The Fort Myers/Naples area office market continues to see cautious growth, according to Randal Mercer, managing broker and partner with CB Richard Ellis - Fort Myers/Naples, Fla. The economic slowdown seen throughout the country has had a muted yet visible effect in the Southwest Florida area. The office market is again gearing up for new development in the latter half of 2001.

"Current average asking lease rates in the Fort Myers MSA have remained steady," Mercer says. "However, specific submarkets have experienced greater fluctuation, which mirror market conditions." Lee County Class A space currently demands average rates ranging from a low of $14.60 in the Fort Myers South submarket to a high $17.53 in the Bonita Springs/Estero submarket. In Collier County, even as the area continues to see an influx of proposed office product, average asking lease rates have not reflected the proposed increases in available space. The current average asking lease rates for Class A space in the Naples MSA range from $19.47 in the North Naples submarket to $28 in the Downtown submarket.

Vacancy in the coastal business corridor has been slowly on the rise over the past 6 months, with the two-county area seeing an overall 3.7 percent increase over vacancy rates at year-end 2000. The Fort Myers MSA has seen vacancy increase to 16.8 percent while vacancy in the Naples market has risen slightly to 14.1 percent.

Overall net absorption in the Fort Myers MSA has decreased remarkably with the exception of the Fort Myers South submarket. There was a negative net absorption of 65,138 square feet in the Fort Myers MSA for the first half of 2001 while the Naples MSA experienced a positive net mid-year absorption of only 9,853 square feet. In Naples, Class A buildings realized a positive absorption of 49,758 square feet while Class B faced a negative absorption of 39,000 square feet. These numbers reflect the recent shift in tenants upgrading from Class B buildings to Class A buildings.

Significant recent activity in the Fort Myers MSA is focused primarily in Class A office product. The Fort Myers North Class A market, which previously enjoyed a 6.7 percent vacancy rate at year-end, currently is experiencing a 30.9 percent vacancy rate due to a major GE downsizing. In the Bonita Springs/Estero submarket, the introduction of Beachway Professional Center has caused significant impact with the addition of 66,000 square feet, which may cause rates to drop in the near future.

In the Naples MSA, Bank of America has expanded their presence in the Bank of America Center and made a long-term commitment to the building. In addition, expectations regarding the completion of Fifth Third Center have helped generate leasing activity for the building's 138,521 vacant square feet.

New development in the Fort Myers MSA has tapered off in the first 6 months of 2001, leaving construction limited to projects begun in 2000. The second half of the year, however, will see an end to this trend, most notably in the Daniels Parkway Corridor, which is primed for several new development projects to begin, Mercer notes.

"These projects will culminate in an additional 100,000 square feet added to the south Fort Myers submarket," he explains. "New office projects are consistently being introduced in the Naples markets." TIB of the Keys will be developing a three-story, 42,000-square-foot building in downtown Naples for its new location. In addition, Citizens National Bank has announced the construction of its new 36,000-square-foot building on Immokalee Road. These buildings, along with several other proposed office developments, will add a significant amount of space in the fall of 2001 and early 2002.

"At this point developers are looking hard at a pure speculative development in Naples before they break ground due to a shortage of viable anchor tenants," Mercer says. "However, vacant land sites in premium locations will continue to drive development despite such market conditions."

Randal Mercer is managing broker - partner with CB Richard Ellis - Fort Myers/Naples.


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