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By Gary Tasman Utter the words “industrial property” to someone outside the world of commercial real estate, and they’re likely to picture concrete jungles with enormous drab buildings, smokestacks and air pollution. In some parts of the country, that might be an accurate impression. However, when we talk about industrial property here in Southwest Florida, smart developers and investors realize that a very different picture is emerging. Industrial real estate is a broad term that covers commercial uses like manufacturing and production, research and development, and storage and distribution. Industrial real estate demand is on the rise, driven by consumption, trade, transport, and e-commerce.  Cushman & Wakefield’s U.S. Industrial MarketBeats Report for Q1 2022 shows exactly how popular these properties are. For the sixth straight quarter, demand for industrial property is outpacing supply, driving the vacancy rate to an unprecedented 3.3% across the country. Here in Southwest Florida, the industrial vacancy rate is a stunning 1.7%. Although there are nearly 2.5 million square feet of industrial buildings under construction in our region, high demand for industrial property is expected to continue for the next few years. Industrial Market Drivers in Southwest Florida What’s driving our industrial real estate market surge? To start, changes in the supply chain and delivery trends during COVID restrictions have made warehouses, self-storage facilities, and multi-million square foot fulfillment and distribution centers highly-prized properties. Thanks to our strategic location between Tampa and Miami, Amazon, Uline, and FedEx have built or are building major facilities in Lee, Collier and Charlotte Counties. With both Southwest Florida International Airport and the Punta Gorda Airport expanding, we can expect to see continued growth in storage, logistics, and transportation. But supply chain reconfiguration is only part of the equation. Despite our region’s reputation as a haven for vacationers and retirees, the industrial sector in Southwest Florida is actually quite diverse and developing. Of course, construction has always been vital to our region, but our industrial sector reaches far beyond bricks and mortar. Thanks in part to our region’s aging demographics, medical manufacturing is a large part of the industrial sector. Companies like Lee County-headquartered NeoGenomics, which conducts diagnostic, prognostic and predictive cancer testing all over the world, are expanding their presence in Southwest Florida. Arthrex, a global medical device manufacturing company, is based in Collier County with a large logistics center in Lee County. Numerous smaller medical and biotechnology companies have followed their lead and dot the Southwest Florida landscape. Whether producing medical devices or consumer products, light manufacturing is on the rise in our region, absorbing millions of square feet of industrial space. Like the region’s medical manufacturers, these companies often produce products vital to the Southwest Florida economy. Manufacturers like MY Shower Door/D3 Glass and Storm Smart thrive in part because of Florida’s explosive residential growth. As long as residents continue to flock to Southwest Florida, we should anticipate more manufacturers in our area that produce construction supplies and similar products. Opportunities in the Industrial Market With the manufacturing sector growing across Southwest Florida, demand for industrial property should remain high for the next several quarters. Supply chain issues have slowed the pace of construction, and thus delayed the pipeline of new industrial properties emerging on the market. However, even after supply and demand reach a state closer to equilibrium, there are many benefits to owning industrial property. Industrial properties tend to garner longer-term tenants, creating a more stable income stream.  Industrial spaces typically need less maintenance and fewer amenities than other types of commercial spaces. With low tenant turnover and maintenance costs, these properties have the potential to produce higher yields for investors. The industrial real estate market in Southwest Florida—and across the nation—is experiencing its highest demand in history. Are you an industrial property owner looking for an opportunity in our current market?  Cushman & Wakefield | Commercial Property Southwest Florida (CPSWFL) has the knowledge, data, and resources to stay abreast of current commercial real estate trends in our region. The Commercial Property Experts at CPSWFL are ready to assist you with determining your best strategy for your property. Contact us by calling 239-489-3600 or reach us by contact-us.

