This article is part five of a six-part series focusing on the most critical questions about development and commercial property in Southwest Florida.
Our recent article on Southwest Florida’s hottest commercial corridors highlighted an abundance of multifamily housing springing up across the region. These projects will gradually come to market over the next 12-14 months. Some economic indicators hint that this multifamily boom may be reaching a peak, which brings us to our fifth critical question about Southwest Florida’s Development:
Has Southwest Florida’s Wave of Multifamily Construction Reached its Peak?
Over the past year, Southwest Florida has seen a dramatic 62% decrease in construction starts. Escalating material and labor costs, combined with higher interest rates, are making it more expensive to build and borrow money, dampening the incentive for multifamily developers. Moreover, the additional supply in the market should cause rent prices to stabilize, further making multifamily housing less attractive for developers. However, we anticipate this trend to be a short-term pause rather than a long-term slump because of ongoing demand.
Rental Rates and Housing Shortages in Southwest Florida
The shortage of multifamily housing in our region has been a longstanding issue. While the current boom will certainly narrow the gap between demand and supply, the current wave of construction will not fully address the region’s housing crisis. The majority of the new units in the current pipeline are luxury and market-rate apartments, which do little to alleviate Southwest Florida’s housing affordability crisis.
We’re all familiar with the often-cited guideline that no more than 30% of our before-tax income should be spent on our housing. Yet Gulfshore Business recently noted that the median household income in Lee County is $71,072. To meet the 30% affordability standard, monthly rent on a two-bedroom apartment should cost no more than $1,777. The reality is quite different, however. Renters in Lee County pay an average of $2,273 a month, meaning there will still be significant demand for housing in our region.
Demand and Multifamily Construction Activity
As the new inventory of multifamily units comes online over the next 12 months, we can certainly expect a temporary lull in construction activity. Nonetheless, demand should rebound quickly as the region’s population continues to grow. With economic conditions expected to improve, we anticipate that investors will once again turn to multifamily development, driving another surge in construction in 2026. In other words, although our current multifamily construction wave may have plateaued, the peak is yet to come.
If you’re a developer considering multifamily construction in Southwest Florida, your next step is to contact the Commercial Property Experts at Cushman & Wakefield | Commercial Property Southwest Florida (CPSWFL). Our team can leverage our data and local knowledge to help you understand the economic potential of your potential development project. Reach out to us by completing our online contact form or calling 239-489-3600 to speak with an expert.