The Naples Office market is coming alive!
Northern Trust Building- class A office in Naples, FL
The office market in Naples Florida, after spending several years in the doldrums is showing some signs of coming alive albeit slowly. The improvements in the market are of course largely a result of the general economic trends and consumer confidence, but also as a result of the flat level of supply of office space. It has been at least two years since any significant additions to the office space inventory were made. The last real significant additions to the office market was the office component of the Mercato and the American Momentum Building, both in north US 41 corridor in Naples.
One good thing for the overall market is that it will probably be at least three to five years before the area will see any major construction of more office inventory. While construction costs are more affordable than during the ‘go-go’ years of the mid decade and land values are certainly much lower as well, the anemic demand and the lack of attractive financing will keep new construction down to a trickle. This all bodes well for landlords of existing buildings and gives the market a chance to get back to equilibrium.
Having had the lead role in the development and leasing of the Mercato, which includes about 140,000 square feet of office space, I must say we completed the project in probably one of the worst economic periods of recent history. Despite that bad timing (which is unavoidable given the long time frame typical to bring large projects such as the Mercato, unless for psychics and those proficient in the secrets of the ouiji board) the leasing of the Mercato’s office space went surprisingly well. Occupancy currently is pushing 90%. The Mercato had become the ‘go-to’ location for anyone searching for true Class A office space, certainly at the expense of other office property owners. Now that the supply of space at the Mercato is drying up, future demand will spill over to other competitors that perhaps weren’t as thought to be as trendy of a location as the Mercato.
Naples’ high level of wealth and affluence naturally leads to a fairly predictable type of office user coming into the area…law firms, banks, and wealth management firms (p.s., “wealth management” is the new accronym for what we all used to call ‘stock brokers’). Another dynamic you have happening in today’s market is the moving up in quality of many tenants. Office tenants in class “B” spaces have found that with lower rental rates in a weakened economy they can now afford class “A” buildings. The further down you go in the pecking order, the greater the impact. Also office tenants in more secondary locations are typically of lesser credit worthiness than those in the top rated buildings, thus making those secondary office buildings more susciptible to vacancy and credit loss.
Accordingly, the slow recovery of the office market will be from the top down….sort of the trickle down affect. I think while we have certainly turned the corner from the bottom of the economic cycle, the march back up will not be rapid, but at least the direction is now positive. This turn in the market should likewise start to stablize the rental rates. For new businesses looking to come into the area, and for established firms, now is certainly an opportune time to find a perfect office space and lock into a competitive rent deal.
Dougall McCorkle, MBA
Sales Associate and Commercial Specialist
Premier Commercial, Inc., Licensed Real Estate Brokers
Direct: 239.213.7234
Cell: 239.860.3368
dougall@premiermail.net
