People prefer a view of palm trees outside their office windows over paradise-inspired desktop wallpaper. At least that can be inferred, given that Florida comes in as the third-highest state for office demand, according to a 2024 Highland Cabinetry study.

Another recent study cites the state as a booming office rental market, with 55% of its metropolitan areas increasing office rent prices. The Cape Coral-Fort Myers metro area is seeing the highest rent price increase for offices, up 8.3% in price per square foot.

The neighboring Naples market operates differently, however, said Jeffrey H. Gage, senior vice president at CBRE.

“What’s interesting about Naples, in particular, is that it’s not a core market; it’s a tertiary market. The corporations and name brands that have offices here are designed to be back office or adjunct to some of the other major metropolitan areas. They’re here to service a customer base,” Gage said.

Jeffrey H. Gage

“Some of the headquarters are here for reasons that may not necessarily be supporting their business. Sometimes CEOs relocate for their own convenience and bring the company with them.”

While office rent prices are indeed increasing because “all boats rise with the tide,” Gage said, and economic conditions and inflation play a part, it’s the trend of short-term leases that can lead to higher rates.

“Typically, transactions are shorter by comparison. Connecticut, New York and New Jersey would do 5- and 10-year deals, but people [here] want short-term,” Gage said. “What that leads to is a stay-and-pay philosophy.”

Once a lease is up and tenants choose to stay after considering such factors as moving costs, landlords can capitalize on a need for convenience.

“Landlords sit back and say, ‘I know you’re not moving, so I’m going to start jacking the rents up,’ and they do, and tenants cave,” Gage said.

This dynamic, rather than supply and demand, drives office rent increases in the local market, unlike in established markets where tenants have more leverage during renewals.

Industrial is a different story.

The market “is on fire,” Gage said, as developments including distribution company Uline’s nearly 1 million square feet of warehouse space near the new Great Wolf Lodge take shape, endorsing the area.

“We’ve got new investors that are coming into the market. They’re paying premium price to buy existing buildings, they’re going under construction on speculation for new buildings, and that’s something that Southwest Florida hasn’t really seen since 2008-09,” he said.

Retail continues apace. The pandemic and internet shopping have changed buying patterns, Gage noted, but tenants will still pay top dollar for a spot on bustling Fifth Avenue. Farther out, say on U.S. 41, businesses can find “plenty of options” for a fraction of the price, he added.

Multi-family housing rents are skyrocketing due to high demand and limited affordable options for service-industry workers.

“We need affordable housing in Southwest Florida, and the trend is going in exactly the opposite direction,” Gage said. “There are a lot of apartments under construction in Naples. What’s fueling that fire is the demand for housing and the fact that rents are increasing at a pace that’s higher than national averages, attracting new capital to come into our market and try to take advantage of that rent growth.”

Tourism, health care and construction are the major employment sectors in Naples, according to citytowninfo.com. However, as large companies that have higher median wages than Naples’ median average of $22 per hour or $46,573 per year (according to ZipRecruiter) come to the area, and developers respond to that, it creates an imbalance of what becomes affordable to area workers.

Affordable housing is a critical issue that municipalities are trying to address, especially as more people move to the Sunshine State. CBRE reports that more than 440,000 people moved to Florida between 2021 and 2022, making Florida the No. 1. fastest-growing state in the nation, with a 1.9% increase in population.

Gage said we will continue to see different levels of growth in commercial real estate development as the number of inhabitants increases.

“I do not expect to see industrial growing at the rates it has,” he said, adding that he suspects an eventual leveling out of rents in multifamily. “As we increase the population and get more product, we’re going to see our market trend pretty closely to what the national markets do.”