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David Stevens is a partner in the commercial brokerage firm Investment Properties Corp., one of Collier County's leading real estate companies that last year celebrated its 40th anniversary in business. A resident of Naples since 1968, Stevens has been an active commercial real estate broker since 1983 and earned the prestigious Certified Commercial Investment Member designation from the CCIM Institute in 1989.
How would you describe the commercial real estate market in Naples at the present time — healthy, robust, frothy, anemic?
I'd say it's healthy. Our market continues to show signs of steady growth and receive steady attention from people in other markets who are looking for investments. And with residential growth still strong, the area continues to enjoy the attention of retailers and restaurants and service providers who want to respond to, and be a part of that growth.
Which individual commercial real estate sectors are performing well? Which are lagging, and why?
We continue to have very favorable demand for retail, whether it be on Fifth Avenue or along U.S. 41 in downtown. Demand is exceeding the supply of people, so there's opportunity for development, in the event that you can find land to develop. We're seeing a lot of service-oriented retail, too — merchants that are Amazon-proof such as Starbucks, nail salons, and food, especially. You can't get your dry cleaning from Amazon, for instance. One softer component, oddly, is office absorption. Now, we did have a few major employers that essentially went dark and that impacted things dramatically. One was HMA, which essentially was acquired by another company that had its headquarters in Tennessee. Another went from occupying three large facilities to one, and as a result put 150,000 square feet on the market. In our market, that's a big chunk of space. And then Hertz, prior to their move to their new headquarters in Estero, had occupied a lot of space in the interim. The other thing that's happened in the professional world is that we're all becoming more nimble. Smart phones are increasingly becoming the center of most of our practices, so traditional conference and office space is not being utilized as much, and as such, office owners have not been able to grow rents and less space is being absorbed. Having said that, we're seeing of late some Pelican Bay office buildings getting more active.
Are there geographic pockets that are out-performing the market overall?
Fifth Avenue in Naples always has a spotlight on it, and of late, there have been some notable acquisitions and activity tends to breed activity, so it remains a focal point. And Fifth Avenue is Naples' signature address, so it continues to be a place where people visit and they're intrigued by it. Because of that, it commands among the highest rents in the area, thanks to the pedestrian activity and that sense of identity. But there are also projects now in areas that just a few years ago would have been considered the boonies. Today, though, the corner of Collier Boulevard and Immokalee Road is where all the people are. Also, there's a new office building at Pine Ridge Road and Interstate 75, and it's the first new office project that's being developed in a long time, like a decade. People are paying attention to that because the interstate is now Main Street for many larger employers.
What are the other overall trends influencing the Naples market?
Naples continues to follow most major markets, with the exception that with higher than average wealth concentrated here, the supply and demand curve is a little skewed, so cap rates tend to be more compressed and there's a shortage of property overall and high demand.
What's the most interesting deal you've worked on recently?
I'd say it's one I am engaged in now. The city has promoted the idea, with some logic, of expanding Fifth Avenue downtown. With the Hyatt Hotel and the continued development of the Naples Square project, there's a patch of about a three quarters of a mile. We're working on an assembledge that involves a vacant restaurant, an old bank building, a former florist shop that had a fire in it and land for parking. Across the street there are some vacant lots, too. If all that could be put together, then what? Well, a lot. The city has a 42-foot height restriction, but if you let your imagination run a bit, there's a lot one could do there.
What's the most challenging deal you've been a part of recently?
I think I'd give the same answer, and because the deal is in its infancy, I'd say it's likely we've not experienced all the challenges that might come with it yet. We're going to try and reinvent the development easel, so to speak, and look at things differently than what's been done here in the past. Hopefully it all goes smoothly and people are willing to embrace some new concepts with open arms.
What do you believe is the forecast for Naples and Collier County's commercial real estate markets for the balance of 2017 and beyond?
More of the same, just a steady -- I know I keep using that word, but it's so appropriate — and consistent stream of people moving here, which in turn spurs retailers and restaurants to want to be here in this market, too. I think we'll also see the typical challenges associated with making things work, but overall, things should remain healthy. One of the things driving that will be the cost of funds. Even with recent interest rate hikes, the percentage remains historically low. That has a lot to do with the health of a market, along with healthy housing sales. I don't see anything — other than maybe some crazy world event — that will negatively impact us.
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