The northwest corner of U.S. 41 and College Parkway in Fort Myers may be located at one of the busier intersections in town, but it wasn't a happy place during the real estate bust.
As many 100,000 cars pass the intersection each day, but the retail corner remained unloved as tenants vacated it during the crash. Dan Creighton was one of those who would drive by, always wondering in the back of his mind why that corner was failing despite the high traffic.
“It's like a rock in your shoe,” says Creighton, a Cape Coral-based developer who paid $3.5 million for the 57,000-square-foot property in 2010.
Now, Creighton says tenants on parcels fronting U.S. 41 are paying north of $30 a square foot net of expenses. “We're getting really strong rents,” he says. The plaza's tenants include West Marine, Pet Supermarket and burger purveyor Five Guys.
He's even jumping into the grocery business, buying Ada's Natural Market. The organic-food market will move into Creighton's plaza at U.S. 41 and College from its current location on U.S. 41 near Page Field and will be run by his wife, Heather Creighton.
Creighton says he's spending $1.5 million to move Ada's, which will open at the new location on Nov. 1. Ada's has a loyal clientele of organic-food lovers who can't find this kind of produce at most stores. “It's been very profitable,” he says.
But back in 2010, it was still unclear if the country would ever emerge from the recession. “People sat on the sidelines out of fear,” says Creighton, CEO of Creighton Development and Construction.
Creighton was an early risk taker, however, jumping in to secure commercial land and buildings on busy thoroughfares throughout Lee County surrounded by well-established residential neighborhoods. His philosophy: “Good property will stand the test of time.”
The California native survived the downturn by building Walgreens drugstores and 7-Eleven convenience stores, projects that didn't stop during the recession. Today, Creighton and his business partner Brent Evans have some 30 projects underway, mostly in “infill” areas that are surrounded by areas full of residents.
Creighton signs are visible at many prominent intersections in the region.
Banks are financing many of Creighton's retail projects, including Fort Lauderdale-based Stonegate Bank and Naples-based First National Bank of the Gulf Coast. “Non-recourse financing is back,” says Creighton.
Non-recourse lending means the borrower isn't personally liable for the loan, but the property is secured by the real estate collateral. This signifies that banks are more confident about the underlying values of commercial real estate and suggests they're easing lending requirements.
Retailers have raised capital and some of that cash is sitting idle in money markets earning meager returns, so there's pressure to build new stores to generate higher yields. “They need a return on that investment,” says Creighton.
With the recovery in general economic conditions in the Fort Myers area, consumers are in the mood to spend again. “There's so much pent-up demand,” Creighton says.
Retailers are Back
Shops are gobbling up space in the Fort Myers-Naples area, pushing down vacancies and spurring new development as rents start to rise again.
Data from market tracker CoStar Group shows retailers have absorbed about 875,000 square feet of space in the area that includes Charlotte, Collier and Lee counties over the past year. That's enough space to fill 15 football fields.
The vacancy rate in the region has dropped from 8.1% in the third quarter of 2012 to 7.4% in the second quarter of this year, according to CoStar. That's even as a total of 452,255 square feet of retail space has been built in Southwest Florida over the past year.
“The sun is starting to shine again,” says Dougall McCorkle, an associate with Premier Commercial in Naples.
Naples is commanding some of the highest rents in the region, with asking rates on tony Fifth Avenue in downtown Naples seeking $45 to $55 a square foot net of expenses, McCorkle says. During the downturn, rents had fallen to $25.
Even locally owned businesses are adding locations again. “Those that survived the downturn are finally starting to make money again,” McCorkle says. “Naples has always been a little lucky because we've got higher net worth individuals who want to open up their own business.”
But it's happening throughout the region as local entrepreneurs are leasing space. “That's something we haven't seen in the last five years,” says Karen Johnson-Crowther, managing director and principal at Colliers International in Fort Myers.
National companies are eyeing markets such as Fort Myers and Naples, tertiary areas that were ignored during the downturn. Relatively low land costs are attracting many retailers who couldn't afford to buy during the boom, says Jim Boback with Boback Commercial Group in Fort Myers. “Land is kind of back in vogue because things are starting to happen,” he says.
Some retailers will come in and build their own space. “Wawa is going enter the market,” says Bill Young, senior associate with CRE Consultants in Naples, referring to the growing gas-station chain. “They'll probably come in and want to do 10 locations right off the bat.”
Restaurant chains such as Culver's, sports equipment stores such as Dick's Sporting Goods and grocery chains such as Aldi and Wal-Mart are scouting sites in the region, brokers say.
For now, retailers want well-established locations that have existing residential developments. They're not interested in building any stores where future growth is anticipated. “It's too early in the cycle,” says Gary Tasman, executive director with Commercial Property Southwest Florida in Fort Myers.
Developers likely won't build retail centers without leasing the space in advance, so don't expect a construction boom that could lead to overbuilding. “Rents are growing a bit, but not at the rate that will justify speculative development,” says Tasman.