By Gary Tasman Our region has become one of the most popular in the nation for starting new businesses and relocating existing ones, thanks to high inbound migration numbers during the pandemic and a pro-business tax environment in Florida. Melanie Schmees, Director of Business and Economic Research for the Greater Naples Chamber of Commerce, states that the Collier County Economic Development Office website has seen a ten-fold increase in inquiries from businesses wanting to relocate to Collier County since the start of the pandemic. Certainly, the Naples area is seeing growth. Thanks to a strategic position midway between Florida’s two largest metropolitan areas, Collier County is seeing growth in transportation, warehousing and logistics in particular. As an example, construction is underway on a 937,000 square foot distribution facility for Uline, which when completed will bring more than 200 jobs to Collier County. But other companies seeking to build in the area are finding challenges. Industrial Supply versus Demand in Collier County Demand for commercial property – particularly industrial property – is far outpacing supply in the Naples area. Our Southwest Florida Industrial Marketbeat report for Q4 2021 indicated that out of more than 10 million square feet of industrial inventory in Collier County, less than 50,000 square feet were vacant. And while a number of properties are under construction, according to Schmees, those facilities are already 97% leased. Many believe that Collier County lacks developable land, which is a fallacy. The county actually has several areas that are identified for potential growth and development. However, much of the County’s available land is neither site-ready nor entitled for commercial/industrial use, translating into high costs and long lead times for anyone hoping to develop on these parcels. Schmees was our guest on the What’s Developing in Southwest Florida podcast recently, and acknowledged the entitlement and readiness issue: “These companies, they know where they want to be and they need to make the decision fast,” she said. “That’s something that Economic Development and the County Commission is recognizing, the need to really form relationships with developers and with landowners to have sites ready for when these projects want to come, instead of carrying it out through a multi-year process.” Areas for Potential Industrial Growth The inland region, east of I-75 and north of Alligator Alley, has been the most rapidly growing area in Collier County for more than a decade. Infrastructure improvements to Immokalee Road, as well as the extension of Golden Gate Parkway, have made eastern Collier County easier to reach. Census data shows that while Collier County’s overall population increased by 17% over the last decade, the zip codes east of I-75 experienced an estimated 26% increase in population growth during the same time period. The town of Ave Maria is certainly the posterchild for Collier County growth. Little more than agricultural fields just a decade ago, Ave Maria is now a bustling community with a population of more than 15,000. It will be joined by a number of neighboring communities in the County’s rural land stewardship area. The town of Big Cypress and its Villages: Rivergrass, Longwater and Bellmar will all soon be under development by Collier Enterprises. With thousands more residents moving to eastern Collier County over the next several years, the need for jobs—particularly in the industrial sector, will grow. The Economic Development Council of Collier County estimates the County will need an additional 3,685 acres of new business park lands by 2030. One of the most logical locations for that industrial growth is in Immokalee, where land is inexpensive, and a ready workforce is already in place. Central Immokalee is just 15 minutes from Ave Maria, and a mere 25 minutes from the future Big Cypress villages. “I think Immokalee is a prime area for investment opportunity as it relates to incentives and programs,” said Schmees. “Immokalee is a [Collier County] opportunity zone and a [USDA] promise zone. It has an FTZ for that foreign trade. Figuring out how to stack those and take advantage of those opportunities out there as a developer or investor, it’s a prime area to do that.” Part of the challenge is that while many recognize Immokalee’s potential, no business or developer wants to be the first to plant their flag. According to Schmees, investors and developers want a model or case study to follow—someone who has already made successful strides in the area. For decades, tourism and hospitality have been the major drivers of Southwest Florida’s economy—especially in the area’s coastal regions like Naples. However, our regional economy is becoming more diverse, a topic we’ve discussed here before. Diversification of our economy creates the opportunity to increase wage capacity in Southwest Florida while maintaining our excellent quality of life. For Collier County to reach its full potential, it needs to continue working with investors and developers to take a chance on the eastern part of the county, and particularly Immokalee. If you are a commercial property investor or developer looking to capitalize on eastern Collier County’s ongoing growth, contact the Commercial Property Experts at Cushman & Wakefield | Commercial Property Southwest Florida by calling 239-489-3600 or by contact-us. For more information about development in Collier County, listen to episode 3 of the What’s Developing in Southwest Florida podcast.

