With the first quarter just behind us, we continue to see positive trends in commercial real estate in SWFL. One thing is for certain: the rate of change on EVERYTHING has increased, so much so that I want to note that these thoughts were penned in the first week of April 2025. But the trends are positive for sure.
2024 was an interesting year for us, as most election years are. This go around felt like the stakes were at the highest, but admittedly, that seems to happen every time as well. To reflect on the year overall, it was almost entirely a countdown to see which way the election went. This affected commercial real estate in many ways, namely impacting, if not halting, our investment sales.
More than waiting for the election, 2024 was a high interest rate/low cap rate environment. Neither are conducive to investment sale purchase activity, but the combination was nearly lethal. Not many can justify purchasing a 6.5% cap when the banks were lending at 7%. Furthermore, money in a simple savings account or money market was getting nearly 5% interest with virtually no risk – so even the cash buyers stayed dormant.
So far in 2025, we have seen investment sale activity increase from its flatline the year before. Buyers are still critical of deal points, but they are absolutely leaving the sidelines. Perhaps that is from more attractive yields and outlooks, or just fatigue from sitting out for so long. Sellers once stubborn to achieve prices and cap rates from years ago are more frequently becoming realistic, hence the completion of some deals. Banks are increasingly competitive, both for owner-users and investors.
Industrial real estate, the reigning darling of most markets, continues to do well in SWFL. Following the year when two sales alone represented over half of the overall sales for the year (in purchase price), our local landscape is forever changed and new and large players continue to enter our market, both from an ownership and a tenancy basis. Leasing activity continues to be strong and vacancy rates low. With so much more square footage coming online in the next 24 months, mainly in south Lee County, we are keeping an eye on those absorption rates, but for now, deals are humming along. As for lease renewals, we are in the final year of bringing rates up to market for those that signed leases around 2020-2022 before rents exploded.
For the office market, we are seeing the shift back into the office. Companies continue to be flexible with employees who prefer the hybrid schedule or to work remotely, but more are in-office. As leases roll over, many businesses contemplate new space layouts, downsizing square footage or even consolidating multiple locations to one central hub. However, the office market in SWFL is one of the healthiest in the entire state, and with nothing considerable in the pipeline for development, we expect that trend to continue.
And for the T word – tariffs. Most are concerned about what impact those will have, and when they will materialize. We expect some bumps in the road for the short term, with an overall positive impact in the long run.
Justin Ankney, CCIM, is senior advisor at Mayhugh Commercial Advisors and a standout professional celebrated for his ethical approach and exceptional results. His passion lies in all asset classes of commercial real estate, with a specialization in industrial and office properties. His responsibilities encompass leasing, sales, owner representation and advisory services. Contact Justin at 239-933-5594 or justin@ mayhughcommercial.com
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