premise that there are sufficient qualified buyers for nearly 600 condominium units, this could change as well, but the recent boom as noted was fueled less by future residents than investor-flippers.

There is something of a “chicken-egg” relationship as well in this proposed project and others; residential demand depending upon the market segment and price responds to the availability of the services available including but not limited to adequate fire, police, sanitation, and the softer infrastructure of parks, landscaping, social amenities and shopping. This proposed development location offers many if not all of these things at the present time. On the other hand commercial development, restaurants and shopping require critical mass of residency. Current retail vacancies suggest that there is insufficient residential base to support what space is already there but that can and will change. The good news is that all of this has happened before in this area in the style of the era and good locations eventually return to success first.