Harbour Plaza in Fort Myers awaits tenants. Almost a quarter of the Class A space in Fort Myers/Naples is vacant. [Photo: Jason P. Smith] |
To get a feel for the extent of the pain in Florida’s real estate market, go shopping for Class A office space in downtown Fort Myers. Along First Street, “Now Leasing!” signs have become almost as common as palm trees. Nearly a quarter of all available Class A space in the Fort Myers/Naples area sits empty — the worst vacancy rate in the state.
“The question is — where’s the bottom?” says Mike Davis, executive director at Cushman & Wakefield in Tampa.
| Office
Vacancies |
Market
|
Vacancy |
Pinellas County
|
19.1% |
Palm Beach County
|
18.6 |
Jacksonville
|
17.5 |
Fort Myers/Naples
|
16.1 |
Orlando
|
15.8 |
Tampa
|
14.9 |
Broward County
|
14.3 |
Miami
|
12.9 |
| Statewide average |
15.7 |
Note: Class A rates, including those
mentioned in the story, will be different.
Source: Cushman & Wakefield, third quarter 2008 |
Gone are the days when growth in office, industrial and retail construction/sales could bouy the sector as the housing market sank. Florida is seeing a 15.7% statewide vacancy rate overall in the office market. In the industrial market, the average rate per square foot for space has dropped to $7.12, from $7.79 two years ago. On the retail front, Florida is likely to see more stores shuttered this month — following a sluggish holiday season — than it has since the recession of 1981-82. Don’t expect a turnaround this year. As companies like Linens-n-Things bail out of large storefronts, vacancies are “going to be the norm for the next year, or next year and a half,” predicts Paco Diaz, senior vice president with CB Richard Ellis in Miami.
And that’s the news from the relatively healthy side of the industry. Housing activity has plunged to just 20% of its bubble highs, says Mark Vitner, senior economist at Wachovia Corp. in Charlotte, N.C. Many markets are rapidly approaching zero new activity. Prices are down about 20% from their peak, returning to 2004 levels. Look for the housing outlook to worsen this year as credit remains hard to come by and as foreclosures continue to clog the market. Florida’s major metro areas continue to log some of the worst foreclosure rates in the nation [“Foreclosures,” page 66].
Nationally, growth in households is expected to correct overbuilding in the housing market by the end of 2009. But because Florida is more overbuilt, it faces a steeper climb out of the slump. Home prices won’t bottom out here until sometime between the middle and end of 2010, Vitner predicts.
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