First quarter results show uptick in vacancy, negative absorption
Lee County Office Market
Lee County is regularly cited as one of the fastest-growing areas in the nation as measured by both population and job growth, but those gains have not translated by and large into the county’s office market in the past year.
Though the county may be experiencing little more than a pause after a significant surge in development and absorption in 2015, figures for the initial quarter of 2018 show vacancy rates ticking upward slightly, average rental rates declining, deliveries waning and positive net absorption falling.
As in other submarkets, some pockets have fared better than others. Bonita Springs, for instance, posts the county’s highest office vacancy rate, ay 9.8%, while South Fort Myers and San Carlos — an area three times larger — maintains a vacancy rate 300 basis points lower, according to data compiled by commercial real estate research firm CoStar Group.
The amount of available office space, on a percentage level, in Lee County at the end of the first quarter of this year. The rate edged up after 14 consecutive quarters of declines, down to 6.6%. Four years ago, by comparison, the vacancy rate stood at 13.3% in the county. As of March 31, vacancy was 6.8% throughout Southwest Florida, comprising Charlotte, Collier and Lee counties.
Average rental rate per square foot for office space throughout all classes in Lee County as of March 31. At the midpoint of 2014, the rate was $14.08 per square foot. Average rental rates across all classes throughout the Southwest Florida region were $14.98 per square foot at the close of the first quarter of the year, after peaking at $21.33 per square foot in 2007.
Amount of negative absorption, as measured in square feet, brought to the Lee County market during the first quarter. Negative absorption reflects space that is greater in supply than in demand. The negative absorption reversed a trend of 14 consecutive quarters of positive absorption, in which leasing activity took available space off the market. In the final quarter of 2015, by comparison, 347,854 square feet was positively absorbed in the county.
Total amount of office space, as measured in square feet, in Lee County as of March 31.
Amount of negative absorption, as measured in square feet, in Southwest Florida at the close of the first quarter. Previously, the region had experienced nine consecutive quarters of positive absorption.
Size, in square feet, of the largest new office lease in Lee County during the first quarter. Riverchase Dermatology’s commitment in 5220 Summerlin Commons Blvd., in Fort Myers, was negotiated by Cushman & Wakefield Commercial Property Southwest Florida and Crandall Commercial Group.
Size, in square feet, of the largest new office delivery in the first quarter. The two-story building, which broke ground last year, is located at 7964 Summerlin Lakes Drive. Year to date, 24,190 square feet of new office space has been delivered in the county.
Size, in square feet, of the only new office building under construction in Lee County in the first quarter. The building was 57% preleased prior to the start of construction. In all, there was 40,238 square feet of office space under construction as of March in the three-county area.
Source: CoStar Group