Commercial properties are being constructed at a rapid pace in Southwest Florida, area Realtors and developers say, a reflection of residential growth and a forecast of growth to come.
Recent studies focusing on commercial development consider Collier and Southern Lee counties as one market and note that in southern Lee County particularly, retail space has increased dramatically. According to the Lee County Department of Community Development, as of 2006 retail space in the Estero area alone measured some 4.4 million square feet, up from 1.45 million in 2000. In 2005, the most recent figures provided by Collier County planning officials, commercial space amounted to 2,823,824 square feet, including retail and office space.
Over the last 18 months the Southwest Florida commercial market has experienced a growth of about 35 percent increase in retail, with much of that growth in available restaurant space, says Dave Wallace, broker/agent with Premier Properties of Southwest Florida commercial division.
At the same time, the area has begun to attract new national retailers into the marketplace.
“Now we’re on the radar screen for national tenants,” Wallace said. He cites Ruth’s Chris Steakhouse, which has opened restaurants within Coastland Center mall in Naples and Coconut Point Mall in Estero. Whole Foods and Capital Grill are targeting Mercato in North Naples. Bass Pro Shop, which operates only regional stores, is in Gulf Coast Town Center in Estero and draws its customers from an estimated 100-mile radius.
“The growth in retail and the attraction of national chains is an indication of confidence in the intrinsic value of the Naples and Southwest Florida markets,” said Spencer Haynes, president of the Naples Area Board of Realtors. “These corporate retailers spend years in research with their planners before locating new facilities. They don’t respond to short-term fluctuations in the market, but instead they base their decisions on long-range outlook that responds to and anticipates residential growth.”
In addition to the new large centers – such as Coconut Point Mall, which will incorporate up to 1.2 million square feet of retail and 90,000 square feet of office space when completed, and Gulf Coast Town Center, with approximately 1.65 million square feet of retail, there is also growth in neighborhood centers throughout the area.
The four corners along Pine Ridge Road and Livingston, for example, are markets under construction, with a hotel, a Hooter’s restaurant, Perkins, a Harley Davidson dealership and more shops on the way within Marquesa Plaza at Pine Ridge Road and Livingston. There is new development along the Davis Boulevard corridor. Galleria on the northwest corner of Vanderbilt Beach Road offers an expanse of retail and office space. Naples Boulevard, which loops from Pine Ridge Road to Airport-Pulling Road, has seen a boom in the past few years, as a movie complex, Lowe’s, Best Buy and a myriad of restaurants and shops have grown up.
“When you look at Southwest Florida market in particular, it is a market of convenience,” said Scott Cameron of Cameron Real Estate. “We drive five blocks to the food stores. In other areas, people might walk. We drive through banks, and have drive-thru dry cleaners, drive-thru pharmacies and drive-thru liquor stores.”
And, he notes, planners prefer it that way. “Our community planners like that because it reduces traffic on the roads.”
Growth has its side effects. With so much space available, existing retailers and restaurateurs may shift their locations, leaving previously occupied spaces vacant. And, as market dynamics shift, there may be vacancies in new construction. That is not unexpected.
Wallace likens commercial development to road construction. Roads are needed to support growth, but there is a period of “inconvenience” during actual construction. As the commercial market grows, there will be some vacancies as businesses adjust to change.
He likens the growth process to road infrastructure. “It’s a temporary inconvenience for permanent improvements for anticipated growth. It is needed to sustain the inevitable growth.”
Another factor contributes to current vacancy rates in Collier County, says Michael O’Mara, broker agent with John R. Wood Realtors.
“In Collier County, we have a limited supply of commercial land,” he notes. “In the past we used to see residential development lead commercial development. Now developers are going in to acquire those properties and leasing in advance of residential development. It used to be that commercial centers didn’t go in until there were rooftops. Now competition requires developers to go in for permitting, lease and wait for residential to catch up.”
Wallace notes that the emergence of national retailers — while reflecting a positive attitude about the area as a marketplace — will also have an adverse effect on smaller retailers.
“Bass Pro Shop, for example, draws from the largest radius of any store in the country, up to 100 miles,” he said. “It draws existing customers from smaller businesses.”
It takes time for the market to adjust, he said. “I believe in ‘laissez faire’ — without controls the market will correct itself.”
Competition from areas in southern Lee County won’t hurt Naples in the long run, Cameron says. “Naples is an established market. It will always be a strong market.”
While the biggest boom in commercial growth has been in retail space, the market for office space continues strong.
“The strongest aspect for office is the office condominium,” said O’Mara, “especially by the medical and professional practices.”
Professional practices will generally prefer to build equity in real estate rather than having the expense of a lease. In addition, lenders offer attractive rates for office condominiums that are considerably lower than the rates for other types of investment properties.
Even so, Collier County would be considered a fairly small market, according to Cameron. A 100,000-square-foot office building is small in most markets, yet the Bank of America building in Park Shore is 80,000 square feet and other significant office projects fall in similar ranges.
In Collier County, industrial development doesn’t play a large role in commercial growth due to the scarcity of land available for industrial development coupled with the cost of the available inventory.
Overall, the health of the commercial market is good, real estate professionals say.
“Commercial activity has stayed strong in the past few years,” O’Mara said.
Growth is inevitable, Wallace notes. “Today is just a snapshot. It’s the big picture you’ve got to look at.”
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