The economic downturn has certainly affected Southwest Florida, and even though the Collier County office market is faring better than neighboring Lee County in terms of vacancy and absorption, new patterns are emerging for 2008.

The median price for office buildings in the first quarter was $296 per square foot, a 67 percent increase from the previous quarter. The total sales value of the office buildings was $4 million, which is greater than the $1.6 million in fourth quarter of 2007.

When comparing first-quarter 2008 sales with the same period a year ago, the results tell a different story. The median price per square foot of $296 declined 5 percent since last quarter. The $4 million total sales value was far less than the $17.5 million in office transactions in the first quarter of 2007. This is the result of fewer transactions coupled with the fact that the average size of the buildings sold were less than 3,000 square feet. The slower sales activity is correlated to rising vacancy that could be making investors and lenders cautious. The vacancy rate of 10.3 percent has gradually risen since it was 9.4 percent a year ago.

Absorption has been occurring at an average negative-4,000 square feet per quarter, though total net absorption remains positive as of first quarter 2008. The average triple-net office lease in Collier County was $24.43, nearly the same as the previous quarter. This is a sign that office rents might level off as vacancy continues to increase, and current listings indicate this has already started to occur. As the office lease market continues to soften, 238,000 square feet of new space is still under construction.

Transaction activity for office condominiums in Collier County is far greater than office buildings. However, this activity has slowed down over the past year. There were 11 sales in first quarter 2008, compared with 39 sales a year ago. Median sales prices have also tapered off from $241 per square foot in first quarter 2007 to $203 per square foot first quarter 2008. Total transaction value was $6.5 million, down 42 percent from the previous quarter.

The Collier County industrial market has been experiencing steady demand and absorption. The median price per square foot of industrial building sales rose 9 percent from the previous quarter to $140, though it is 18 percent lower than a year ago. Capitalization rates over the past twelve months have been an average 7.2 percent.

The number of sales declined slightly from seven last quarter to five, though volume was also slow in the first quarter of 2007. The total value of all transactions declined from $27.6 million last quarter to $10.7 million. However, that is more than quadruple the $2.6 million total in first quarter 2007.

Notable activity in the first quarter includes a $3 million sale for 13 buildings (mostly warehouse) totaling more than110,000 square feet on 11.8 acres in Immokalee. In North Naples, a 5-acre lumber yard with 29,000 square feet of industrial space sold for $4.1 million.

Vacancy of multi-tenant industrial buildings 20,000 square feet and greater rose sharply since the previous quarter. The vacancy rate in fourth quarter 2007 was 3.5 percent and is now 6.6 percent as of first quarter 2008. While the vacancy is still not excessively high, a continued trend may result in declining lease rates—a trend that already seems apparent when comparing to rents from a year ago.

In tandem with rising vacancy, absorption dipped down to negative-47,013 square feet, primarily due to over 40,000 square feet of new flex space delivered next to the Wal-Mart at CR 951 and Radio Road.

There tends to be as much transaction activity for industrial/flex condominiums in Collier County as there is for buildings. There were eight sales in first quarter 2008, the same as the previous quarter but down from the 13 sales a year ago. The median price per square foot was $175, similar to the previous quarter and up 24 percent from a year ago. Total transaction value was $3.4 million, down from $3.8 million in fourth quarter 2007.

The Collier County retail market remains healthy, as evident by the relatively low vacancy, positive absorption and stable lease rates. Though sales volume is down slightly since the previous quarter, activity is up from five sales in first quarter 2007 to eight sales in first quarter 2008. A similar trend was evident in total quarterly sales value, up slightly from $13 million to $13.8 million since the same period a year ago.

The total sales value in fourth quarter 2007 was higher at $22.8 million due to stronger volume during that period. The median sales price of $220 per square foot is up 30 percent since last quarter and up 9 percent from first quarter 2007. Capitalization rates over the past 12 months have been an average 6.3 percent.

Notable activity in the first quarter includes the sale of two shopping centers in Naples: one for $2.7 million ($186 per square foot) and an older center for $3.2 million ($123 per square foot). Both shopping centers are located on Tamiami Trail.

Vacancy of multi-tenant retail buildings 35,000 square feet and greater is 5.3 percent, up from a year ago though down slightly from the previous quarter. As a result, lease rates increased from an average $22.82 last quarter to $24.27 in first quarter 2008.

The Collier County retail market realized total absorption of 477,410 square feet in the first quarter, a substantial increase from the previous quarter and a year ago when net absorption was negative. There is currently about 424,000 square feet of new retail space under construction. Major new projects are coming online on Tamiami Trail in the North Naples submarket with many tenants already announced. The projected outlook is that healthy demand will keep absorption strong in the long-term, though an economic slowdown may have a residual effect throughout 2008. Monitoring the sensitively of local and national retail growth during a probable recession will be a trend to watch for as the year progresses.

The commercial land market in Southwest Florida has come down from record growth over the past few years. The median sales price has been hovering in the range of $17 to $22 per square foot for the past four quarters. Activity in the first quarter includes the sale of two parcels on Tamiami Trail East, south of Davis Boulevard in Naples. A 1.02-acre parcel sold for $30.38 per square foot and a 5.88-parcel sold for $24.60 per square foo. An outparcel in the Mission Hills shopping center at Collier Boulevard and Vanderbilt Road sold for $67.46 per square foot. On the opposite side of the price spectrum, three small adjacent parcels on Santa Barbara Boulevard in Golden Gate sold for a $10.12 per square foot.

Due to low supply of available vacant land with industrial zoning in Collier County, quarterly sales volume is typically low. For this reason, the median sales price can appear to fluctuate rapidly due to only one or two vacant industrial properties changing hands in any particular quarter. A 1.68-acre industrial parcel on Shaw Boulevard near I-75 sold for $675,900, or $9.24 per square foot. There was also a 8.77-acre lumber yard on Old 41 that was sold, but a portion of this property is improved and was not factored into the statistics.