Amber is the color of prosperity in the bay area's commercial real estate market as developers of both office and industrial space march steadily into the new century. The tight market of the mid-'90s that finally opened up in 1998 and 1999 has stayed on course. The reasons are legion, but perhaps the most common one given is that fiscal responsibility is not just handy rhetoric these days. With real estate investment trusts (REITs) doing most of the developing, shareholders and Wall Street generally are demanding caution at every turn. That's why build-to-suits are courted by many developers. That's why many of the speculative developments aren't quite the gamble they might seem, as varying percentages of preleased space are required before any ground is turned. Steven F. Swann, southeast regional vice president of Realvest Partners Inc. - one of the few major players in the Tampa Bay market that is not a REIT - says he's "not worried about overbuilding. With REITs the major source of capital, earnings is one of the most important things. Fortunately, they're in position to carefully monitor supply and demand. That, more than anything else, will help keep our economy in balance." While acknowledging the complexities involved in financing and development, Swann says it is simply better business for everyone that we are in an era of "professional competition. I see the REITs as sophisticated professionals, especially compared to the suede shoe boys of the 1980s," when savings and loan institutions seemed only too eager to throw money at anyone who could conjure up a believable project and sell it with a slick patter. Indeed, while investors have made headlines by throwing money at sometimes shaky Internet startups in hopes of a quick and easy retirement, financial firms quietly have been recommending REITs as solid investments even as their stock prices have foundered over the past two years. What is NAIOP The National Association of Industrial and Office Properties (NAIOP) is comprised of more than 8,000 professionals involved in developing, master planning, constructing, financing, and managing industrial and office properties in North America. NAIOP members are responsible for 90 percent of all industrial and office development in the United States.   In Florida, NAIOP members number more than a thousand, the second largest membership total among all the states, and a reflection of activity here. NAIOP chapters serve Central Florida, Northeast Florida, South Florida, and Tampa Bay.   The NAIOP Tampa Bay Chapter, with more than 230 members, is the forum for commercial real estate along the West Coast. Association involvement adds value to each member's business through education, information, networking, community service, and governmental representation. In fact, NAIOP promotes effective public policy and intelligent development to create, protect, and enhance property values.   NAIOP has representation in Tallahassee, Washington, D.C., and at the local level. The organization helps to shape the discussion of growth management, environmental protection, tax assessment, and other issues.   NAIOP members are the principal players who shape the industry. If you're active in commercial real estate development, you need to join NAIOP to learn, to grow, and to meet and form relationships with NAIOP members. For membership information, call the NAIOP Tampa Bay Chapter at 813/886-0245. On the Internet, you'll find more information and a calendar of events at: www.naiop.org/chapters/ TAMPA_BAY.htm Raymond James & Associates Inc.'s May research report on REITs reminds investors that "fundamentals are sound across most real estate product types and that public market scrutiny has brought a new level of discipline to the real estate industry." The report summary, by the firm's director of real estate research Paul Puryear, says, "we expect REIT total returns in 2000 to fall within a range of 10-20 percent, driven by continued solid FFO growth and attractive dividend yields ...." Puryear writes that while "sound fundamentals and underlying hard asset value are the basis for our confidence in recommending the sector ... we will need a rational public market environment." His optimistic conclusion: "We seem to be getting there." This and other financial firms' recommendations are based on what they regard as the sound, cautious practices now extant in the industry. In fact, few seem to be putting any money into commercial real estate without sound due diligence. Don Mincey, senior vice president and senior credit officer of AmSouth Bank, agrees that lenders "are continuing to be cautious." Mincey, who is immediate past president of NAIOP's Tampa Bay chapter, says "steady as she goes" is a good description of the market after the first quarter of 2000, and says it might be apt "at least through the end of the year." His own bank's "loan pipeline continues to be strong, populated with credit requests that are falling into the traditional office build-to-suits, retail centers, freestanding retail stores and luxury condos. Developers have adopted a tone of prudence and balance." It took Highwoods Properties Inc. only five months to lease more than 90 percent of the 225,000 square feet in its Lake Point II at Tampa Bay Park office building. Most of the REITs, Mincey says, "continue to be bullish on the market here. They are staking out positions with some land inventory. They can just pay cash and inventory the land, unlike companies that have to adhere to certain bank criteria. Those impose certain limitations on what you can do with non-cashflow components of your assets. There's no revenue from inventoried land." Overall, Mincey says, "it seems that all the markets here are hitting on all cylinders. But downtown Tampa may still have some space because of the building inventory from the late '80s and early '90s." (See accompanying story, page 46.) Julia Rettig, Duke-Weeks Realty Corporation vice president for marketing and NAIOP president-elect, agrees with Mincey's "all cylinders" assessment. "The community is thriving right now. We're getting a lot of attention nationally. I think our market is stronger than we give ourselves credit for sometimes. We see ourselves as a second-tier market, but I think the perception in the rest of the country is that this really is a strong market to look at. Look at the Chase Manhattan move [Chase Manhattan recently announced a large expansion of its Tampa Bay operations]. We beat out Texas and other markets for that." While innumerable factors go into a corporation's decision to move to or expand in the Tampa Bay area, Rettig says the well-worn "quality of life" issue is still the one that gives the market its strength. "We have 12 months outside here. We don't have to deal with the seasons." Rettig says her own company considers the market has a "very strong industrial side. We have put up more than a half-million square feet of product in the I-75/I-4 corridor, and it is 100 percent leased out. We're finishing up another 100,000-square-foot distribution center and see no problems leasing it out." And Duke-Weeks will be going "to our investment committee with two more buildings. We're going to build two at a time next time," she says. Copyright ©  Maddux Report L.C. 2000