By Daphne Shannon

The condo industry in Northwest Florida is abuzz. People are talking. But, to the surprise of many, the buzz isn't about Destin or South Walton County, or even recent "hot property" Perdido Key. The buzz is about Panama City Beach. Long decried as "past its prime" and viewed by many as the area's "dirty little secret," Panama City Beach, with almost 20 confirmed condominium projects in the works, is poised to go from stepsister to Cinderella in a very short period of time.

Jimmy Lewis of Lewis Development and Management Co. in Birmingham, Ala., has developed condominiums along Florida's Northern Gulf Coast from Perdido Key, Pensacola Beach and Navarre Beach to Fort Walton Beach, Destin and South Walton County. Now, he is developing Majestic Beach Towers on Panama City Beach's Front Beach Road.

"I've been building on this coast for 20 years. And all that time, we've been hearing that we're running out of beach—well, now, we've really gotten to that point. Yet, people still want to come to Florida and buy condos," Lewis said. "Honestly, I've combed the coast, and Panama City Beach is the last horizon of beachfront property. People go where the developers go, and right now, the developers are going to Panama City Beach."

Redevelopment is, according to most industry insiders, the key to Panama City Beach's boom of condo industry growth, as more and more old beach hotels are being bought and demolished to make room for new condo developments. For example, Majestic Beach Towers will replace the old Majestic Motel. "We bought an old, run-down property and are going to replace it with a great product," Lewis said. "Panama City Beach is at the economic crossroads where a number of old hotels have outlived their usefulness, and the gulf front they sit on is prime. Gulf front is really what people want, and that's what Panama City Beach has to offer through redevelopment. We're not pioneering here—we're rebuilding. You have to look past what it looks like now and think about what it will be."

Mel Leonard, director of building and planning for Panama City Beach, said, "What has worked against Panama City Beach for so long—the old, run-down hotels along the beach—seems to now be working for it. Since the coastline is running out of new development opportunities, developers are having to look at redevelopment. They are saying, 'Where can we make something work?' and Panama City Beach is the answer to that question."

Bob Warren, president/CEO of the Panama City Beach Convention and Visitors Bureau, agreed. "It's a prime opportunity. Real estate has really skyrocketed on our beach. We see this area as the area for growth in the state of Florida right now," Warren said, adding that one industry official recently estimated that there is $1.2 billion worth of construction in the works in the Panama City Beach area right now.

Garrett McNeil is vice president and director of operations for Cornerstone Development Group, developers of Sterling Beach, a condo complex currently under construction in the Panama City Beach area.

"Panama City Beach already offers a lot of what Destin has to offer—a beautiful beach, family attractions, shopping, etc., and the city is doing a fantastic job of trying to bring more tourists to the area. The area is experiencing a little bit of what Destin went through a decade or so ago. Right now is the right time at the right price in Panama City Beach. By placing Sterling Beach in Panama City Beach, we're able to offer luxury condos—large units with unbelievable amenities—and still deliver them to customers at a great price, allowing them to realize a great investment," McNeil said.

"We love the market—we're very high on it," he continued, adding that Sterling Beach will be completed in the first quarter of 2003 and that Cornerstone is already making plans for its next Panama City Beach condo property, Sterling Reef. He said the development was recently made available to Cornerstone's preferred buyers (those who have purchased through their development group before), and 90 percent of the units, representing roughly $28 million in sales, were sold almost immediately. "We obviously feel very strongly about Panama City Beach," he said.

Preparing For Growth

Thousands of new condo units in Panama City Beach are expected to bring hundreds of thousands more visitors, and some have questioned whether Panama City Beach is ready for that kind of evolution. As far as the city's physical structure is concerned, Lewis does not feel Panama City Beach will miss a beat. He said, "You're going to see a tremendous amount of influx, not only in properties, but also in the number of people coming to this area. But, one thing we really like about Panama City Beach is that because the city is not being newly developed, the infrastructure is already in place," he said, noting that Panama City Beach's three main roadway arteries—Front Beach Road, Middle Beach Road and Back Beach Road—serve the city very well. In fact, when asked what Panama City Beach would be like in five to 10 years, Lewis said, jokingly, "Destin, but with better roads."

Others are not quite as exuberant as Lewis, but they still feel that Panama City Beach has the tools needed to handle growth in a positive manner. Leonard deals with the inner workings of Panama City Beach's infrastructure on a daily basis and said he feels the city is prepared and is planning properly. "So far, there's still room to grow, and there's a certain level of impact already there because this is redevelopment," he said. "This influx of development will only heighten the city's infrastructure—we will have construction that meets codes, buried utilities, sidewalks, attractive landscaping—all positives for the city."

