Land Investments: The Good, The Bad, and The Ugly.

Sure, Southwest Florida's real estate industry is solidly hot. Even in the downturn of the early '90s, growth here didn't stagnate, it just slowed a little. And now, with investment trusts fattened by a high-calorie stock market, with NAFTA and the concept of clustered developments opening lands far and wide, and with perennially high growth rates, real estate looks better than Wendy's stock in the early '70s.

But, still, the real estate market here is not for sissies. Costly mistakes can be made, and they can be made quite easily, even on the surest of deals. Now, as much as ever, the successful investors and developers are those who learn the market.

The short course, according to Ross McIntosh, senior broker associate with Collier Real Estate Group Inc., and regional vice president of Realtors Land Institute, is elegantly simple. "The task always," says McIntosh, "is to be in the right place, at the right time, with the right product."

The long course is neither elegant nor simple. "We really aren't talking about a market, but a bundle of markets," says McIntosh. Each market within the bundle is defined through its product type: the ultimate use to which the land will be put. Within the bundle is found both opportunity and risk. While one fortune is made in retail-destined property, another could be delayed, or even lost in, say, hospitality, or in offices.

While senior living facilities might look hot, apartments might be where the real money is to be made.

"As long as demand for new products is coming on at the same rate that demand for old products is waning, as long as new hot spots are emerging at the same rate others cool," McIntosh says, "then the market is arguably healthy."

But underneath its shell of stability, the bundle is made up of sticks and stones and things that go bump on your balance sheet.

Here are some things to watch.

Boxing With The Devil

"Land owners shouldn't be relying on big boxes," McIntosh says. During the last decade, this area has seen a revolution in shopping center design with the onset of big box retailers such as Sam's, Toys R Us and Sports Authority. And neighborhood centers, anchored by major chain grocery stores surrounded by local shops, now find themselves with the supermarkets being twice as large, and the local shops being half as many.

Although some retail space is still being constructed, according to McIntosh, "That wave has crested." Outside of what he calls the lumber and hardware wars (Lowe's market re-entry and Home Depot reaction), there is no significant activity.

McIntosh points to an existing inventory of vacant big boxes. "[Empty] Wal-Marts, Levitzes and Paces become attractive to the new entries in the marketplace," he says, "at a lower cost than if they were to build new."

In the Bonita Springs-Estero corridor, the most dust that has been raised has been by the four grocery-anchored neighborhood centers built in the last eighteen months. But McIntosh warns not to be seduced.

"The reality is those are probably the last four which will be built in that market.

"Ultimately it is a function of supply exceeding demand," he says. "The best locations adjacent to existing or anticipated consumer bases have been developed."

Even in rapidly growing northern Collier County, McIntosh foresees a slow down in the development of retail space. "In all of Collier, the Publix which is under construction at I-75 and Immokalee Road may well be the last to be built for years to come." Throughout Southwest Florida, he warns, "The pool of consumers will have to expand before there is demand for additional centers."

The strongest stick in the bundle, though, just may be freestanding drugstores.

"Just when we thought that there was an Eckerd on every intersection," McIntosh quips, "it turns out there's going to be a Walgreen at every intersection, too." He describes a revolution in drugstore retailing that is driving the need for new sites: "Convenience stores with pharmacies," he calls them. Now, they are 15,000 square feet, up from the typical attached store size of 9,000, and they have complete food aisles.

"They are meeting a different, expanded need," and so, represent opportunity.

McIntosh sees another retail site opportunity: convenience stores. "There is a wave of sites being acquired for gas stations with convenience stores, and convenience stores with gas."

Call The Office

If you are risk-averse, McIntosh might fit you into an office-destined site. "The office market... seems to operate at the greatest equilibrium." While he lists exceptions-Pelican Bay historically enjoys high occupancy levels, but now has the highest vacancy rates in recent memory-the office market does not seem to be as susceptible to wild over- or under-supply.

Medical office space may be the exception that proves the rule. Historically, McIntosh says, the medical office market is one of the engines that have driven the office market. He attributes the recent cooling-off to the uncertainty that is surrounding Columbia HealthCare's current foibles: executives indicted on Medicare fraud, and outside audits as a way of life. "Do you want to rush to build where Columbia says they are going to build?" he asks rhetorically. "Probably not. They may not build."

He does, however, expect a stimulated medical office market near the I-75/Pine Ridge Road interchange, due to the construction of Cleveland Clinic's hospital-to-be near there.

Plenty of Room for Plenty of Rooms

"We are very much a part of a national trend," McIntosh says. He lists two booms: the first in limited-service hotels such as Budgetel and Holiday Inn Express, and the second in the recovery of the luxury-resort hotel development market.

In Southwest Florida now, there are perhaps a dozen limited-service hotels in some stage of development. With Diamond Head in Fort Myers Beach and at least two others in the advanced stages of discussion in Collier County, luxury hotel construction is at a recent high.

The somewhat sudden health of the luxury hotel market-McIntosh offers anecdotal evidence of room rates doubling and high occupancy-has served to create opportunity for both the haves and the have-nots.

"Prudent investors are selling their luxury hotels, taking advantage of the strong market and high occupancy," he says. "The adventurous investors are building new."

McIntosh sees an unusual niche developing. "What is unique to this market is the number of new European-style inns." He lists four currently under construction and an aggressive expansion program in a fifth.

Senior Living Facilities

"REITs are driving ACLFs," McIntosh semi-reveals. REITs are Real Estate Investment Trusts and, he explains, are cash-fat due at least in part to the stock market. ACLFs are adult congregate living facilities, many of which have been bought up by the REITs since the early '90s. This buy-up, according