Naples and surrounding areas' offices are outpacing the rest of Southwest Florida
Like many Florida submarkets, Collier County’s office sector has largely rebounded from the impact of last decade’s recession.
Office vacancy in the county has declined by more than 200 basis points from four years ago, and rental rates have edged incrementally higher.
On the investment side, cap rates have compressed proportionally, and new construction has taken root — though much of the new product is smaller and less speculative than that of a decade or more ago. But unlike the balance of Southwest Florida, Collier County’s office market enjoys a pedigree not found elsewhere, the result of an abundance of wealth in Naples and its outlying areas that fuels much of the development of Class A office space.
Just as significantly, leasing activity in the county has ramped up measurably in 2018, with large blocks of space throughout the county absorbed during the first two quarters of the year, according to data compiled by commercial real estate research firm CoStar Group.
The amount of available office space, on a percentage level, in Collier County at the end of the second quarter of this year. The rate has edged up after reaching a nadir of 5.1% as of September 2017, reversing a downward trend begun at the close of 2014. At that time, the overall county vacancy rate was 10%. By comparison, the vacancy rate for all of Southwest Florida stood at 7.4% as of June 30.
Average rental rate per square foot for office space throughout all classes in Collier County as of June 30. Surprisingly, despite the solid economic activity that the county has experienced for the past several years, the quoted rate is only slightly higher than at the midpoint of 2014, when it stood at $19.88 per square foot. On a recent historical basis, rental rates peaked in the second quarter of 2017 at $20.76 per square foot. The three-county Southwest Florida region’s rate, by comparison, was $15.03 per square foot during the same period.
Amount of positive absorption, as measured in square feet, in Collier County in the second quarter. Though scant, the absorption reversed the trend of the two previous quarters, when combined the county had negative absorption — more space on the market than was removed through leasing activity — of 110,821 square feet.
Total amount of office space, as measured in square feet, in Collier County as of June 30. By comparison, the amount is less than half that of the county’s northern neighbor of Lee County.
Amount in square feet of the largest office lease in Collier County in 2018. Naples Heart Rhythm leased space in the Brennan Medical Building, a two-story medical office building, at 730 Goodlette Road North, in the Commons Professional Park.
Number of new office buildings under construction in Collier County at the close of the second quarter. In all, the four buildings contain 17,520 square feet. Combined, new space was 68.6% pre-leased prior to construction.
Size, in square feet, of the largest new office delivery in the second quarter in Collier County. The single-story building, which broke ground last year, is located at 1390 Tamiami Trail North. Developed by Integral Building Corp., the building is now fully committed.
Size, in square feet, of the largest new office building under construction in Collier County at the end of the second quarter. The 875 109th Ave. building is expected to be completed during the third quarter of this year.
Average price per square foot of Class C office space in Collier County as of June 30. By comparison, in all of Southwest Florida — comprising Charlotte, Collier and Lee counties — the quoted rate for older space with few modern amenities or finishes is $12.21 per square foot. Perhaps surprisingly, the vacancy rate for this space stood at 3.2% as of June 30, spread over 221 buildings.
Average price per square foot of newer Class A office space in Collier County at the end of the second quarter. By comparison, Class A space — defined as properties less than 25 years old containing modern amenities — elsewhere in Southwest Florida rents for a quoted rate of $17.01 per square foot. Collier’s Class A rental rate is the highest in the three-county area, perhaps owing the shortage of supply: The county has just 35 Class A buildings in all, containing 1.91 million square feet.