Industry professionals noted shifts in vacancy rates and lease costs in certain areas. Furthermore, they were foreseeing a slowdown in construction activity.

Here is what they had to say about the tri-county region’s commercial market:

Lee County
In Cape Coral, where not long ago it was nearly impossible to find office space, the vacancy rate hit 18.4 percent, says Gary Tasman, a broker with Cushman & Wakefield in Fort Myers. By contrast, office units in downtown Fort Myers are harder to come by, with a vacancy rate of 4.7 percent.

Those are just two examples of the lopsided conditions throughout the county.

The oversupply in the Cape can be traced to a combination of factors, Tasman says. First, a new, 60,000-plus-square-foot building developed by John McGarvey ratcheted up available properties that have not been rented. And of the total 940,000 square feet of product, Cape Coral landlords have lost 57,000 square feet of tenant occupation.

Tasman says the loss is due to fallout from the housing market. With activity down, construction-
related businesses, for example, closed shop or downsized. "Cape Coral is very dependent on the housing market," he says.

Regionwide, out of the inventory of 11.1 million square feet, the office vacancy rate averages 10.2
percent, with nearly 1.2 million square feet available. "That number will climb as much as 2 percent," Tasman says. "We’ve got a bit of strong medicine to take [in 2008]."

Still, the numbers aren’t so bad; when vacancy hits 10 percent or less in an area, that’s considered a good measure for building more commercial space.

Office rent prices in Lee County are $22.72 per square foot.

Another factor that affects pricing is common area maintenance, which can tack on another $25 per square foot for class-A space to $5.50 for class-C. Those rates were on the rise in 2006-2007, but have leveled off, Tasman says. Although CAM rates are not adjusted down, landlords can drop regular lease rates to attract renters, he says.

In the retail realm, development and leasing tend to increase near larger centers, such as Coconut Point Mall in Estero or the Pine Island Road corridor in Cape Coral, according to Karen Johnson-Crowther, a broker with Colliers Arnold. "There is a lot of shadow development, with strip centers trying to locate close to those [major centers]," she says.

Farther away from the big projects, vacancy rates are climbing, in part because of business closures. Many of them are mom-and-pop-type operations that are having a hard time maintaining an adequate customer base to pay the rent, insurance and common area maintenance fees. "You’re now seeing a lot of ‘For Rent’ signs," Johnson-Crowther says.

Much of the leasing activity comes from franchise operations, she says. Presumably, they have deeper pockets. But even chains aren’t guaranteed success, as evidenced by the closing of Applebee’s on South Tamiami Trail in Bonita Springs, she says.

Despite the unsteadiness, there have been no significant decreases in rents, Johnson-Crowther says.

Within the industrial sector, vacancy in the county stands at 9.2 percent. However, unrented flex spaces range from 4.4 percent in North Fort Myers to 13.4 percent in Cape Coral to 26.7 percent in Fort Myers. "That’s where you see fallout from the [construction] trades," says Tasman, referring to the higher numbers.

Overall, industrial lease rates run $9.03 per square foot.

Collier County
With retail vacancy rates between 8 percent and 10 percent, Naples-area landlords have no problem signing leases. It’s a strong market, fueled by plenty of spending power that’s characteristic of this affluent community, according to broker Charlene Greenblatt of Colliers Arnold.

Whether it’s a strip center along East Tamiami Trail or the upscale Waterside Shops, space is in demand. "Collier County is one the most underserved markets in the country," says Greenblatt of the retail sector.

Lease rates have leveled off a bit, but the numbers are still solid, she adds. A spot on Fifth Avenue South costs between $60 and $70 per square foot, while a unit at Pine Ridge and Livingston roads is about $28 per square foot.

With available land for retail projects beginning to disappear, the sector should remain strong.
Want to lease industrial space in Collier County? Good luck.

Out of an inventory of 7.8 million square feet, a paltry 220,000 square feet are available, representing a 2.8 percent vacancy rate, according to Tasman.

Average lease rates stand at $11.33 per square foot, more than $2 above those in Lee County, which reflects that land costs "are still high." Tasman predicts the rates will stay steady.

As far as future development, he sees potential in the I-75 corridor.

And in the county of plenty, that includes the office sector. The vacancy rate is a lofty 17.5 percent, meaning 715,000 square feet of space is empty, Tasman says. Another 125,212 square feet are under construction.

Naples broker R. Scott Cameron has noticed sluggish lease activity that has prompted some landlords to adjust pricing. "Basically, we are seeing some vacancies in properties that have never before registered anything other than [being] fully occupied, especially in the industrial and office markets," says Cameron, president of Cameron Real Estate Services. "There is some discounting going on."

Charlotte County
Punta Gorda and Port Charlotte are places that outside developers eyed as new potential hot spots. They came, they built, but the faltering residential market has, in part, led to fewer occupants for the projects than developers had hoped for.

"Office probably has the highest vacancy rate and will have the lowest absorption," says Re/Max broker Ron Struthers. In Murdock Village, for example, 300,000 square feet are available at between $17 to $22 per square foot.

"It’s definitely a tenant’s market," says Struthers. "An agent can negotiate a good deal."

There’s also an abundance of industrial space. Punta Gorda has 195,000 square feet of empty units, with costs ranging from $8.50 to $10 per square foot, triple net. Port Charlotte rates run between $8 and $9 a square foot gross lease, which includes CAM and insurance. Much of the space is at Charlotte County Airport Commerce Park.

Retailers can choose from a variety of possibilities, from strip centers, which run from $12 to $17 a square foot, to major malls where tenants pay $22 to $23 per square foot, triple net, which adds costs for insurance, tax and CAM. Downtown Punta Gorda spots can fetch $19 to $24 a square foot.

Figures on vacancy rates were not available, but Struthers assures that "there’s not a lot of space on the drawing board."