High demand for apartments pushes up rental rates, selling prices in Fort Myers and Naples

Laura Layden
Fort Myers News-Press
  • Apartments are red hot in Southwest Florida. The high demand is reflected in the skyrocketing rental rates — and the prices paid for the real estate when it changes hands.
  • Another sign of the apartment market's strength? New construction continues, with more projects in the works, in Lee and Collier counties.
  • The higher demand for apartments has driven up the rental rates, making owning apartment complexes more lucrative — and a better investment.

Apartments are red hot in Southwest Florida.

The high demand is reflected in the skyrocketing rental rates — and the prices paid for the real estate when it changes hands.

Another sign of the apartment market's strength? New construction continues, with more projects in the works, in Lee and Collier counties.

Last week, Encore Vive, a 288-unit luxury apartment community at The Forum in Fort Myers, sold for $91 million. That equates to more than $315,000 a door, making it one of the top sales of its kind.

"Sales like this prove the demand for multifamily projects continues to shine as one of the investment darlings of Southwest Florida," said Paige Rausch, a real estate broker and analyst with Aslan Realty Advisors in Fort Myers.

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Encore Vive is one of several apartment complexes in The Forum in Fort Myers.

The complex, she said, likely commanded such a high price for a few reasons.

"The well-thought-out site selection, luxury finishes, and amenities are on par with gated communities and private clubs," she said. "My compliments to the developer and new owners." 

The property last sold for about $4.9 million in 2019, as vacant land, Rausch pointed out after reviewing the county's land records.

Property records show ownership of the complex has shifted from one limited liability company to another.

Newmark represented the sellers and arranged financing for the buyers, said Tyler Minix, the company's director of multifamily capital markets.

"It was opportune timing," he said "Selling into a strong market." 

The sellers saw really strong interest after putting out a call for offers after Labor Day, Minix said. 

The new owner goes under the name Awpre Encore Vive 2021, an affiliate of Atlantic Wealth Partners, an investment advisory firm with an identical address in Jupiter, Florida.

Justin Thibaut, LSI Cos.

Justin Thibaut, a president/partner at LSI Cos. Inc. in Fort Myers, said: "Money is chasing these income-producing, stabilized multifamily assets. And interest rates are very low right now so that increases demand." 

In fact, he said, most of the newer apartment developments are being "set up with an exit strategy" in mind.

"It's not just multifamily. Anything that is income-producing right now is getting a lot of attention," Thibaut said.

The high price paid for Encore Vive in part reflects a reawakening of The Forum and the area surrounding the interchange at Colonial Boulevard and Interstate 75, which includes the addition of the Topgolf entertainment venue.

"Staggering number" 

Stan Stouder for Marketwatch

Stan Stouder, a founding partner of CRE Consultants | Brokerage Services in Fort Myers, described the per-unit sales price paid by the investment buyers of Encore Vive as a "staggering number." 

"We were seeing $150,000 to $200,000 a door two years ago," he recalled.

Looking ahead to 2022, Stouder said he expects to see more apartment communities commanding jaw-dropping prices, for several reasons, including the continuation of the "great COVID migration" away from bigger cities and towns that are more crowded.

"Florida is the beneficiary of that," he said. "That is exacerbating the lack of an adequate housing supply, which means more people are having to go into apartments."

Encore Vive is one of several apartment complexes in The Forum in Fort Myers.

The higher demand for apartments has driven up the rental rates, making owning apartment complexes more lucrative — and a better investment.

"This is no longer 'Millennials don't want to buy houses,'" Stouder said. "There is a limited number of houses to buy." 

He described the housing situation for new residents in Southwest Florida as "crawl, walk, run."

"It used to be if you moved in from another state, you'd go running to your new house," Stouder said. "Now, you have to do that in steps." 

These days even smaller, simpler houses can take a year or more to build, due to shortages of construction materials and labor, he noted.

"All of that is redirecting traffic more and more to apartments," Stouder said. 

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More big sales

In Southwest Florida, other notable apartment sales over the past few months include: 

  • West End at City Walk in Fort Myers, for more than $81 million. The 318-unit complex, near downtown, is located at 2250 McGregor Park Circle, between McGregor Boulevard and West First Street.
  • Campo Felice in downtown Fort Myers, for $55 million. The building — at 2500 Edwards Drive — has 323 apartments, overlooking the Caloosahatchee River.
Campo Felice sits right across from the Fort Myers Yacht Basin.

In September, the Gordon River Apartments in Naples sold for $17.5 million. The new owner is Naples 1400 LLC, an affiliate of Corridor Ventures, a Connecticut-based real estate investment firm. 

The 95-unit apartment complex is at 1400 Fifth Ave. N. in the River Park neighborhood.

The Blackstone Group, a New York-based investment firm, acquired the Milano Lakes Apartments, in Naples, for $80.5 million in August. It has 296 units, sitting off Collier Boulevard at The Lords Way.

About a year ago, an affiliate of Philadelphia-based Equus Capital Partners Ltd. purchased Inspira, a 304-unit luxury apartment community, for more than $82.25 million. It's located in East Naples at Lely Resort's entrance off Rattlesnake Hammock Road.

