Real estate experts bullish on Southwest Florida

photo: London Bay Homes

By June Fletcher

Forget recent stock market volatility: Real estate experts say the outlook for Southwest Florida’s economic future is sunny.

Strong job and population growth will spur a healthy economy and robust real estate development in every sector, the experts told a group of about 150 business people at a Real Estate Investment Society workshop Friday at the Cohen Center at Florida Gulf Coast University.

“It’s time to gear up,” said Jerry Parrish, chief economist and director of research at the Florida Chamber Foundation, adding Florida will need to add two million new jobs by the year 2030, partly to serve a population older than 65 that is projected to grow by an equal amount.

In Southwest Florida, jobs growth is already running ahead of the state. Parrish noted the Naples metro area saw 22 percent job growth over the year in July and Cape Coral-Fort Myers 20.8 percent. Both grew faster than the state as a whole, which rose 16.6 percent.

But since retirees are also leaving the workforce at a quick clip, the region needs to focus on bringing young, new talent to the workforce to keep businesses humming. “We need every able bodied person working,” he said.
Sustained job growth is also vital to the state’s economic health because nearly three-quarters of Florida’s general revenues come from sales and use taxes. “The more people at work, the more property and sales taxes are paid,” he said.

Robert Beatty, dean of the Lutgert College of Business at Florida Gulf Coast University, said that there are more jobs open in both Lee and Collier counties than there were before the housing crash.

But since the region’s population is growing, too, he found the increase sustainable and a reason to be optimistic.
“We’re seeing people who want to come and stay here,” Beatty said.

For those involved in construction, the recent uptick in job and population has spurred a business bonanza.
Michael Greenberg, Southwest Florida regional president of Neal Communities, said his company has already sold out two of the seven communities it has built in Collier and Lee counties.

The downside is, he’s also scrambling to find enough skilled construction workers to build new homes — a problem other homebuilders in the region are facing, too.

“We need for the labor force to grow — biggest issue we face is we’re all competing for the same labor,” he said.
Those who build commercial properties are reaping profits, too.

“It’s fun to be in real estate again,” said Brian Goguen, chief operating officer at Barron Collier Companies, mentioning the firm’s recent sales of the Mercato for $239 million and La Playa Beach and Golf Resort for $188 million, or about $1 million a room.

“Everyone is bullish on real estate, a lot of money has flooded into the market,” he said, adding “large institutional investors are chasing deals.” And after a long period of caution, “banks are lending again,” he said.

Mark Stevens, president of Stevens Construction Company, said “we’re starting to do some commercial work that just wasn’t out there a few years ago.” The company’s Fort Myers office is currently building the Southwest Florida Performing Arts Center in Bonita Springs, as well as a bank, a deli and some medical offices.

Adam Palmer, principal of Land Qwest in Fort Myers, pointed out that commercial building owners also have an opportunity to profit by raising rents on tenants whose leases were written during the downturn, when rents were less expensive.

But investors in commercial properties shouldn’t expect rampant appreciation to fuel profits in the future, as they have for the past few years, said Randy Anderson, chief economist for Griffin Capital Corp. based in El Segundo, California.

Speaking to the group via Skype, Anderson said “we’re not in the first innings” of the real estate recovery, and therefore investors should stick with the fundamentals when assessing a deal.

“Buy assets in good markets where you can where raise rents and where management matters,” he said.
Looking at various sectors, Anderson was most bullish about the industrial market, largely due to the need for more warehouse space as online retailers like Amazon grab more market share. For the same reason, he was less enthusiastic about the retail sector. “Stores in strip malls in the middle of nowhere have a hard time paying the rent,” he said.

Telecommuting and the trend toward cube farms and flex space, rather than big private offices, has muted the need for more office space, he said.

But multifamily still has room to run, he said, as young people create new households and older ones downsize.
“Real estate is not cheap anymore and it’s not a simple game,” he said. “But there are still a lot of good deals and opportunities available over the next three to four years.”