In June, family-owned Sip & Dine became the only restaurant in Cape Coral to win a 2023 Wine Spectator Restaurant Award, just three months after partially reopening post-Hurricane Ian.

The same month, the restaurant and wine bar shut down indefinitely, citing “the landlord’s deteriorating temporary roof and hesitancy to make needed repairs” on its website.

“It’s been hard knowing we could officially shout [about the award],” Sip & Dine co-owner Aloma Romanowski says, voice cracking between sniffles. “Where will people go to taste our wine and food?”

The family spent more than four months renovating the storm-damaged multiunit space while waiting for the landlord to repair the third-unit roof permanently. “It was severely damaged,” Romanowski says. “We did not know if he was going to fix the roof or not because we had no information. We had to go through our lawyers, and there was really no response from him.”

When summer season hit, and buckets of rain allegedly leaked in, Sip & Dine’s owners decided to close for safety reasons. Scarred by the experience, they’re not sure where to reopen. “We are going to be very careful about finding a location. This hurricane was devastating, and I don’t feel due diligence on repairs is being done up to par,” Romanowski says.

Several sources hinted at similar situations—one who moved out after the landlord allegedly didn’t do repairs and another who couldn’t justify soaring rent costs—but ultimately declined to go into detail.

So, we turned to commercial real estate experts to learn more about today’s professional property renting realm and how business owners can navigate finding reliable, affordable space.

All the fixings

Regarding post-hurricane repairs, “I’ve seen both sides of the story,” says Justin Thibaut, president and CEO of LSI Companies Inc. “Insurance is paid out, has covered repairs and is working through time frames and material shortages to get it done. I’ve also seen where landlords self-insure, and some of those have been different as far as what repairs have been made and how quickly they’ve been made.”

A self-insured landlord uses personal reserves to cover potential losses instead of purchasing insurance from a carrier. “It’s a little less black-and-white when an insurance company is not involved,” Thibaut says. That means tenants would be wise to ask landlords about their insurance plans.

Covering costs

As insurance costs increase, so does rent, in many cases. “Tenants are looking at increasing costs of leasing space by no fault of the landlord, but really just by fault of the hurricane,” Thibaut says. “If an insurance policy doubles, clearly you’re going to see an increase on the check you’re writing to your landlord every month.”

Pricier leases are also a response to the market. “We’ve definitely raised our rental rates, but that’s really been market-driven,” says Matt Brown, managing director and co-director of asset management at Brookwood Financial Partners. “There’s just a lot of people moving to Florida, creating a lot of jobs, which in turn creates demand for office space.”

The company offers triple-net leases, so tenants pay a base rate and operating expenses. Typically, Brown said, the market average base price increases 3% yearly, while operating costs may increase 2-3% yearly. A triple-net lease can mean lower monthly rent if operations costs are well-considered.

“If you’re a tenant and the gross rent is $1,000 per month at one building, and the landlord can’t figure out how to manage their expenses or overpaid their expenses, and it’s $1,500 at the next building, you’re going to go to the cheaper building,” Brown says. “We’re incentivized to manage our expenses because we want to keep overall rent low for our tenants, but from an inflation standpoint, we’re just trying to manage it like everyone else.”

Inventory insights

Thibaut also cited low inventory as a factor in higher costs, partially in response to the hurricane. “A lot of ready-to-occupy space that existed in our market prior to the storm was filled pretty quickly by folks who needed to keep their businesses running that were in coastal areas or barrier islands,” he says.

While it remains to be seen whether these businesses stay in place, it makes the market more competitive for now. Thibaut advised reevaluating some needs to find what’s realistically rentable.

“It’s less checking a bunch of boxes on the wish list and more, ‘Can we make it work on this major thoroughfare?’ It’s getting a little trickier because a lot of checks-all-the-boxes spaces are not available on the market.”

Foundational facts

Asking about a building’s ability to withstand natural disasters can help avoid unfortunate battles with landlords around potential property damage.

“I had not been used to getting asked the question of whether or not a property has incurred flood waters,” Thibaut says. “I think going forward, that’s one of the first questions folks are going to ask.”