Lots of opportunity: High vacancy rates spur lease incentives
Dozens of vacant and near-vacant commercial properties line the streets and boulevards of Cape Coral. Hoped- for consumer traffic isn’t there, exisiting businesses aren’t earning the revenue hoped for and the local economy struggles.
Although Realtors have identified a silver lining in the sale of residential homes, vacant commercial properties continue to showcase “For Rent” or “For Lease” signs in their front windows. Some property managers and owners, in an attempt to fill vacant properties and stimulate economic growth, are offering unprecedented promotions.
Cape Coral Property Services owns commercial property in the city and President Charles Siragusa announced that a vacant building on Del Prado Boulevard is offering free rent to new businesses.
“No one pays any rent until they make money so what I would do is draft a lease with a tenant which allows them to pay a percentage of their gross revenue,” said Siragusa. “So, the first couple of months if they make no money, they pay no rent.”
Others across the city are adopting similarly bold economic programs to get the city’s ball rolling again. Free rent programs vary from more flexible options to those with one or two months flat without rent.
Siragusa explained that many startup businesses are afraid to rent space because of the financial obligations — instead they conduct their work from home. There is also the looming chance their business could fail and their aspirations will turn into just another entry on the eviction or foreclosure list.
So far Siragusa said the company has been contacted by a veteran’s organization, a charitable organization and a mortgage broker to receive space rent free.
“This is the bottom of the recession and it’s starting to get better,” he said. “It is a perfect time for someone to make the jump.”
Dick Collins, spokesperson for the Florida Merchants Network, said Cape Coral Property Services’ intent is to set up a mutually beneficial partnership that will allow local businesses to flourish without a high mobility rate.
High vacancy rights also affect existing businesses by failing to draw in Cape Coral residents with money to spend.
Geo’s Italian Restaurant at the Shops at Cape Crossing is the only active business in a plaza full of vacant commercial properties. Owner George Lukas feels he would be making more revenue if there were more businesses to draw traffic.
“I am doing good but I figure I would do better if there were more businesses,” he said.
There has been speculation that new businesses may open up at Cape Crossing — including a number of different restaurants — but Lukas said he doesn’t know for sure.
Punta Gorda-based Five Star Florida Realty also is advertising free rent on two buildings located at Nicholas Parkway. Norm Burke, owner of the firm, explained that the length of free rent for businesses depends on a number of factors.
“It depends on the tenant and the length of the lease,” he said. “The concept we are interested in is trying to get people in the facilities and we are willing to talk to new and old tenants.”
Free rent depends on the strength of the business and its financial backing, he said. A more established business interested in downsizing its space would receive free rent for much longer than a startup, and those willing to do tenant improvements could further extend this time.
Burke said that free rent programs are challenging the traditionally held notions of tenant leases and the nature of business in Cape Coral.
“It’s the first time we ever went this deep with this type of free rent. Obviously the economy has a lot hurting and we are doing what we can to help people who are trying to get started or move,” he said. “We have got to be a lot smarter today and differentiate ourselves from the way we did business in the past.”
Five Star Florida Realty turned one large retail space into a ” marketplace” where 50 to 60 small businesses could have a shot in this market, explained Burke.
The future of Cape Coral’s economy depends not only on selling vacant homes and jumpstarting the construction industry, but also decreasing the commercial property inventory.
Vacancy rates on commercial properties are the highest ever, according to Gary Tasman, a commerical Realtor at Cushman and Wakefield of Florida. The overall vacancy rate for office space is 23.2 percent and 15.7 percent for industrial space.
“Not only is it significantly higher than it has ever been, it’s extremely high by normalized standards for any market,” said Tasman.
According to research compiled by Cushman and Wakefield, first-quarter individual vacancy rates were 13 percent for warehouse or distribution facilities, 29.5 percent for office or flexible space, a shocking 62.4 percent for class A office space, 14.2 percent for class B office space and 18.6 percent for the lowest grade, or class C, office space.
The story of what happened to the Cape Coral commercial market in 2008 rings the same to the plight of residential homes. For five years home prices skyrocketed, the economy soared and builders worked feverishly to increase the inventory of commercial properties until the bottom fell out a couple of years ago.
As a result, cities across the state were left with dozens of empty offices and no buyers in sight.
According to Tasman, it will take the commercial market longer to rebound from the crash, specifically because the retail industry won’t expand until more people buy homes, move to Cape Coral and contribute to the economy.
Furthermore, the sale of office or retail space is directly related to local job growth, he said, and without a decrease in Lee County’s 12.4 percent unemployment rate none of these spaces will be purchased.
“Right now we are seeing the houses bought, but I’m not convinced they are being bought by people who will occupy them on a seasonal or permanent basis,” said Tasman.
Most of the homes for sale in Cape Coral are being snatched up by investors who plan to rent the properties until prices stabilize and they can sell for a profit. Ultimately, it will take an influx of residents in Cape Coral to create more demand for retail businesses, said Tasman.