Southwest Florida’s office market bucks national real estate trends

Nationwide office space is a “wild card,” but in Southwest Florida it’s set to thrive.

Further business confidence in the southwest Florida office sector is evidenced by tenants undertaking costly build-outs to newly leased spaces.

Economic disruption happens daily but is rarely all-encompassing. Commercial real estate, as in other commodities, will have sectors showing outstanding resiliency, those which will experience painful turbulence, and a whole lot of gray areas in between. Unique pressures on certain product types will actually lead to distinct opportunities. Smart investors will wait for the dip and jump in.

Positive change has occurred in the following real estate sub-sectors which have thrived in the past 12 months:

●      Warehouse and distribution centers benefitting from a notable   increase in e-commerce

●      Retail centers and spaces with a grocery focus

●      Restaurants with a model centered on delivery and pick-up

●      Data Centers

Experts have diverse and competing opinions about the office sector, which remains the “wild card” as businesses make pressing decisions regarding remote work options and corresponding space needs. Southwest Florida, however, is on the positive side of that discussion.

Wise investors look for an opening, and southwest Florida may be where it is.

Across the nation and especially in large cities, the office sector has seen a notable pause in activity — a characteristic which many naysayers believe could be the precursor to occupancy loss. An exception is Facebook, which has acquired more than 2.2 million square feet of office space in New York City for thousands of employees in less than a year.

While opinions on the pandemic’s future impact on real estate may vary widely, one thing is certain: success in commercial real estate hinges on tenants paying their rent. Period.

The office market in southwest Florida has seen little to no impact in the way of declining rents or extreme requests for landlord rent forbearance. In fact, our office’s Property Management division ended 2020 with an average of 95% of all rents collected.

Southwest Florida businesses show commitment to the region

In addition to the “staying power” shown by southwest Florida office tenants in their timely rental payments, our office has seen a surge of new leases by national tenants with strong credit. These tenants are signing initial terms in excess of five years and in many cases, seven to ten years.

Experts have diverse and competing opinions about the office sector. Luckily, Southwest Florida is on the positive side of that discussion.

Additionally, new owner-occupied office buildings such as the Scotlynn Group and NeoGenomics are making incredible progress. Gartner Group will reportedly be back in their seats by summer. These commitments say volumes about the strength of our local office market.

In contrast to these optimistic observations in southwest Florida, national lease terms in the fourth quarter of 2020 and year-to-date 2021 were increasingly shorter as users continue to opt for extensions amidst uncertainty. Therefore, southwest Florida’s activity downright bucks the national trend.

Further business confidence in the southwest Florida office sector is evidenced by tenants undertaking costly build-outs to newly leased spaces. These investments build upon tenant improvement allowances already granted by landlords, and they indicate that businesses want their employees to feel comfortable as they return to normal. This monetary commitment shows intent for longevity in the market and eases the ongoing concerns of office owners in southwest Florida.

Southwest Florida is still a landing zone for investor funds

Out-of-market and offshore buyers are once again beginning to eye the southwest Florida market, making significant investments backed with substantial capital and liquidity. The office sector has long been a mainstay in the commercial real estate arena and is slated to remain a solid, long-term, stable investment.

As such, risk-tolerant investors are repositioning or reallocating portions of their portfolio and funds with a greater emphasis on value-added options. Southwest Florida fills the bill.

Now is exactly the right time to examine your real estate investment goals for the next decade, develop a realistic acquisition strategy with your brokerage professional, assemble a team of professional property managers and get in the game. Wise investors look for an opening, and this is it.

To explore professional property management options visit https://creconsultants.com.

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