Rising interest rates, construction costs, insurance premiums and scarcity of available land all played roles in turning down the volume of Southwest Florida real estate deals last year. Even though pace slowed, prices still soared.

Record-breaking volumes of apartment deals that established themselves as the new norm of 2022 ceded way to record-breaking prices of both raw land and finished assets across the region in 2023.

In October, a portfolio of more than two dozen properties on and near Fifth Avenue South in downtown Naples sold from David Hoffmann and Hoffmann Family of Companies to Aspen, Colorado-based M Development for more than $185 million.

And the former beachfront Red Coconut RV Park on Fort Myers Beach sold to Seagate Development Group for $52 million in September. The deal for just less than 10 acres—about the size of seven and a half football fields—marked a record land price for Estero Island, and became one of the highest-priced land deals in Lee County history.

To compare, the 7.5 acres on which the new Margaritaville Resort was built on Fort Myers Beach began selling between December 2014 and August 2021 for what would become a combined $26 million.

The Hoffmann and Red Coconut transactions sucked a lot of oxygen out of last year’s real estate market news. The rest of the market’s news certainly wasn’t bleak, said Matt Simmons, a property appraiser with Maxwell, Hendry & Simmons. It was slower—far slower … but with continued eye-popping prices.

“We just haven’t seen the same velocity of sales,” says Simmons, who as a broker represented the seller in the Red Coconut deal. “That’s a large part of buyers this year having to really reconcile with the interest rates. The Fed’s action on rates, it was a blunt instrument. They were trying to tame inflation. I think our market, if you look back to around August of last year, we were starting to kind of make an adjustment. I think we were actually starting to react with the rest of the national market.”

Regression to the mean

Real estate value always goes up, but over the course of time, those upward blips can go down. That didn’t happen to prices last year, but it happened to volume.

In Florida, the four commercial real estate sectors of retail, office, industrial and apartment complexes combined to go down by 51.6%, year over year, from 2022, according to CoStar data from Phil Fischler, CEO of Fischler Property Company in Fort Myers. It fell from about $96.4 billion in 2022 to $46.7 billion in 2023 deals.

In Lee County, that combined year-over-year volume plunged by about 57.6%, falling from $3.17 billion worth of 2022 deals to about $1.34 billion worth of 2023 deals through November, the CoStar data showed.

“The backdrop on all of this is we are still, across all of these sectors—certainly office, industrial and retail—we are setting record highs for rents and sales prices,” Fischler says. “Even though transactional volume is down, the rent is at an all-time high, and the sales price is at an all-time high.”

In Collier County, year-over-year volume dropped by about 36.7%. The total value sold fell from $1.1 billion in 2022 to $726.7 million in 2023, according to CoStar data pulled by broker  Rob Carroll of Investment Properties Corp. in Naples.

“It was interesting,” says Carroll, whose company brokered the Hoffmann deals. “When I got it, I reviewed it. I was extremely surprised that the volume was as low as it was. I wouldn’t have guessed it. We talked about the market this year and the volume in-house. But we had a tremendous year this year.

“I was taken aback. I was just very surprised.”

The CoStar data doesn’t include off-market deals, such as Hoffmann’s. “But you’re still comparing apples to apples,” Carroll says. “For comparison purposes, the trends are still there. I think this year what we saw is probably what your article is going to say: The prices were still high, but the volume was much lower.”

So, what commercial trends could emerge in 2024? “The short term is less clear, because there are so many variables with international, geographical risks, what’s going to happen with the Fed, an election year,” Fischler says. “But for the long term, it looks like Southwest Florida is in a great position for growth with job and population growth.”

Multifamily deals slowed most

Nelson Taylor, vice president of market research for the land brokerage firm LSI Companies, crunched some numbers. The top 25 real estate deals in Southwest Florida combined for $2.2 billion in sales in 2022. The top 25 regional deals combined for $900 million in 2023 through November.

The difference between the two years, besides the gap of $1.3 billion in value? The lack of multimonthly, multimillion-dollar apartment complex sales, Taylor said.

Waterline Estero, a 260-unit complex in Estero, sold for $78.8 million, ranking first on Taylor’s list of highest-priced transactions. (The Hoffmann deal didn’t make the list because it was recorded as a series of individual transactions, not one big one).

Of the top 14 deals on Taylor’s spreadsheet, that was the only apartment deal. “A lot of that has to do with the interest rate environment,” Taylor says. “It [the Federal Reserve] did what it intended to do, which was slow down economic activity. It’s just not at the same velocity.”

