Predicting Build-Out in Southwest Florida

By Rick Compton

Imagine the morning after build-out. One of the top three

industries in the region, shut down. No dirt moved, no equipment rented, and no

plumbers plumbing.

You’re bound to feel an impact. Even if your revenue sources

are not even remotely connected to the local building industry, your business

surely is. One of your employees, married to an electrician, real estate agent,

or closing attorney, may no longer be able to afford to live here — or work for

you — if the other family income is lost. And the local bank that finances your

business undoubtedly earns a large profit in new home mortgages. Would it be

here without that business? Regional newspapers routinely carry as many as

84-pages of ads and advertorial copy for and about new homes. No more new homes

means no more ads or advertorials. No business can sustain these sorts of

multi-million dollar revenue drops without sustaining far-reaching effects.

Think about it. Construction accounts for nearly 13 percent

of Lee and Collier Counties’ total payroll, according to the Census Statistical

Abstract. That’s more than 23,000 people earning, and then spending, more than

$660 million. If you pulled that figure out of the retail market there would be

more than one pick-up truck dealer scratching his head in an empty showroom.

Build-out has the potential to change Southwest Florida’s

business life as we know it ... in a big way. But, is build-out really more

than a bunch of talk? And, if it is, when can we expect it to happen, and what

does it mean for business?

The End is Near ... Well, Maybe ...

It’s only natural that a persistent demand chasing a limited

supply would ultimately cause inventory depletion. That’s called build-out in

Southwest Florida where the land is limited and the claim to it is great.

We are bounded on one side by the unbuildable Gulf of Mexico

and on two other sides by unbuildable national park lands. The land that is

left bares the burden of three layers of government, all ratcheting down

population densities with bureaucratic monkey wrenches. And the demand

continues unabated. Every day, the two counties report, more than 110 people

arrive to demand a little piece of the shrinking pie.

With that in mind, it sure seems like build-out is

inevitable. Of course, it depends on who you ask.

Ross McIntosh, a development land broker and analyst says,

“Build-out is a myth.” Everyone else — government planners, realtors, land use

specialists, building industry spokespeople and the like — all predict the area

will be built-out somewhere within the next 20 years or so.

“We are probably 20 years away — depending on land prices,”

says Randy Thibaut of Land Solutions, Inc. “If prices increase, development

will slow.”

For McIntosh, build-out is countered by redevelopment,

already a regular sight along the Naples waterfront. “The $100,000 water-front

package from the ‘60s has become a $650,000 property,” he explains. “Then it’s

knocked down, and replaced with a house at $2 million, $2.8 maybe.” In this

scenario, the urban area, he says, will be building for many years to come.

“We have an infinite demand for fresh, contemporary

accommodations,” McIntosh says. “So we are not at any risk in the urban area.”

At risk or not, build-out is worth thinking about and

planning for. Gavin Jones, the transportation planning manager of the Collier

Metropolitan Planning Organization (MPO) says he doesn’t have any idea when

build-out will occur, but his office is planning for it. “In the last five

years, we put together a [planned] network to serve a population build-out in

the urban area for a permanent population of 520,000,” he says.

However, the MPO is in the process of altering that number

to be at least 40 percent higher. “We will be in the midst of trying to

estimate what the road needs are over the next few months,” he says. His early

forecast? “I make out the build-out population, the maximum density, at 746,000

people.”

The people at the state are even less certain. Bernard

Piawah is this region’s planning manager at the Florida Department of Community

Affairs. “Build-out does not necessarily mean build-out,” Piawah says. “It’s

just a theoretical assumption of land distribution.”

Piawah’s boss, community program manager Roger Wilburn

offers an example, “The only [county] even approaching using all its land is

Broward,” he says, “and if you go there, they are still really pumping.”

Closer to home, the Lee County Economic Development Office’s

executive director Janet Watermeier has concerns about build-out. She

commissioned a study to determine the effects the US Army Corps of Engineers’

Environmental Impact Study will have on build-out. The EIS is a document that

assesses growth in the context of environmental preservation. Watermeier hired

respected researchers Fishkind & Associates to do the study. Fishkind says

build-out is about 20 years out.

