Being a middle market broker or developer isn’t easy. While the largest deals often occur in major cities due to the appeal of a prestigious address, smaller markets are sometimes overlooked. Yet, during a time of economic downturn, many of these smaller markets seem to be faring well compared to their big brothers and sisters — and the major players in these smaller markets are not afraid to boast of their selling points.

Southeast Real Estate Business recently spoke with some members of the brokerage and development community to discover their views of smaller markets. They include Bob Copty, president of Copty & Company in Roanoke, Virginia; Erin Ennis, managing director — North Florida with Advantis Real Estate Services in Tallahassee, Florida; and Clay Murphey, partner with Satilla Investments in Macon, Georgia.

SREB: What are the basic differences between working as a broker in a smaller market versus a larger market?

Copty: I think that our experiences are similar to those in larger markets. We tend to deal in smaller spaces and buildings compared with larger markets, but I think the activity and process is similar.

Ennis: One of the most interesting aspects of being a broker in a second- or third-tier community is that you need to have a broader base of skills. In a major metropolitan area, most brokers are specialized. In smaller markets like Tallahassee and Panama City, Florida, a good broker has to be able to do an investment sale one day, write a lease the next, and sell an industrial parcel the week after that.

A broker in a smaller market also has to complete many more transactions to match the income level of peers in major cities because they are generally doing leases that are 5,000 to 20,000 square feet as opposed to 40,000 to 200,000 square feet.

SREB: What does a second- or third-tier city have to offer that a first-tier city doesn’t?

Ennis: In general, the smaller markets have been insulated somewhat from economic shocks in the last year. I think the smaller markets are a little more insulated in the sense that the lows are not as low — but neither are the highs as high when markets are booming.

For Tallahassee and Panama City, much of the recruitment centers around lifestyle. For businesses relocating to North Florida, the driving force is the quality of life. Panama City offers easy access to the Gulf of Mexico and a relaxed quality of life. Tallahassee is near the coast and has universities that are very attractive. It also offers a vibrant, well-educated and young community. These areas also don’t have traffic congestion like major markets.

Copty: The quality of life that a smaller community offers is a great advantage. We feel that the future is extremely bright for communities like Roanoke. We have a magnificent quality of life, and a company can be very efficient here. The commute time from residential areas to the center of the city or to the vast array of cultural opportunities is just 10 to 15 minutes. Several colleges and universities are also nearby. We’ve been ranked consistently among the best places in America to live and retire, and it certainly is one of the best places in America to do business.

Murphey: I think Macon offers a slower pace of living with a unique small-town perspective. We have a central location on the interstate system at Interstate 75 and at Interstate 16. We’re 2 hours from both the beach and the mountains, and I think our proximity to Atlanta is also a benefit. We are close enough to travel to Atlanta for an evening and still come home the same day.

The cost of living is also much lower in Macon, so it doesn’t cost as much to do business here. We’ve got a good base of employees and some great colleges and universities here as well.

SREB: What are some of the challenges that a broker or developer might face in a smaller market that they would not contend with in a larger market?

Ennis: A challenge for us is educating people about the benefits of a small city. There are also air transportation issues in that the routes are limited and it’s more expensive to fly out of smaller airports.

Copty: I think the frustration for our market has been that we have lost tenants to larger communities. There has been some, but very limited, relocation of companies from more dynamic markets to ours at a cost savings. A lot of companies perceive that it is hard to attract top talent to small communities, so they feel it’s important to have their headquarters in a large city and at a prestigious address.

We used to have rather large banks in our community that were either committed to the Roanoke Valley or housed here. But with all of the banks and financial institutions that have merged, it is more complicated to find capital. In a lot of cases, we are working with decision makers and lenders that are no longer in the community. And it’s just another step and another frustration to go through. I think continuing to have the funding to grow projects is certainly one of the challenges of a smaller market.

Murphey: Even though you can reach Atlanta’s airport from Macon in about the same time as someone from north Atlanta, people want that quality of life that they think a city like Atlanta brings. Large companies don’t look to locate or relocate in our community.

Being in a small market and in tight financial times, lenders want to know who your credit tenants are. In a small market, you don’t have Fortune 500 companies, so you have to go to a lender and first educate them about your tenants.

 

New Developments in Second- and Third-Tier Cities Roanoke: Riverside Centre for Research and Technology in Roanoke, Virginia, is a three-phase development on South Jefferson Street that will include 1 million square feet at build-out. It is being developed by the City of Roanoke Housing Authority, and its first building, the 50,000-square-foot Carilion BioMedical Institute, is currently underway. Macon: Gateway Plaza is a 110,000-square-foot, six-story, Class A office building currently underway in the 300 block of Mulberry Street in downtown Macon, Georgia. The developer is Satilla Investments, and the delivery date is planned for spring 2004. Gateway Plaza is the first office building to be built downtown since 1980. According to Clay Murphey and Jeff Jones, partners at Satilla Investments, the development has been well received and is already 65 percent pre-leased. A mixed-use riverfront development is also being planned for downtown Macon. It will be a 5-year, $70 million project, and proposals from developers are currently being accepted. Northwest Florida: The St. Joe Company is currently developing many projects. Key developments include two projects in Northwest Florida, WaterColor and WaterSound. WaterColor Crossings is a 499-acre coastal resort and residential community in south Walton County. At build-out, the community will include 1,140 residences, a 60-room inn and 100,000 square feet of commercial space. Nearly half of the site will be devoted to open space and preservation areas. WaterSound is a master-planned resort and residential community under development in Northwest Florida. It will include 499 residences, a village center, community gathering spaces and landscaped parks.

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