As election day approaches, we’re all grappling with uncertainty about the future. Presidential elections typically spark a “wait and see” attitude among investors. However, the political affiliation of our nation’s next leader has minimal impact on the commercial property market.
Instead, variables like interest rates, employment, consumer spending and net migration hold much more influence over Southwest Florida’s commercial property landscape. Rather than focusing on the election, smart investors will consider six other critical questions:
IS SOUTHWEST FLORIDA HEADED FOR A “DOOM LOOP?”
Rising property values and inflation are sparking fears of a downward economic spiral. However, Southwest Florida is well-equipped to avoid such an event, thanks to strong job growth, a surge in new businesses and rapid residential growth, which are keeping vacancy numbers low, supply limited and demand robust. As a result, our region will likely experience a soft landing in an economic downturn.
WHAT IMPACT WILL INTEREST RATES HAVE ON COMMERCIAL REAL ESTATE?
Elevated interest rates have slowed the volume of commercial transactions recently, as increased borrowing costs dampen investment and development demand. Strong rent growth locally will soften the impact of higher borrowing costs for most properties. We anticipate interest rates stabilizing and a rebound in commercial sales volume over the next year and a half.
WILL WE SEE AN AVALANCHE OF DISTRESSED ASSETS?
Maturing loans on properties financed with low interest rates are producing a surge of distressed assets nationwide. Locally, however, strong rental rates are helping to keep properties profitable and values above debt. Low vacancy rates, solid job growth and positive net migration will help Southwest Florida resist this national trend.
WHAT ARE THE HOTTEST CORRIDORS IN SOUTHWEST FLORIDA?
Several local commercial zones are on the cusp of significant expansion. Keep a close watch on these areas: the Punta Gorda Airport corridor, Burnt Store Road and Pine Island Road in Cape Coral, the Fort Myers River District, Skyplex at RSW, Alico Road and eastern Collier County. Although different factors are driving their growth, all are poised for a period of rapid expansion.
HAS THE MULTIFAMILY CONSTRUCTION WAVE REACHED ITS PEAK?
A dramatic decrease in construction starts hints that the multifamily boom may be peaking. With an abundance of multifamily homes coming to market soon, rent prices will begin to stabilize, making this sector less attractive for developers. However, the multifamily construction wave still won’t fully address the need for housing. Although we expect a temporary lull in construction, our ongoing population boom should quickly revive demand.
WHAT ARE SOUTHWEST FLORIDA’S LARGEST COMMERCIAL AND PUBLIC SECTOR PROJECTS?
While tourists are likely excited about multiple large-scale hotels and resorts, the majority of our major construction projects target the needs of our growing population. These include $3.3 billion in new schools, over $750 million in health care initiatives and a $1.4 billion RSW airport expansion. Infrastructure projects include the replacement of the Cape Coral Bridge and up to $110 billion in Hurricane Ian rebuilding projects.
Obviously, the results of November’s election matter to each of us individually, but there are more significant factors for commercial property buyers and sellers to consider. Instead of concentrating on the uncertainty, investors should focus on the opportunity presented by Southwest Florida’s growth.
Gary Tasman is CEO and principal broker for Cushman & Wakefield | Commercial Property Southwest Florida. His expertise encompasses all aspects of the real estate ownership, management and development process, including buying, selling, leasing, financing, asset valuation and property management. Visit cpswfl.com or call 239- 489-3600 for more information.
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