Stan Stouder, a broker with CRE Consultants, shared his third-quarter data from 2023. It included some deals that did not appear on CoStar, such as the $99.25 million sale of the 327-unit The Edison apartment complex in Fort Myers, and the $72.1 million sale of the 436-unit Venetian apartment complex in Fort Myers. Those were the top two deals on his top 10 list. They were also the only apartment deals on his top 10 list.

“One of the first things I noticed for the top 10 transactions for both Lee and Collier were how few were multifamily,” Stouder says. “Which is atypical. That’s an observation.”

Venetian Apartments, built in 2018, sold July 17 for about $165,000 per unit; The Edison, built in 2019, sold Aug. 24 for about $303,000 per unit. “Another observation is The Edison sold for 50% more per unit than the Venetian,” Stouder says. “They’re a similar number of units. But my God, they sold a little over a month apart, and there’s a 50% disparity, and The Edison sold for 50% more per unit.

“That would be of interest. When you start breaking it down on price per unit, it’s a huge variance for two sales that transacted 45 days apart in the same market.”

What seemed like a relentless pace of trading apartment complexes in 2022 meant a slowdown was inevitable, especially given the Fed’s aggressive raising of interest rates, Stouder said.

“The multifamily market was moving so fast and going so fast that when things began to level out, you don’t have as much to sell,” Stouder says. “There’s still demand. But people can only afford to pay so much in rent; those rents are starting to level out. That’s going to take some of the steam out of speculative apartment building. A lot of them were already built and changed hands.”

That means rents, which relentlessly had climbed until after those interest rates did, finally have stabilized. And they could continue to stabilize: “I do think that you’ll see it,” Stouder says. “But for several years, the multifamily market was growing so fast, and those rents were moving at a higher rate. Now, I think we’re getting much closer to an equilibrium between vacancy and speculative construction.”

Topgolf makes for a top deal

The 14-acre Topgolf complex, 2021 Top Golf Way in Fort Myers, sits at one of Southwest Florida’s busiest intersections on Interstate 75, at the southwest corner of Colonial Boulevard. It also changed hands for the second time in 18 months.

This time, Win Chevrolet Properties bought the 48,000-square-foot building and land from Sideways Properties. The price of $38 million in September 2023 eclipsed the one recorded at $32.3 million in March 2022. Topgolf has 18 years remaining on its lease. The deal ranked fifth on the CoStar list for the year and third on Stouder’s third-quarter list.

The Club at Grandézza in Estero sold for $27.3 million. “Topgolf sold twice,” Stouder says. “That is a specialty. And the Grandézza Country Club is a specialty. That’s pretty unusual when two of the top five deals are not in the four main food groups.” (The four being commercial, office, industrial and multifamily.)

Topgolf, the tenant, has what’s called a triple-net lease, meaning it is responsible for paying the taxes, the insurance and the upkeep and maintenance of the property, which favors the owner.

“I think it’s an income-driven deal,” Stouder says. “But also, it doesn’t have to be 30 years. Topgolf could go away. You could have the value of the property. You could have the highest and best use of the property so much greater. You could have an investor say, ‘We’ll pay you millions and millions of dollars to leave.’

“Golf (driving ranges) are typical uses to hold property until the property or the area matures around it. Topgolf is not that. Topgolf is an operating business. It completely changed the golf world. I don’t think somebody paid that kind of money because they’re going to change it in a year or two. But God forbid, if Topgolf ever defaulted, your collateral being that parcel is exceptional. It’s not in the middle of nowhere; it’s in the middle of everywhere.”

Smaller deals with sizeable impacts

Stouder brokered 342 acres of land known as Owl Creek for $5.5 million in May. Neal Communities purchased the land and plans to build more than 350 homes there. As of press time, it also was looking to rezone an adjacent 788 acres from agricultural to residential for another subdivision that could double the population of Alva.

Fort Myers Broadcasting Company, which operates WINK-TV and is affiliated with Gulfshore Business, paid $15.5 million for an office building that once had been a Comcast service and dispatch center, plus $3 million for an adjacent parking lot in Gateway. The 57,260-square-foot building and adjacent 5.6 acres will be transformed into a new broadcast center and company headquarters, and will reshape the future of broadcast news for the CBS-TV affiliate in Southwest Florida.

Near Immokalee, Florida Power and Light also has its eyes on the future—in the form of solar power. The state’s largest power company paid $40.5 million for 4,387 acres at 4315 Wombles Road, off State Road 82, just west of State Road 29 and northwest of Immokalee. There, what had been an orange farm owned by Turner Groves Citrus will be transformed into a solar field operated by FPL.

