Office Tenants Have Limited Options In Southwest Florida
The Southwest Florida markets of Fort Myers and Naples collectively have 33 million square feet of office inventory. Of that, only 1.6 million square feet are vacant, resulting in a 4.8% vacancy rate, one of the lowest in Florida. It has been over two years since vacancy was above 6% in the region, compared to the 2015 to 2019 average vacancy rate of 7%.
Market participants have indicated that users looking for space in the market have limited options for ready-to-go space. Increased construction costs coupled with prolonged permitting timelines have made building out office space an uphill process in many markets across the U.S., and that is certainly the case in Fort Myers and Naples.
Roughly 320,000 square feet of space is vacant in the region’s four- and five-star buildings. However, a considerable portion of that is in one large sublease. Gartner has roughly 130,000 square feet of its 200,000-square-foot building in Fort Myers up for sublease. While smaller tenants may be accepted, the spaces are being marketed at 32,000-square-foot floor plans with furniture.
The vast majority of leases are on the smaller side here. The average lease size in 2024 was just 2,100 square feet. However, if an office tenant is seeking over 7,500 square feet in four- and five-star quality buildings, there are fewer than 15 spaces available in the region.
Smaller spaces lease exceptionally fast in the Southwest Florida region. Buildings with less than 7,500 square feet of available space have a median month on the market of just five months. In comparison, properties with over 7,500 square feet of available space have a median month on the market of roughly 15 months.
New construction will do little to add to the region’s office inventory, as less than 65,000 square feet are under construction. In addition, roughly 45,000 square feet are fully preleased medical office buildings. Rising construction costs, tighter lending practices and office asking rates in the region, which average around $30.00 per square foot, make traditional office construction difficult to pencil. Future development could occur, but new projects will likely consist of medical office or build-to-suit facilities.
Office vacancy fundamentals are not expected to materially change in the coming quarters. As a result, the Southwest Florida markets of Fort Myers and Naples will likely continue to have sub-5% vacancy rates.
(CoStar Analytics | By Michelle Rumore)
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