Collier County includes some of the most affluent communities in the country. With that status brings many challenges to the building industry, especially when coupled with outside factors like COVID19, Hurricane Ian, inflation and a possible recession.
Recently, a panel of construction industry experts shared their thoughts with a local audience of business professionals.
Keith Gelder of Stock Luxury Apartments described the various challenges in commercial real estate in the next 12 to 18 months.
"I would say in the commercial real estate front, right now, you're seeing a great standoff occur, said Gelder. "They call it the bid- ask spread, right? Buyers and sellers, there's an enormous disconnect in terms of commercial property valuations. So, what's happening is there's no transaction volume. Go speak to any investment sales broker right now and they're looking for activity. That's all a function of interest rates. So there's gonna continue to be less less transaction volume in the market."
He added an additional challenge to the commercial real estate market, "And then from a new construction standpoint, there will probably be less multifamily starts in 2024. There's tremendous challenges in the lending environment right now."
David Genson of Barron Collier Companies countered that there may be opportunities, as well.
"What Keith is saying about the great stand off -- that's very true. What we’re also going to see in the next 12 to 18 months is that there's many commercial loans on commercial properties that are gonna be coming due that I think some buyers will have to default on. And so there may be some additional real estate opportunities for picking up commercial real estate, as a result of that," he said. "But the primary hurdle is going to be the interest rate and I don’t see that changing anytime soon."
Jamie French of the Collier County Growth Management Department noted the impact of flood insurance rates.
"Flood insurance rates will continue to go up at an 18% increase per year," said French. "We’re already experiencing a 14% decline in transaction activity that we’ve seen at the county level. Construction activity on both residential and commercial, it has dropped in new starts."
So there are still challenges ahead in today’s building environment. Gelder quoted a developer on the east coast, who quipped, “Amateur hour is over.” Gelder went on to explain, “Only the most experienced developers are going to be able to be successful in this environment. The rest will not get funded and won’t be able to execute deals.”
In other words, it’s going to be “survival of the fittest” in the Collier County building industry as we continue to navigate challenging times.
Karen Moore is founder and publisher of Southwest Florida Business Today, and a regular contributor to WGCU.
