What’s Driving the Stability of Southwest Florida’s Industrial Market?

As commercial real estate interests nationwide prepare for a potential economic slowdown, Florida’s commercial real estate market continues to thrive unabated. Further, there’s no indication of imminent change.

The ongoing boom in activity is largely the result of the state’s robust population, job, and income growth. These factors bode well for Florida to capitalize on the influx of disposable income by encouraging personal consumption and maintaining consistent commercial real estate demand.

As more business is transacted online, the rise of technology and ecommerce is driving consumer demand for less conventional spaces, such as industrial warehouses and flex units. As a result, some of the state’s commercial sectors have outperformed others this year. The industrial submarket is notably favorable for developers and investors as they accommodate this change in consumer preferences and commercial transactions.

Industrial real estate in Southwest Florida is flourishing, thanks to a combination of low vacancy rates, increased rental rates and scarce inventory, all of which have greatly enhanced demand. Just this year, industrial rental rates have increased by nearly 5% over 2018, and overall industrial vacancy continues to be the lowest in the commercial sector, recently reported at 2.9%. This decreased vacancy seemingly stems from the overall net absorption of all product types.

To accommodate the demand for industrial space, developers in Southwest Florida are creating speculative construction projects, some of which are significantly leased prior to groundbreaking. Among the area’s newest developments is Southlinks Commons of Bonita, a 26-acre, mixeduse commercial park in its third phase of construction. Adam Palmer, CCIM and Mike Doyle CCIM, brokers with LandQwest Commercial, represent the 368,000sf development.

“The limited inventory in Collier County has led many companies to expand across the county line,” said Palmer. “Distribution facilities, corporate headquarters and regional shops alike have been able to greatly benefit from a location that conveniently allows them to service multiple markets.”

LandQwest’s Senior Broker Associate Eric Edwards attributes this surge of development and expansion into Lee County to the shortage of industrialzoned land for new product in Collier County. “Therefore, pricing is still at a premium, but also driving interest north to the Alico corridor and projects like Southlinks because of the supply of industrial-zoned land and easy access to I-75,” Edwards said.

While new construction projects will likely ease the limited availability of industrial space in the interim, the supply has yet to meet the increasing demand. If Collier County rezones land in the future, this too may reduce some of the above-market pricing. In the meantime, the industrial sector should continue to be among the most profitable assets in the area for owners and investors.

(Haley Blorstad is the pioneer of LandQwest Commercial’s Junior Associate program for leaders of its industrial, office, retail, land, special-use, and investment divisions. LandQwest is a full-service commercial real estate brokerage firm providing property management, tenant representation, leasing, sales, and consulting services to commercial clients throughout central, west central and southwest Florida. For more information, call 239-275-4922 or visit LQWEST.com.)