By Gary Tasman In early March, the Florida House passed a bill that is designed to help local governments and developers to create more affordable housing opportunities in the state. SB 962: Residential Development Projects for Affordable Housing has now passed both the Senate and the House with unanimous bipartisan support and appears to be on track for the Governor’s signature. The bill would allow local governments to approve residential and mixed-use developments on any parcel of land zoned for commercial or industrial use, as long as at least 10% of the project’s units are reserved for affordable housing. The bill is seen as a potential booster shot to cure the state’s deficiency of workforce housing. While this is an admirable step for the legislature, it should not be our only action to resolve the affordable housing crisis in our area. Affordable Housing in Florida For those seeking affordable housing options, Florida is one of the most challenging states in the nation. A 2021 report by the National Low Income Housing Coalition notes that while no state has an adequate supply of affordable housing for its population, the Sunshine State is in the nation’s bottom five. The state has a deficit of more than half a million affordable and available rental units for households earning 50% of the area’s median income. The affordable housing crisis is exacerbated by skyrocketing real estate prices over the last decade. Increases in the cost of housing have far outpaced wage growth in Florida. A 2021 study by QuoteWizard notes that while wages statewide had grown nearly 21% over ten years, median home prices have jumped 99.3% during that same period. Potential Solutions to the Affordable Housing Crisis There are three potential answers to the affordable housing problem, however only one is a truly realistic scenario. The possible solutions are to: Increase wages Decrease the cost of housing Increase housing supply Let’s take a look at each of these possible solutions. We’re certainly seeing progress statewide in income growth, although not at the level we would need to catch up to our current home prices and rental rates. We also expect to see some sort of correction in our housing market in the future, but it’s doubtful that home prices will fall significantly. Instead, we expect to see home and rental costs simply stabilize. While the two factors above could help alleviate a small amount of pressure, the biggest impact we can have on resolving our affordable housing woes would be to increase the amount of housing stock in our communities, and to do it more quickly than demand is growing. Increasing Housing Supply Through Density With the exception of our region’s coastal areas, Southwest Florida is a haven for single-family homes and gated communities. While that makes for a pleasant suburban feel, it also increases urban sprawl, making it more expensive to live here. Sprawl means that municipalities must pay more to deliver services like police, fire, ambulances, public transportation and sanitation services, which in turn raises our local taxes. Residents in sprawling areas endure longer average commutes and use more gasoline, further raising the cost of living. The most logical solution to ease the burden of urban sprawl is to increase density—or the number of housing units allowed per acre of land. By concentrating density in areas with adequate infrastructure, we can reduce the cost of providing municipal services, thus keeping our costs of living lower. Higher density also provides the opportunity for more housing diversity, like apartment units ranging from one-room studios to four-bedroom penthouses, as well as more condominiums, duplexes, and other multifamily options. Concentrated Development in Southwest Florida Here in Southwest Florida, we already see examples of municipalities that are strategically concentrating development. Fort Myers’ Midtown neighborhood represents one example. Infrastructure improvements will accompany the development of this area, which will include high-density housing all within walking distance of the desirable River District. Charlotte County employs a strategy called Transfer Development Units (TDU), which identifies appropriate locations for higher-density development, as well as areas where density should be reduced. The goal of the TDU program is to encourage the removal of outdated platted subdivisions and lots and support more sustainable higher-density mixed-use development. And in Collier County, the East Naples development plan hopes to spark more walkable neighborhoods and mixed-use communities with workforce housing opportunities. Just this week, three new apartment complexes broke ground, promising to bring more workforce housing and affordable units for seniors to East Naples. While Florida’s SB 962 should be celebrated as a victory for affordable housing advocates, local governments have tried to incentivize developers to hold back units for affordable housing for decades—with minimal success. Instead of encouraging builders to create more affordable units, they often discourage developers from pursuing projects at all. However, government incentives, paired with smart growth and higher density developments, may offer the key to solving our local affordable housing troubles. Are you a developer seeking opportunities in Southwest Florida? The Commercial Property Experts at Cushman & Wakefield | Commercial Property Southwest Florida have the knowledge and experience to help guide you. Call our team at 239-489-3600 or contact-us.