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

Pandemic causes economic disruption, but companies look south for outstanding resilience

By: Randy Mercer, Founding Partner – CRE Consultants

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

Positive change has occurred in the following real estate subsectors, which have thrived in the past 14 months:

●      Warehouse and distribution centers benefitting from a notable increase in e-commerce are filling up with more development on the way

●      Retail centers and spaces with a grocery focus are staying strong and healthy despite a few vacancies

●      Restaurants with a model centered on continued 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.
Wise investors look for an opening, and Southwest Florida may be where it is. CRE Consultants

Across the nation and especially in large cities, the office sector has seen a notable pause in activity — a characteristic that many naysayers believe could be the precursor to occupancy loss. The exceptions are 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, and Google, which is spending in excess of $7 billion expanding its footprint of offices and data centers throughout the U.S. and hiring at least 10,000 new full-time staff over the course of the year.

Post-pandemic recovery is occurring in anticipation of a historic economic 2021. Florida’s positive attitude by state and local governments with most favorable tax rates are driving a quick turnaround. Companies are looking at Florida and southwest Florida as never before. Follow the money. 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. Although work at home is still happening to some degree, very few existing business leaders are really planning to stay in that mode,” CRE Consultants Founding Partner Randy Mercer said.

“In fact, business leaders are mostly back in the office and have been for quite some time. Idea spontaneity, collaboration and in-office creativity simply can’t be duplicated online. Coffee-machine chat drives positive creative discussions, company news is disseminated more casually, and people are thrilled about living a normal life again — work included.”

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 10 years. Tenants in the market are also considering expanding for a myriad of reasons.

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

Additionally, new owner-occupied office buildings such as the Scotlynn Group and NeoGenomics are making incredible progress. In fact, it’s possible that Gartner Group employees will 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 year-to-date 2021 were increasingly shorter as users continue to opt for extensions amid 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 buildouts to newly leased spaces,” Mercer said. “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.”

“Office furniture orders are up, and, despite supply chain hiccups, are driving solid gains,” President of OFDC Commercial Interiors Joe Gammons said.

Southwest Florida is still a landing zone for investor funds

Out-of-market and offshore buyers are once again seriously considering 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 all commercial real estate and property management options, call Randy Mercer, founding partner at CRE Consultants, at 239-481-3800 or visit creconsultants.com.

Link to article on Naples Daily News