This is a milestone of sorts for the Business Observer's annual economic forecast issue: It's the second year in a row that cautious optimism isn't the overriding theme of the day.
President, Owen-Ames-Kimball Co. | Commercial construction
Company: David Dale says his commercial construction company likely will post revenues of $50 million, roughly the same as 2015. “We're doing a lot more infrastructure, aviation, heavy civil work than we have traditionally in our mix,” Dale says. “We've always done that, but our balance is a little more there because there's still a lot of commercial property that hasn't been absorbed.” Existing buildings need to fill up with new tenants paying higher rents to justify new construction. “We're doing a lot of tenant finish and build-out work.”
Industry: The commercial construction industry has recovered from the collapse. “I would think everyone is doing fairly well and the folks who are left are very busy,” Dale says. That has put pressure on the availability and cost of labor for commercial contractors, especially if they're competing with active homebuilders. “Masons and drywallers are in very high demand right now because we share the same resources with the residential guys,” Dale says. Meanwhile, subcontractors are reluctant to hire more people because memories of the downturn remain fresh in their minds, he says.
Region: The challenge of regional growth is keeping up with it. “One of the restricting factors is to get some of the infrastructure pushed out. Roads and bridges have to be in place and in good shape,” Dale says. “We're a bit behind the curve on some of that.” Still, he's encouraged by projects such as widening Interstate 75 from the northern area of Lee County to Charlotte County. Together, Charlotte, Collier and Lee counties have a population of about 1 million people, which should continue to attract companies from outside the region. “I know the economic development office and the regional group that's been put together have really been trying hard,” Dale says.
President, Southwest Florida, Bank of America | Banking
Company: Gerri Moll oversees $4 billion in deposits at Bank of America's Lee and Collier offices and she says strong loan production will likely continue next year. “It's across the board,” Moll says, ticking off the industries that are borrowing for expansion: health care, real estate, manufacturing, hospitality and tourism. “I think it will be as good as this year if not better.” In addition, Moll oversees a combined $6.5 billion in assets under management at related wealth management firms Merrill Lynch and U.S. Trust. Combined, the financial giant operates 47 offices in Lee and Collier so Moll has a good perspective on hot areas. She says growth is especially strong in the area between Fort Myers and Naples, which includes Estero, Bonita Springs and North Naples.
Industry: The consolidation in banking will likely continue into 2016, as evidenced recently by Bank of the Ozarks' proposed acquisition of C1 Bank in St. Petersburg. “I certainly understand why they would want a foothold in Florida. The demographics are attractive,” Moll says. “We expected to see increased consolidation including in banking and that's starting.” Interest by out-of-state banks in Florida is a positive sign. “It's a strong statement about the overall recovery in Florida,” she says. However, Moll notes that bank valuations still remain lower than they were during the boom years.
Region: Strong demand for residential real estate will continue to drive regional growth in 2016. “Demand seems to be outstripping supply, particularly along the coastal corridors,” Moll says. “There's not a tremendous amount of development land, especially in Collier. We're reaching the boundaries of the urban area.” That's pushing growth north of Collier into Lee County. Moll is especially enthusiastic about Florida Gulf Coast University on the east side of Interstate 75 in Fort Myers.
“The university has been a great catalyst for growth,” says Moll, who was a founding trustee of the university. “I remember being there for the groundbreaking [in 1995] and it felt like the middle of nowhere.”
CEO, Madhav Group | Hospitality
Company: Aashish Patel says his company recently purchased three airboats and a swamp buggy to its fleet in Everglades City to handle what is likely to be another strong year for tourism. In addition, he anticipates another strong year of occupancies and rate growth at the four hotels he and his family operate in the Lee and Collier areas. “It's looking like a strong year and the economy has rebounded well,” Patel says.
Industry: The hospitality outlook remains bright, but Patel says he's concerned about forecasts of a warmer winter in northern states. “Weather is a huge, huge part of it,” he says. “If we see more El NiÃ±o, we may have a warmer winter up north which would translate to a less than impressive season.” To a lesser degree, Patel says he's also concerned that Easter will be celebrated March 27 next year, earlier than April 5 this year. “We always like to see a late Easter,” Patel says. “It extends our season.”
Region: The presidential election should help boost the region's fortunes next year. “Florida is a key battleground state,” Patel says. “Get ready for a busy year because a lot of money will be pouring into Florida because of the election.” In addition, early indications of airport traffic and visitation projections show another strong year for the region. However, Patel is more concerned about 2017 and 2018 because hotel executives have indicated to him that the economy may experience slower growth.
Managing partner, CRE Consultants | Commercial real estate
Business: Sandelli forecasts continued strong demand for commercial real estate in Southwest Florida as the recovery continues. “On the leasing side we're anticipating it will be as good as or better than this year,” he says. Sandelli says 2016 sales could be as strong as 2015 if there's inventory for sale. “There's so much money chasing so little product, are you going to see the opportunities present themselves?” he wonders.
Industry: Commercial real estate will continue to attract attention, especially with large users of corporate office space expanding in the area. Companies are scouting sites outside first-tier markets such as Miami. “That validates the fact that people are looking at a third-tier market” such as Naples, Sandelli says. Still, Sandelli doesn't expect new commercial real estate firms to plant their flags in areas such as Fort Myers and Naples that are already well served by local commercial brokerages that work with national firms.
Region: Areas such as Fort Myers and Naples continue to attract year-round residents and companies, boosting the economy during the traditionally slow summer months. “What that's doing to our economy down here is we're morphing into a full-time operating community. That creates opportunities for business,” Sandelli says. “We're seeing existing tenants that are expanding. Some of these are solid companies are looking to grow within the market.” That has attracted deep-pocketed investors, too. “In our market, we're seeing more institutional influence but a lot of the properties are owned by individuals with wealth.” The national elections next year and the pace of the recovery concern Sandelli. “I still think the economy is moving in the right direction, but it's still painfully slow. There are so many issues going on in the world,” he says.
Len Zaiser IV
President, Azimuth Technology | Manufacturing
Company: Weapons manufacturer Azimuth Technology says it expects to increase sales by 60% next year as it doubles the size of its manufacturing facility in Naples to 46,000 square feet. “The outlook is extremely positive for us,” says Len Zaiser IV, president and co-founder of Azimuth Technology. Azimuth manufactures precision parts for handgun and rifle producers, and Zaiser says the prospect of tighter weapons laws in the U.S. likely will push sales. “The second driver is all the instability around the world,” Zaiser says. “A lot of our products go overseas for our allies.” Besides, European countries have made it harder for weapons manufacturers to operate there because of the unfavorable political climate. “It's driving business our way,” he says.
Industry: Manufacturing on the Gulf Coast is centered on specialty parts and Zaiser says his industry peers are seeing strong demand for their precision products. “The concerns for many is recruiting skilled labor and talent,” Zaiser says. A strong dollar is not as much of a handicap as some have suggested because there are currency advantages now to buying manufacturing equipment overseas. If the Florida Legislature approves extending the sales-tax break on manufacturing equipment, Zaiser says that could further boost capital spending and job creation.
Region: Collier County's manufacturing economy is running into the same challenges that face most growing firms: the lack of land for development. “My biggest concern in Naples is room for future expansion,” says Zaiser. “There are so many companies that want to and could move down to this area if there was room, land and buildings for them.”
For more data on the Gulf Coast's economy, see our by the numbers charts.