“It’s been a struggle with citrus,” Carroll says of why the transaction makes sense. “The solar farms, they can’t be everywhere. They have to be located near high-capacity powerlines. FPL has to be strategic with where they place them … It can’t be a farm field that goes under water. They have to be able to get out there and serve the solar arrays. Citrus crops tend to be on higher, dryer land, so that makes for more attractive locations.”

Industrial holds strongest

While sales volume trended downward across all other commercial real estate sectors in 2023, industrial held steady, data shows.

In Collier County, industrial sales volume fell by just under 2%, from about $110 million worth of deals in 2022 to $107.8 million in 2023, according to Carroll’s CoStar data. But that was still almost 125% more than in pre-pandemic 2019.

In Lee County, industrial volume fell by 21.8%, from $259.6 million in 2022 to $203.1 million in 2023, according to Fischler’s CoStar data. But that was still 60% more when compared to 2019 numbers.

“We’ve had tremendous growth in that sector,” Fischler says, “largely because we’ve built a lot of new product. Alico Road and Ben Hill Griffin and Treeline, there’s been new opportunities for transactions. That sector is performing differently from others.”

The year ahead

The brokers expected 2024 to be an extension of 2023, but much will depend on which direction the interest rates go. “I would expect that this trend will last through next year,” Carroll says of high prices but lower volume. “It sounded like they (experts) detected a couple of rate deductions next year. That would help. We don’t think prices are coming down, I can tell you that. We think the prices are going to hold.

“I think the trend we talk about is the continued demand on all sectors of leasing. The slowing of transactions, but the dollar range being quite high.”

Justin Thibaut, CEO of LSI Companies, which brokered the Red Coconut RV Park sale, said interest rates and where they go will be critical as the year gets underway.

“If interest rates stabilize or decrease, we’ll begin to see more apartment transactions again, no doubt,” Thibaut says. “And in light of that, we would see land transactions heat up again, as well. Anything that involves financing has been somewhat delayed or inactive for the last couple of months as we see what the Fed does for 2024.”

Thibaut also expected more deals to come on Fort Myers Beach, noting that in addition to the Red Coconut deal, the Outrigger Beach Resort, 6200 Estero Blvd., also sold for $38.2 million to London Bay. London Bay also paid $25 million in December for the ruined, beachfront Sandpiper Gulf Resort, which had 63 units.

“Those were the two best pieces on the beach, the Outrigger and Red Coconut,” Thibaut says. “I’m sure we’ll see more. But a lot of it has to do with what happens with the first couple of groups with getting their projects off the ground.”

Simmons also sees the 2023 trends spilling into 2024. “There’s this period of time where the buyers and sellers have to reconcile,” Simmons says. “When that happens, there’s usually a slowdown in transaction volume. I think we are now seeing that on the seller side. A lot of sellers will not go on the market now because of where the market might be. Buyers are still ready to buy and want to step forward. But sellers have not had time to adjust to the new reality.”

Mega-deal sets records in downtown Naples

One of the biggest regional real estate deals in 2023 turned a number of heads in downtown Naples. Billionaire David Hoffmann and his Hoffmann Commercial Real Estate sold a significant portfolio of more than two dozen properties on and near Fifth Avenue South for more than $185 million to M Development, a high-end developer based in Aspen, Colorado.

This was a once-in-a-lifetime opportunity to purchase so many coveted upscale properties in a single mega-deal. “A very rare portfolio to find. Very rare,” says Rob Carroll of Investment Properties Corp. of Naples, who represented the buyer in the transaction. David Stevens and Tara Stokes of IPC represented Hoffmann in the deal. “And they don’t hardly ever trade hands. So, they were definitely aware of the uniqueness and the opportunity to get it done, which is why they were willing to pay what they were for it.”

The transaction was the largest in the history of IPC, which has operated for nearly 50 years in Naples, said Stevens, principal of the upmarket commercial real estate firm. “It’s the biggest transaction that’s occurred in my career, and the biggest one that’s occurred on that street.”

M Development simply had an opportunity to acquire a collection of great buildings, said Brandon Tarpey, senior vice president of real estate and one of the principal owners of M Development with founder Mark Hunt—who had a Chicago connection with the Hoffmanns.

“It kind of folds into our portfolio quite well, of things that we own in Jackson Hole and Napa Valley and Aspen,” Tarpey says. “We’re super excited. And on a personal note, I’m excited to spend more time in Naples and get a place down there. We have five or six team members that are living there full-time now.”

