The rush is on
commercial real estate by Jean Gruss | Editor/Lee-Collier
Commercial real estate brokers and developers have seen the recent growth in Southwest Florida. They want in on the action.
The commercial real estate business in Southwest Florida is getting a lot more crowded.
Once a sleepy backwater of Florida, it's no secret that the area spanning Charlotte, Lee and Collier counties is experiencing a commercial real estate boom. Last year, for example, two new malls added more than 3 million square feet of shops in southern Lee County alone. That's roughly the size of 52 football fields.
Commercial brokerage firms with national reach such as Cushman & Wakefield, Colliers Arnold and Sperry Van Ness are opening new offices and recruiting well-established local brokers.
And another sign that the Southwest Florida commercial real estate market is maturing is that CoStar Group last year started providing data for this region. CoStar is a national firm that tracks commercial real estate space in large metropolitan areas around the country and sells the information to brokerage firms.
Meanwhile, out-of-town developers have been moving into the area with projects ranging from shops to offices and industrial buildings. They include Opus South of Tampa, EastGroup Properties of Jackson, Miss. and Songy Partners of Atlanta, among others.
On the brokerage side, Cushman & Wakefield recently named Gary Tasman, formerly with VIP Commercial in Fort Myers, to head up a new office that includes three other brokers and a three-person administrative staff.
Colliers Arnold beefed up its Fort Myers office from two people a year ago to 21 today. The firm is negotiating to move into larger offices in Fort Myers later this year.
The ranks of brokers at Sperry Van Ness also are growing. Five years ago, Mark Alexander was the only Sperry Van Ness broker in Fort Myers. Today there are seven.
To be sure, several national brokers already have a presence in the Southwest Florida market. CB Richard Ellis and Coldwell Banker Commercial have had operations for years. But this new wave of firms with national reach and affiliations comes at a time when commercial development is booming, even as residential construction has slowed significantly.
What's more, well-entrenched local brokers are likely to compete effectively. Case in point: Frank D'Alessandro, a founding partner of Gates D'Alessandro & Woodyard, has been a dominant broker in Lee County for 26 years. In the 1990s, D'Alessandro helped establish Grubb & Ellis' presence in Fort Myers.
"They found out this wasn't quite the market for them and they pulled stakes," D'Alessandro notes.
Clients want to be there
Firms such as Cushman & Wakefield and Colliers Arnold say one reason they're expanding in Southwest Florida is because their existing clients want to be in the area that includes Fort Myers, Cape Coral, Bonita Springs and Naples.
"Over the last five years, there's been an ever-growing need of our clients to be there," says Larry Richey, senior managing director at Cushman & Wakefield in Tampa. "That's how we've gotten to know Gary Tasman and his team."
Richey says he has referred clients to Tasman at VIP Commercial in recent years but he says business has grown to the point where Cushman & Wakefield needed to establish an office in Fort Myers. Tasman left VIP Commercial to join Cushman as executive director of the Southwest Florida office.
Clearwater-based Colliers Arnold has been hiring more brokers in Fort Myers in part because clients the firm is helping in Tampa and Orlando also want to be in Southwest Florida. "We're picking up [clients] in Orlando and Tampa whose goal is to eventually cover the I-4 and I-75 corridors," says J. Patrick Duffy, president of brokerage services for Colliers Arnold.
"I sent four assignments there today from Tampa Bay," Duffy says. "[Fort Myers-based broker] Jim Garinger just listed an $80 million mixed-use project which was sent to him by our Clearwater office."
Retail, land and apartments
For now, the office and industrial markets of Southwest Florida are small relative to those in Tampa, Orlando and Jacksonville. According to CoStar Group, there's about 19 million square feet of office space spread throughout Charlotte, Lee and Collier counties. That compares with 41 million square feet in Hillsborough and Pinellas counties, according to Cushman & Wakefield.
"What we really think the compelling reason is what's happening in retail, land and multifamily in Southwest Florida," says Richey. "Because the population is growing at such a fast pace and because of the full-time residents and tourism growth, all those types of residential or resort-type developments drive a lot of the opportunity down there."
Although shops and apartments are likely to lead the market, Colliers Arnold's Duffy says there are opportunities with office and industrial space as well. "Clearly, retail is going to continue to explode," he says.
But low vacancies in both office and industrial space (see chart) will continue to attract attention. What's more, Duffy expects more businesses will migrate from the east coast of Florida, especially from Miami, as available land dwindles.
"This is no longer a small market," says Richard Clarke, the newly appointed vice president at Opus South in charge of Fort Myers. He cites Lee County's population surge above 500,000 last year as a catalyst for growing interest in the region.
Clarke is scouting sites along Interstate 75 to develop industrial buildings. He's also looking for land in Cape Coral to develop commercial projects. Already, Opus South is planning to build a 244,000-square-foot shopping center in Fort Myers called The Shoppes at Gulf Coast and it has a residential condo project in the pipeline in Naples for when the residential market rebounds.
Meanwhile, real estate investment trust EastGroup Properties plans to build as much as 875,000 square feet of industrial space near the intersection of Ortiz and Laredo avenues in Fort Myers. And off Colonial Boulevard near I-75, Songy Partners is developing 360,000 square feet of offices in six buildings at the Forum Corporate Park.
The local edge
The new entrants to Southwest Florida are recruiting local brokers. "In the last couple of years, I can't think of any new commercial brokers who came in with one of these new firms," says D'Alessandro.
It makes sense. After all, real estate is an intensely local business that relies on a brokerage firm's connections and knowledge of what's available for purchase.
D'Alessandro says Southwest Florida is not likely to gain the same status as Tampa or Orlando anytime soon. "The reality is that we are a secondary market and we'll always remain a secondary market," D'Alessandro says. One reason is that Southwest Florida doesn't have a deepwater port. "Of course we'll grow, but the reality is that we won't be a primary market," he says.
For that reason, D'Alessandro says some of the national firms will eventually leave the area, though he won't speculate which ones will. "There will be some fallout," he says.
But Colliers Arnold's Duffy says Southwest Florida is not unlike the Tampa Bay area 15 years ago, when the national brokerage firms started becoming a force there. At the time, Arnold affiliated itself with the national Colliers brand.
"For a corporate user who likes to use the same company all over the United States, if you're not linked, you're not going to get that business," Duffy says. "National platforms don't allow second-tier brokers into their companies," he says.
Trend. Commercial real estate brokers and developers are targeting fast-growing Southwest Florida.
Industry. Commercial real estate.
Key. Companies with national reach are expanding into Southwest Florida markets.
Southwest Florida Market Snapshot
Commercial real estate brokers and developers are targeting the Southwest Florida region, which encompasses Charlotte, Lee and Collier counties. Here's a snapshot of the region by property type according to CoStar Group.
Total area (square feet): 19.4 million
Percent vacant: 4.7%
Net absorption in 2006 (square feet): ?316,753
Average asking rent per square foot (triple-net): $18.99
Total area (square feet): 37 million
Percent vacant: 2%
Net absorption in 2006 (square feet): ?460,210
Average asking rent per square foot (triple-net): $7.75
Warehouse/office "flex" space
Total area (square feet): 2 million
Percent vacant: 8.2%
Net absorption in 2006 (square feet): 49,629
Average asking rent per square foot (triple-net): $10.91
Total area (square feet): 24 million
Percent vacant: 1.6%
Net absorption in 2006 (square feet): ?200,538
Average asking rent per square foot (triple-net): $20.01
Total area (square feet): 30 million
Percent vacant: 3.2%
Net absorption in 2006 (square feet): ?5,626
Average asking rent per square foot (triple-net): $17.39
Source: CoStar Group