Don O'Donniley, director of development services for Bay County, emphasized that development itself must step up in order to assure that the area's infrastructure can keep pace with its growth. He said, "We do not currently have impact fees, aside from wholesale water impact fees, and that's going to factor into the equation soon—development is going to have to help pay its way."

Warren said, "We had the governor [Gov. Jeb Bush] in town the other day to speak to the TDC [Bay County Tourist Development Council], and he voiced concerns about infrastructure issues. We're completely broadening the scope of this destination, and we have to be prepared for it. We have to be able to make adjustments, and of course, we're looking for partnerships with development to do this. I think we have some problems, but we are addressing them. And, the positives will be tremendous."

Aside from infrastructure preparedness, some in the industry have wondered if Panama City Beach, with a year-round population of only around 5,000, truly understands the major changes that are around the corner. Tom Sparks is vice president of association operations for Edgewater Beach Resort Management and president of the North Gulf Coast Chapter of Community Associations Institute. Edgewater Beach Resort has been a condominium mainstay in Panama City Beach since its inception in the early 1980s. He said, "The majority [of Panama City Beach residents and longtime investors] are not aware of the huge changes we are in for. This is really an explosion of properties. Some people might say, 'Well, development's really just going to be on the beach,' but it will really affect our whole area. It's going to be a bridge to bridge phenomenon," Sparks said, referring to the fact that Panama City Beach is "bookended" by the Hathaway Bridge leading to Panama City and the Phillips Inlet Bridge that leads from Bay County into Walton County.

Warren agreed. "I'm not certain that they are totally prepared for this. The day-to-day person probably does not realize the extent of the development that is going to occur."

But O'Donniley said that because of extensive coverage by local media of the incoming development and the demise of many of the "mom and pop" beach hotels, locals may be more prepared than some think. "There's been quite a bit of coverage, especially in the [Panama City] News-Herald," he said. "They understand what's going on, and we have seen some opposition, specifically to the high rises—concerns of over-crowdedness, sort of a 'we'll be driven out of our house' attitude."

O'Donniley said he and other officials understand the needs of both sides and are working to stringently "follow the regulatory rules that are already in place" and "are looking at a new set of regulations" addressing issues such as height limits, zoning districts, set-backs, etc.

Lewis said, "I don't know if locals understand exactly what is coming down the pike. But, from what I can tell, these [developments] are being well received. I have not personally seen any of the anti-development sentiment, which is part of living in Florida, it seems. Some people want to close the door behind them."

Lewis said he doesn't feel Panama City Beach is taking on too much too soon. "I don't feel like we're over building. Markets can always change, but the well-located properties, especially, in this case, gulf-front properties, will always do well. What we are seeing is that the interest is there—supply meets demand."

Sparks said, "Of course, there's a little concern that it may be too many too quickly. And, to the retirees down at Laguna Beach [an unincorporated beach area west of Panama City Beach], the development is a bad thing. To them, this is the end of their quaint little village. But, it's all in your perspective. Certainly, so many of us know the great things this growth will do for our area."

What Does This Mean For PCB?

Ready or not, condo development is coming to Panama City Beach in a big way, and there's no doubt that it will have a huge impact on the city. Some in the industry have joked that Panama City Beach seems to be struggling with a split personality—is it the number one Spring Break Hangout in the World as The Travel Channel claims it to be, or is it an upscale, family-oriented beach resort destination? Well, the answer, according to some, is both—for the time being. While Panama City Beach has long had a love-hate relationship with its "Spring Break Headquarters" image (Spring Break does bring in more than 500,000 visitors in less than 40 days), it's obvious that officials are working to wean the city from its dependence on Spring Break and value-oriented customers.

"[Growth] has the potential to change the make-up of our visitors and get the highest and best use of our property," Leonard said. Lewis echoed those sentiments: "What this means for Panama City Beach is that development is going to bring in a better element."

Warren concluded, "Panama City Beach has always been a value-oriented destination and that may not be the case anymore. [In five to 10 years], what you are going to see is a destination that has grown, one that is seeing a new clientele, and a destination that has even more to offer in terms of retail, restaurants and attractions. We're going to see a destination that is maturing at a rate beyond any other destination in the state. I see a whole new Panama City Beach, a first class destination."
 

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