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Need a big warehouse building in the Fort Myers area? You're probably going to have to build it yourself.
As the economy recovers, tenants looking for 10,000 square feet or more of modern warehouse space may find themselves with few choices and significantly higher rents.
The vacancy rate for warehouse space in Charlotte, Collier and Lee counties has fallen to 5.9%, down from 6.8% a year earlier, according to the latest data from CoStar Group. There hasn't been any significant new construction in years.
Riviera Beach-based food distributor Cheney Brothers is one of the firms that went its own way, with a distribution center under construction in Punta Gorda off Interstate 75 near the Punta Gorda Airport. Punta Gorda-based Florida Premier Contractors is building the first phase, which measures about six football fields. The facility has floor-to-ceiling heights of 32 feet, which allows the company to stack five pallets. The $41 million project includes a freezer nearly two football fields in size.
Even where warehouse space is available, it's usually outdated, and that's another reason for Cheney Brothers to build. “Today, a lot of the warehouses don't have the clear heights that are necessary for a distribution center,” says Warren Newell, new project development specialist with Cheney Brothers.
Some area officials hope the Cheney Brothers project will be the spark Charlotte County needs to gain a distribution hub identity for the region. “It's a real coup for Charlotte County,” says Ronald Struthers, a broker associate with Coldwell Banker Commercial NRT in Punta Gorda. “From Charlotte County you can service the whole west coast,” Struthers says. “It's a great distribution center area.”
Meanwhile, the lack of available warehouse space in the Fort Myers area has pushed up rents. Some tenants who signed leases during the downturn on favorable terms may be surprised at 20% to 30% increases in rents today, says Derek Bornhorst, senior vice president at commercial brokerage Lee & Associates in Fort Myers.
Matt Price, partner with Seagate Development Group in Fort Myers, says recent lease deals come close to the $8-per-square-foot rents net of expenses that may justify new construction. Also land for warehouse use is relatively inexpensive.
But a surge in warehouse projects hasn't materialized. “We're in a really interesting position in the market,” Price says. “Last year at this time I thought we'd be building (more) by now.”
Lee County recently raised taxes on new construction, also known as “impact fees,” but that may be only one reason for the delay of new warehouses in the Southwest Florida market.
“The construction costs are a little scary right now,” Price adds. “That's putting pressure on that $8 number to be higher.”
In addition, lenders remain conservative. “We're going to need the banks to buy in as well,” Price says. “Are they ever going to loan on spec?”
While demand for warehouse space has grown, developers may also be hesitant about the future of the economy. “Values and lease rates need to be going up, because if they don't steadily go up we'll find ourselves with absolutely nothing to lease,” says Todd Holman with commercial brokerage Woodyard & Associates in Fort Myers. “Once there's a shortage, rates are driven up very rapidly and real estate developers can't build rapidly. What you can end up with is a bubble situation.”
Bob Johnston, president of Lee & Associates in Fort Myers, points out one final reason for a delay in new warehouse construction. “The problem with this area is the lack of developers,” Johnston says. “We're not Orlando, Tampa or Miami.”
Follow Jean Gruss on Twitter @JeanGruss
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