While Stouder expects to see more big apartment deals in the Naples and Fort Myers markets, he cautions that the tide could quickly change for a variety of reasons, from tax increases on capital gains to hikes in interest rates.

Rental rates jump

Gary Tasman is CEO and principal broker of Cushman & Wakefield Commercial Property Southwest Florida.

Gary Tasman, the CEO and principal broker for Cushman & Wakefield | Commercial Property Southwest Florida, said the average monthly rate for multifamily residential rentals has jumped by more than 50% in the past year. 

In the Fort Myers area, he said, the rate has risen by 23% over the same time.

The average rent in Lee County for newer class A rental communities is $2,115 per unit and in South Lee and Collier County its $2,357 per unit as of the end of October.

For current apartment owners, increased property values can make selling out hard to resist.

As a result, Tasman said he too expects to see more pricey deals over the next six months. 

He also anticipates more new construction.

"It's hard to find rentals, even with as much as we are building now. That's because Southwest Florida has done a great job of creating very well-paying, year-round jobs," he said.

Wages are rising — and that means more renters will seek out nicer and newer apartments and communities, Tasman said.

"This is a new plateau of growth for Southwest Florida," he said. "We've never seen an environment like this. But it's the result of decades of work that our region has done to maintain its quality of life and to attract more diversified jobs."

He doesn't expect rental rates to continue increasing at the same rate, describing the pace as unsustainable, but he doesn't see them tumbling backward either. 

"My expectation is that things are going to settle back down and we will have a healthy rate of inflation," Tasman said.

New apartments

To meet demand, new apartment projects are forging ahead in Southwest Florida. 

For example, a limited liability company, known as 41 Central Fort Myers Apartments, recently purchased 8.41 acres of multifamily zoned land behind the Palm Pointe Shoppes for $3.4 million.

A new four-story apartment complex is planned on the site — at 11605 S. Cleveland Ave. in Fort Myers. A groundbreaking is planned for February.

The highly-amenitized complex will have four stories, with a total of 275 units.

Construction is expected to take about 18 months.

Located off U.S. 41, the property is minutes from the Midpoint and Cape Coral bridges. 

“This extension of Palm Pointe Shoppes is an optimal site for the '41 Central' apartment project,” said Mike Concilla, a managing principal for LandQwest in Fort Myers. “There’s excellent visibility along 41, not to mention walkable dining options right outside your door.”

Concilla represented the seller, 2010 Palm Pointe LP, in the transaction. Jonathan Richards of Lee & Associates represented the buyer.

No "signs of stopping"

According to the latest quarterly report by Lee & Associates, "demand in the multifamily sector doesn't show any signs of stopping," especially in Lee County.

In the third quarter, the volume of sales in the multifamily market topped $155.2 million in the Fort Myers area, which included the sale of Campo Felice and the Oasis Grand to the same buyer, Westside Capital Group, a Miami-based real estate investment firm. 

Oasis Grand, with 265 units, fetched $71 million. The tower sits on 1.3 acres, along the Caloosahatchee River — at 3040 Oasis Grand Blvd.

As of September, there were 11,910 rental units under construction in the Naples area, and more than 26,000 in the Fort Myers market, according to research by Lee & Associates.

One of the apartment projects being built in Southwest Florida is Allura, by Stock Development. Located at the intersection of Livingston Road and Veterans Memorial Boulevard in North Naples, it will offer 304 luxury apartments. 

The development will include a two-story, 15,000-square-foot clubhouse with a bowling alley, golf simulator, movie theater, bar setup and large swimming pool with cabanas. It will also offer pickleball and bocce ball courts, a tot lot, dog parks, and a walking and biking path around a three-acre lake.

Construction started about a year ago, and completion is slated for July 2022, according to the project's website.

Preleasing for Allura will start in January, said Claudine Leger-Wetzel, Stock's vice president of sales and marketing.

"Demand has been strong with such amazing amenities and a fabulous location. We expect strong preleasing," she said.

Stock’s luxury apartment community of Allura, located off Veterans Memorial Boulevard (bottom) and east of Livingston Road (right), now has all five residential buildings and its clubhouse under construction.

Competitive market

RentCafé, an apartment living blog and search site, ranked Southwest Florida 12th on its list of the top 50 most competitive rental housing markets in 2021.

The rankings are based on high demand, low apartment availability and renters with high credit scores.

According to the report, rentals in Southwest Florida only sat vacant for an average of 24 days this year.

Additionally, 96.6% of the rentals on the market were occupied — and there were an average of 24 applicants competing for every available apartment.

Currently, RentCafé reports the average rent for an apartment is $1,672 in Fort Myers and $2,032 in Naples.

Eugene, Oregon, came in first as the most coveted place to rent this year. It was followed by San Diego, California, and Knoxville, Tennessee.

In the report, Veronica Grecu, a writer and researcher for RentCafé, said "as the pandemic lingers on, its effect on where and how people choose to live intensifies."

"Following last year’s trend — and despite the fast pace of recovery in the nation’s big cities — prospective renters continued to look for larger apartments close to nature this rental season," she said. "As such, locations that were able to accommodate the need for ample living spaces and easy access to outdoor attractions — but that also had a limited supply of rentals — turned red hot this year."