But, Watermeier says, “What might happen is that if the

Environmental Impact Study restricted the supply, the time frame could decrease.”

Could be. Dawn Jantsch, president of the Naples Area Chamber

of Commerce is already seeing some early warnings of build-out. “A lot of the

large developments are done,” she says. “There are not many DRIs [Developments

of Regional Impact] going through.”

David Weeks, Collier County’s principal planner, refers to a

study done in Collier in 1994 addressing build-out within Collier’s urban

boundary — from the coast to roughly 12-miles inland. He points out that the

study was not specifically intended to determine a build-out date, but it did

predict it could happen as early as 2019, or as late as 2049. “There are

variables,” he says. “If the county were to expand the urban area, for example,

or would allow different types of growth outside the urban area.” Weeks says

the county is now in the process of doing a study of development outside the

urban area, dictated by the state government. “The end result of that is that

there could be changes,” he says, but the evolution may or may not benefit the

business community. “The changes could be more restrictive,” he says, “or could

be more open.”

McIntosh knows the answer for large developers. He’s seeing

it already. “What happens to the tract builders, the consumers of large tracts

of land?” he asks. “They’ve gone up the I-75 spine.” From his Collier County

base, he sees the northern migration. “Now, they’re at Alico Road, Daniels,

Colonial. Why? Because I-75 provides the only complete access to Naples.”

Fishkind agrees. “The changes we’ll see are the large developers

who will move up the coasts as large tracts of land are no longer available.

But,” he adds, “there is in-fill and redevelopment.”

Filling in the Blanks

As the large tracts are filling in, developers are pushing

the urban envelope in an effort to qualify more land for greater, more

profitable densities. Economies of scale power the assembly-line efficiency of

building and selling hundreds of similar homes next door to one another. As

land runs out, builders become more willing to push the legal limits of

lesser-density lands.

“There is development pressure, a desire to allow more,”

says Weeks. “Twin Eagles is the first challenge.” Twin Eagles is a North Naples

project which was successful in getting initial county approval to tightly

group homes into urban-like densities even though it is located in a rural area

where homes are restricted to one per five acres. “That interpretation changed

when they approved Twin Eagles, allowing for clustering,” Weeks says.

Clustering calls for no more homes on a specific tract, but for the same number

of homes centralized in a small portion of the tract. The balance of the tract

is left open for anything from a nature preserve to a golf course.

“We count the density based on total land area. That was the

first step to see a development [in the rural area] comparable to what you see

in the urban area.” The Twin Eagles decision is blamed for much litigation and

a bankruptcy. Yet, according to Weeks, the stakes are high enough to make

future challenges likely. “I’m sure there will be more pressure.”

Because the remaining large tract developers are looking

ever northward, progressively smaller tracts — as small as a single lot — will

ultimately become the sites of most new home construction.

“What if we put the tract builders out of business [here] by

not providing any more tracts?” asks McIntosh rhetorically. “They are already

changing to do on-your-lot stuff,” he says, and cites one of the area’s largest

building corporations, Centex, as having adjusted its market position. “Centex

bought Wayne Homes specifically to meet that demand, because it’s the largest

on-your-lot builder in the U.S.”

Jantsch sees single-lot in-fill as the next logical

opportunity. “We have to recognize that [the market] has a tremendous amount of

redevelopment potential,” she says making reference to an affordable north

Naples neighborhood west of Tamiami Trail. “Naples Park, for example: there is

more density in Naples Park than would ever now be considered [under current

permitting rules]. You are going to see homes on lots between homes we have

now. Are we taking up all the land?” She issues a confident, “No.”

On the demand side, McIntosh sees too many customers for the

large builders to walk away from. “They will look for other opportunities to serve

the market,” he says. “The industry is market driven, not vice versa. Whatever

people want, these people will provide.”

Is There Life After Build-out?

Whether build-out occurs at either extreme of the forecasted

spectrum, by definition, there will be fewer and fewer new homes built as the