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Jim Tamblyn, a senior associate in commercial real estate brokerage firm Colliers International's Fort Myers' office, has been focused on the Lee County market for the past decade. His primary focus is on the office market.
What's the overall state of the commercial real estate market in Lee County, and what's driving the market at this juncture?
The retail market here has been very strong for the past several years. Our industrial market has also proved to be very strong, too, and now, we are reaching a point where there is very little inventory available. In fact, we're at a point where we should be drifting toward speculative industrial construction, but to date, we haven't seen it. That's probably on the near-term horizon, but I think it will require additional strengthening of rental rates.
Our primary economic drivers, here as elsewhere in Florida, continue to be residential construction and tourism. We've seen both of those strengthen considerably over the past several years.
On the retail front, which is generally most affected by residential building and tourism gains, we've seen a lot of redevelopment of retail space, especially along U.S. 41. There are a lot of new restaurants being built and opening. Now, they're smaller in scope than a lot of other retail projects, but because they're multiple properties, overall they're having an impact on the market in terms of square footage.
The same has been true in Cape Coral and Bonita Springs. In both places, a lot of redevelopment has occurred in the last few years, so while we're not seeing a lot of new regional-oriented retail centers springing up, there's been a lot of infill development.
Is there any one sector that has stood out in Lee County over the past year as a top performer?
I'd say there are probably two sectors: retail has outperformed the market, and there's been a lot of new construction. Infill development has occurred primarily in established areas.
We're not seeing too many retail plays where building had gotten ahead of the growth path, and that happened a lot in the previous decade beginning in 2004. There's a Wal-Mart store now on Estero Parkway, and that's an example of a new store that's not ahead of the market. The other hot sector down here has been land. We've had a very strong showing here both in terms of sales volume and pricing.
What market sector has not been hot in Lee County over the past several months, and why not?
I'd have to say the office market here, while not unhealthy, hasn't had the same velocity as some. Transactions in the market have cooled, especially as compared to activity that occurred at the beginning of the year. And that's not especially unusual. So I'd say that of all the primary sectors here in Lee County, office has been the least strong of late.
Companies that grew in the last economic boom, they expanded to meet the market demand that existed at that time, and then when the bubble burst, they had to downsize significantly. I'm talking primarily about mortgage brokers, real estate-oriented law firms, title companies and the like. They all geared up to meet 100% of the demand that was well above historic levels last decade. So many of them, when they shrank, a lot of them decided not to grow back to their previous capacity. Taken together, that's had an impact on the office market here and on leasing activity.
What's the outlook for Lee County for 2016?
I believe we'll see a lot more of the same. Absent a significant increase in interest rates, we'll see continued growth and commercial property sales and sales of income-producing properties should remain strong. An interest rate spike would have a limiting factor on future sales, but the Fed has indicated they're not interested in doing that, so I think we should see the continuation of what has been a sustainable market here.
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