Forecast 2021: Commercial real estate strong in Southwest Florida

Experts predict commercial real estate to improve next year.

Lee & Associates
Published in Naples Daily News 6 a.m. ET on December 28, 2020
2021 should be a strong year for commercial real estate in Southwest Florida.

Commercial real estate in Southwest Florida is in an enviable position – relative to the rest of the country – and it’s poised to improve next year.

Consider these key contributors: a growing population, plenty of land for future development and new roads are under construction. Plus, the cost of doing business is significantly lower than high-tax northern states.

Any way you look at it – vacancies, rents, absorption – the resilience of commercial real estate in Southwest Florida is setting the stage for a healthy 2021.

“The overall outlook is surprisingly positive for our community,” said Claire Searls, who closely follows the data trends as director of research for Lee & Associates brokerage in Southwest Florida.

Claire Searls, director of research for the Fort Myers and Naples offices.

Searls said the healthiest sector in Southwest Florida is industrial warehouse space, which is benefiting from the growth in online shopping and the busy homebuilding industry. But even the retail sector is relatively strong as people continue to visit stores. “Our area is somewhat cushioned and insulated from the downturns in other parts of the country,” she said.

Experts with Lee & Associates recently presented brief forecasts of the main commercial real estate sectors in Southwest Florida. View the latest quarterly market analyses at www.lee-fl.com and click on “Market Research.”

Industrial space: Rents will rise

Logistics companies related to the homebuilding trades and retail distribution have been gobbling up warehouse space throughout Southwest Florida, lowering the vacancy rate to just 3.6%. What’s more, the cost of new construction has spiraled upward and developers have been cautious about building too much speculative space.

All this means one thing: “We are starting to see an increase in industrial rents, it had to happen,” said Jerry Messonnier, principal with Lee & Associates. He estimated industrial rents will rise 15% to 20% over the next five years across Southwest Florida.

Even as vacancies remain tight, supply and demand are in relative balance for now. “The industrial market is going to have a nice steady growth rate over the next five to 10 years,” said Messonnier. “Most of the people we’ve talked to seem to be in an expansion mode.”

Jerry Messonnier, SIOR, principal, Industrial Division.

Apartments: More coming

Population growth is also fueling the demand for apartments. Meanwhile, rapidly rising single-family home prices may force some people to continue renting until they can afford a down-payment to purchase a home.

“Lee County is averaging 2,000 new residents per month and 20% of them are renters,” noted Thomas Webb, director of multifamily and senior vice president at Lee & Associates.

Observers are watching closely how well new apartments under construction in the area of Colonial Boulevard and Interstate 75 in Fort Myers are going to fill up next year. In some cases, Webb said that new apartments have filled up faster than developers anticipated, suggesting continued strong demand.

Webb will be keeping a close eye on the job market this winter, particularly in the service industry. “That’s going to have an impact on what many workers can afford,” Webb said.

Thomas Webb, CCIM, MSRE, director of Multifamily Investment Division.

Offices: Corporate relocations

With the benefit of work-from-anywhere technology, entrepreneurs are moving their companies out of crowded high-tax cities, such as Chicago and New York, to lower-cost areas like Southwest Florida.

“They’re moving their house, their business – everything,” said Michael Mahan, vice president with Lee & Associates. “Florida is booming with people relocating.”

Mahan ticks off the advantages relative to big cities: low taxes, relatively low office lease rates, less congestion and large blocks of available Class A space. “From a corporate standpoint they’re saving money,” Mahan said.

Still, Mahan cautions that companies may not need the same amount of office space as before because of the work-from-home shift. Despite this, it’s a healthy sign that there’s not much sublease space on the market because people will be returning after a COVID-19 vaccine is distributed.

Michael Mahan, vice president, Office Division.

Retail: Few vacancies

While shopping centers nationally are struggling, Southwest Florida’s retail market has been resilient, as evidenced by a relatively low vacancy rate.

“We’re not really having a retail apocalypse in Southwest Florida,” said Bill Young, senior vice president with Lee & Associates. “Most of our centers are doing OK, considering the drop off in overall store traffic and dining out at restaurants. All of the tenants we speak with are bullish for 2021.”

As a result, Young forecasts that rents and vacancies will remain stable through the first half of next year. He noted that the winter tourism season is well underway as evidenced by the marked increase in traffic on the roads.

Consumer confidence will improve even further by the third quarter of next year. “I see it getting better because the COVID-19 vaccine is coming out,” Young said.

Bill Young, senior vice president, Retail Division.

About UsThe Local Real Estate Experts

The Naples – Ft Myers office was established in 2011 in response to the explosive growth in Southwest Florida and is now recognized as one of the most successful commercial brokerage firms in Southwest Florida. We are backed by the resources of the largest broker-owned firm in the nation. Each of our nationwide Lee & Associates offices has a strong local ownership combined with a powerful platform from the national network which includes 59 offices and nearly 1,000 brokerage professionals. These resources, combined with the office’s in-depth research capabilities and cutting-edge technology, enables our professionals to offer their clients the highest level of service in the industry.

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