M Development’s portfolio addition includes a dozen buildings on Fifth Avenue South, nine off Third Street South and a few others on U.S. 41 in Naples that the Hoffmanns amassed since moving to Naples in 2015. The only property outside the city limits is 2205 Tamiami Trail E., site of Coral Cay Adventure Golf in East Naples.

The deal included a nearly 100-unit commercial condominium complex at 780 Fifth Ave. S. that sold for more than $20 million. That three-story building extends two-thirds of a block and includes commercial tenants, such as Bank of America, Provident Jewelry, Starbucks Coffee and the 780 on Fifth executive office suites.

“While the time has come to pass the ownership torch on some of our local real estate holdings, we are committed to growing our impact through further investment in Southwest Florida businesses and will continue to maintain the ‘Hoffmann Standard’ across all our holdings,” says Greg Hoffmann, co-CEO of the Hoffmann Family of Companies with his brother, Geoff.

The family still retains considerable holdings, such as Hertz Arena and Florida Everblades hockey team in Estero, as well as many other properties in Florida, Missouri, Colorado, Michigan and Illinois. Plus, none of their scores of local businesses were part of the deal.

The sale of Hoffmann’s prized collection of downtown real estate was surprising, though, even for the family patriarch.

“We’re like a lot of people and companies. I mean, you buy stuff, invest in it and, at some point, you do sell,” David Hoffmann says. “I was personally planning on never selling it, but my sons had a different vision.”

M Development is expected to have a different vision, too. The developer will be part of the Naples community but will be less visible than Hoffmann, which noticeably branded itself with its company name on plaques and signage on its buildings.

“No question about that,” Carroll says. “I think they want to make sure they’re out there so people know who they are and what they’re about, but it’s not going to be their name and the desire to be so visible.”

M Development’s short-term plan for the Hoffmann properties is not to do anything. At this point, the company just plans to maintain the buildings and make sure they look great, said Tarpey, noting that the company is here for the long term in Naples and wants to do the right thing for the community.

“I love Naples,” he says. “I love the historic charm. I love what it is, and I don’t want to see it change like anyone else.”

Since the deal closed in October, M Development has spent time getting to know its more than 90 new tenants, finding out how their businesses are going and whether they need more space or less space, Tarpey said.

Expect some business additions to Naples as M Development looks at its new tenant mix in a broader scope.

“I think there are a couple of properties that are redevelopment plays, but I don’t know. I think that’s absolutely something that they’re going to be looking at,” Carroll says. “They’re developers—that’s what they do—but I don’t know their timeframe for any of that stuff.”

M Development has been busy focusing on another major development site in the city that the company purchased a year before the Hoffmann sale. The company’s first Naples redevelopment move—a proposal to build a three-story mixed-use project with Restoration Hardware and Whole Foods Market across nearly two city blocks—was met last year with official opposition, but that didn’t stop the company from purchasing the Hoffmann portfolio.

“They love markets like Naples because of the high barrier to entry,” Carroll says. “It was no different in Aspen when they got there. So, they have experience on this. They know what they’ve got getting into it and they love it because, on the other side of it, it’s hard for the next guy. You’ve got to really be willing to get in and live in the community to get things done in a place like Naples, so it’s interesting: It’s almost like part of the intrigue is because it is so difficult.”

—Tim Aten

Deal breakdown

Fifth Avenue collection

301 Fifth Ave. S. — $7,804,000

353 Fifth Ave. S. — $11,919,000

375 Fifth Ave. S. — $9,863,000

401 Fifth Ave. S. — $9,991,000

500 Fifth Ave. S. — $7,829,000

625 Fifth Ave. S. — $14,256,312

630 Fifth Ave. S. — $3,417,000

649 Fifth Ave. S. — $6,792,000

680 Fifth Ave. S. — $4,393,000

780 Fifth Ave. S. — $20,238,722

898 Fifth Ave. S. — $5,421,000

900 Fifth Ave. S. — $7,268,000

410-460 Fourth Ave. S. — $8,348,101

Third Street collection

350 12th Ave. S. — $867,000

360 12th Ave. S. — $855,000

363 12th Ave. S. — $4,493,000

370 12th Ave. S. — $2,459,000

382 12th Ave. S. — $2,448,000

375 13th Ave. S. — $2,901,000

290 14th Ave. S. — $8,560,000

271 Broad Ave. S. — $5,462,000

393 Broad Ave. — $2,117,000

41 collection

428 Ninth St. S. — $8,560,000

950-990 First Ave. N. — $17,710,000

2205 Tamiami Trail E., East Naples — $15,692,000