A look back at 2018 and looking ahead in 2019:
Our team recently published the Southwest Florida Year End MarketBeat Reports for Office, Industrial and Retail markets. All three sectors of the Southwest Florida market remain tight with overall vacancy rates below 10% across the board. A trend toward redevelopment of functionally obsolete buildings into more dense and diverse mixed-use projects surfaced from this research as the hottest opportunity in CRE in Southwest Florida in the coming year. In summary:
- Office: New build-to-suit and owner-occupied construction is expected to increase due to obsolescence of existing inventory. Vacancy rates and asking rents may stabilize into the start of 2019 as office demand slows and tenant improvement costs increase. Gartner Campus South expansion is one of the largest under construction projects in the S. Fort Myers/San Carlos submarket of Lee County. Watch for several large office projects to be announced I the next few quarters.
- Industrial: Supply creates demand. With over a million square feet of new industrial space under construction, Cushman & Wakefield l Commercial Property Southwest Florida expects to see demand increase in 2019. Amazon leased 60,000 SF of space being the largest transaction affecting absorption for the year 2018. With the most new inventory, warehouse/distribution buildings will lead leasing activity for the year to come.
- Retail: Although, there have been several big-box closures and bankruptcies as e-commerce growth continues, Whole Foods opened in the fourth quarter 2018 and Ollie’s Bargain Outlet expected is to occupy 42,250 square feet (sf) this year (in 2019). Big box closures converting to office or other uses that need high parking ratios will increase. One of the largest 2018 completions in retail was Daniels Marketplace.
Top trends that will impact the commercial real estate sector in 2019.
Some highlights on what to watch in Commercial Real Estate include:
Is a Recession on The Way? There Are Mixed Signals: Yield curves are compressed, but only one out of nine indicators suggest that CRE pros needn’t worry too much, at least for now, about a recession. Jobless claims remain low and consumer confidence is strong.
Co-everything: Everything from co-retail – developments focused on entertainment, cultural and flexible spaces – to co-working arrangements among separate companies will become even more popular in 2019. Watch for co-living concepts to emerge and become mainstream.
Low Unemployment, Labor Shortages and Rising Wages: Low unemployment will continue to drive up wages while increasing the current labor shortages.
Micro-transportation Effect: There will be a place for non-traditional transportation such as; scooters and shared bicycles. In cities like Fort Lauderdale, where approximately 4,000 units are about to come online, introducing scooters to the market will substantially help reduce the number of cars on the road. In 2018, Lime launched in Miami, Fort Lauderdale and Orlando. Punta Gorda has joined the trend by supplying free loaner bicycles found at numerous locations throughout the community made available by the city. As more users continue to embrace programs like Lime as an alternative mode of transportation, watch for the service to continue to expand statewide.
Lack of Industrial Space: Slow rebalance in vacancy should be evident, while rents trend upward with new construction deliveries. Warehouse site selection will focus on workforce, not highways. Watch for development of new self-storage facilities, locally.
Opportunity Zones: Expect to see deals in opportunity zones transact in the first and second quarters. The combination of fears of rising interest rates and clarification on opportunity zone rules will certainly be a catalyst for transactional activity in Southwest Florida.