How One Deal Illustrates the Challenges Ahead for Brokers
In early October, long before the coronavirus had been identified, broker Elliot LaBreche's inbox pinged with an email blast from CBRE Group, listing for sale an office building in Jacksonville, Florida.
The 22-story tower at 841 Prudential Drive was built in 1955 on the south bank of the St. Johns River and is part of a medical campus anchored by Baptist Medical Center. LaBreche, vice president of Easton Group near Miami, figured the property might be of interest to his client, ShareMD, an investor starting a nationwide network of flexible office buildings for doctors.
In February, ShareMD completed the $67 million acquisition, the highest price for a single-office asset in the market in nearly six years, according to CoStar. George Scopetta, president and managing partner of ShareMD, visited the property three times and had in-person meetings with a brokerage and law firm, but the bulk of the deal was conducted electronically or on the phone, according to LaBreche.
As the new coronavirus spreads, disrupting daily life and business routines across the globe, technology is already helping to lessen the blow to commercial real estate and allowing some deals to proceed. Still, brokers say they are experiencing major slowdowns as social distancing and travel restrictions become the norm.
The capital markets sector was robust before the public health crisis intensified across the United States, according to Jonathan Kingsley, executive vice president for Colliers International in South Florida. But the travel bans and other restrictions are making it difficult for buyers to tour buildings -- typically a necessary step for sales to close, he said.
“People don’t like to make decisions about buying property if there’s any doubt about the market,” said Rebel Cook, a broker in Jupiter, Florida.
What's more, LaBreche explained that lenders are hesitant to underwrite new deals, given so much uncertainty over how long the health crisis might last and what shape the U.S. economy will be in when life returns to normal.
“I don’t see any deals gaining momentum,” he said. “People are hunkering down.”
LaBreche, 31, graduated from the University of Southern California in 2011 and moved to Florida in 2013 to work for Cresa, a tenant-representation firm that was later acquired by the JLL brokerage. LaBreche has worked for Easton in Doral, Florida, since 2017.
Shortly after moving to Easton, LaBreche started to specialize in the niche sector of healthcare real estate. It has limited competition and is benefiting from a nationwide shift from treating patients in hospitals to less-expensive outpatient buildings, he noted. The rise in aging baby boomers also is driving the sector, LaBreche said.
The U.S. healthcare system is a $3.8 trillion industry, but that figure is expected to rise to more than $6 trillion in six years, he said.
“Not a lot of other industries have that type of growth,” he explained.
ShareMD aims to acquire about $400 million in assets over the next few years, targeting the U.S. Southwest, the Sun Belt and the Mid-Atlantic region, according to LaBreche.
Last fall, he represented the company when it bought two buildings in Miami-Dade County for $33.1 million. In addition, ShareMD is bullish on Jacksonville because of its strong demographics and job growth. Jacksonville ranks second in the nation for markets expected to lead in 65-and-older population growth over the next five years, according to a CoStar report titled “Investing in Medical Office: Just What the Doctor Ordered.” Jacksonville’s 65-and-over population is expected to grow 5.2% over the next five years.
But ShareMD and other investors almost certainly will have to adjust their short-term goals, based on the coronavirus pandemic.
“Every buyer right now is derailed from their regular course of business, and there will be problems with tenants paying rent soon," LaBreche said. "Healthcare is a little bit more insulated, but it doesn’t mean we’re not going to be impacted.”
