The new year will be a time to keep an eye on the bottom line more than ever. Between unsettling inflation, flashback gas prices, a disrupted supply chain and lingering labor shortages, it’s tough doing business anymore, even with Southwest Florida’s promising population and development booms.
So, will 2022 just be a continuation of what we’ve experienced in 2021? “It probably will stay more of the same unless inflation starts to grow at a faster rate than anyone expected,” says professor Christopher Westley, dean of the Lutgert College of Business at Florida Gulf Coast University. “I think with respect to inflation, we haven’t seen anything yet. There’s still a large upward pressure on prices beyond what we’ve seen already. Given that, plus the supply chain problems, which also place an upward pressure on prices, it could be much more significant.
“When the Fed starts acting serious about raising rates and sucking some of this excess cash out of the economy, excess liquidity out of the economy, we probably will continue on the same path we’ve been on for the last couple of years. It’s hard to know what the future will bring.”
Westley expects an economist to come in and clean it up, channeling Paul Volcker, the former Federal Reserve chairman credited with ending the high levels of inflation in the 1970s and early 1980s. The result would be a market correction. “So, will that happen in 2022? I don’t know. It could,” he says, not wanting to sound overly dismal. “But maybe it will continue to grow and the stock market will go into the 40s (40,000) within a year.”
Redevelopment projects dotting Southwest Florida will start taking shape or see completion in 2022. About 6 acres at the corner of Vanderbilt Beach Road and Gulf Shore Drive will be redeveloped this year to create One Naples, a mixed-use project that includes two 165-foot-tall condominium towers, three mid-rise buildings, a marina on Vanderbilt Lagoon and a Gulf view of Vanderbilt Beach. The groundbreakings for new villages are expected this year in Collier County for thousands of homes on thousands of acres between Golden Gate Estates and Ave Maria.
Massive resorts also are under construction throughout the region. Sunseeker Resort will see more progress in Port Charlotte. Margaritaville Beach Resort will take shape on Fort Myers Beach. Naples Beach Club, as it has operated for 75 years, will be demolished this year and redeveloped with a Four Seasons hotel as its centerpiece. Great Wolf Lodge also has been greenlighted for a huge resort and indoor waterpark in Collier County.
In downtown Naples, the next stage for Gulfshore Playhouse is underway for a shiny new cultural campus being built in Naples Design District. Meanwhile, the Design District community will start to see some creative changes as the first ideas from its transformation plan are presented and implemented by the city’s Community Redevelopment Agency. A short distance away, The Naples Players plans a $15 million capital project to reimagine its home on Fifth Avenue South.
In East Naples, Rebecca’s and The Maddox, a large wine venue and private-member wine club across from Celebration Park, are projected to open this fall. On the southeast corner of Immokalee Road and Collier Boulevard in North Naples, Founders Square businesses will launch, including eight new restaurants at The Pointe in the first quarter of 2022.
In Lee County, the Bayshore Road corridor east and west of Interstate 75 is surging with residential developments that will start to take shape in 2022. D.R. Horton is building Brightwater, a community with a projected 1,275 homes and an amenity called Crystal Lagoon, a 5-acre swimming hole with a white-sand beach. On the eastern end of Bayshore, D.R. Horton also plans to rezone more than 340 acres of agricultural land to create a 440-home single-family and two-family-attached residential community called Owl Creek. Also in Lee, expect to see incredible residential and commercial growth along the corridors of Alico Road, Bonita Beach Road, Burnt Store Road and Corkscrew Road.
Infill development will definitely be a real estate trend to watch in 2022. As residential developments continue to spread inland and eastward in Southwest Florida, available land keeps getting more and more scarce. This will prompt the trend of infilling parcels adjacent to already-developed land.
“Infill development is going to become a bigger part of what we will see in Southwest Florida going forward,” says Matt Simmons, a property appraiser with Maxwell, Hendry & Simmons. “We are running out of easy, viable land for new development. So new projects will have to be sourced from infill properties that are tired and need to be redeveloped.
“Infill development can be more challenging, but it’s also highly desirable because it’s typically tapping into existing infrastructure already in place to serve the end product. It’s also an opportunity to create density closer to our developed core areas, which is a good way to continue to grow without disproportionately burdening our roads.”
One perfect example of an infill development to take shape in 2022 is Odyssey by Soltura, which broke ground in November off Forum Boulevard in Fort Myers, just south of State Road 82. This will be a 129-rental home community with a $29 million construction budget. Fl Forum Investors LLC, part of Soltura Development, bought the 12 acres for $650,000 in February. It’s a long and narrow strip of land.
“What was at some time overlooked, buyers are now looking at them,” says Randy Thibaut, CEO of LSI Companies, a local land brokerage company. “They’re looking at the smaller pieces. It’s important. For me, my message would be that people don’t want density, but people don’t want sprawl. That means you have to take the infill pieces and find the right opportunities for higher density rather than keeping low density rules in the infill. The infill pieces increase their density rather than creating more sprawl.”
More diversified economy
New development projects are responding to demand, helping to diversify an area overly reliant upon the hospitality and tourism industries. Major new distribution centers for Amazon and Uline under construction in Lee and Collier counties, respectively, will pump hundreds of jobs into the local economy, providing a buffer in tougher times.
In 2022, we’re not as diversified as we could be, but we’ve made progress in the last decade, FGCU’s Westley said. “Companies have been leaving these high-tax, highly regulated states for Florida because it is a better place to do business. We have no income tax and firms have more say in how regulations are created and implemented relative to other states,” he says. “The first thing that happened is when Trump passed his tax plan, which meant you could no longer write off huge chunks of your state income tax. That caused a lot of people to take Florida more seriously to move to. And then the pandemic was the second thing that made Florida look really good by comparison.” Of course, being known as the Sunshine State helps, too.
Uline’s building of a nearly 1-million-square-foot center here reminds Westley how important it is for the regional economy to be diversified. “The more diversified we are, the more we won’t overheat during a boom, the less we’ll overcorrect during a bust,” he says. “We are more diversified than we have been in the past. It’s not all tourism and hospitality and retirement sector demand. There are more things going on. One really exciting thing is the growth of the supply chain sector down here; that’s a much more stable industry.”
Sports betting in Florida lasted a month before a federal judge halted its exclusive gambling deal with the Seminole Tribe, ruling in November it violates Indian gaming law. The tribe’s request to allow wagering while it pursues an appeal was also denied, forcing the shutdown of the Hard Rock Sportsbook app.
Gov. Ron DeSantis negotiated the gambling deal with the tribe in May, making Florida one of 33 states where wagering on sports is legal. The announcement of the 30-year compact was expected to bring more than $20 billion to the state over the life of the deal. “Despite the decision, the Seminole Tribe looks forward to working with the state of Florida and the U.S. Department of Justice to aggressively defend the validity of the 2021 Compact before the Appeals Court, which has yet to rule on the merits of the 2021 Compact,” Seminole Tribe spokesman Gary Bitner says.
The tribe winning its appeal is just one of the avenues for sports betting to return to the state. Gaming law experts like South Florida-based Daniel Wallach say the most likely way is a voter referendum in November 2022. Sports wagering industry leaders DraftKings and FanDuel put up $10 million each toward getting signatures to put a referendum on ballots that legalizes sports betting outside Seminole lands. If the proposed referendum passes, the tribe would lose its exclusivity in the market and open the door for a sea of competitors to enter, including the Bonita Springs Poker Room, which is a plaintiff in the lawsuit against the tribe.
A new compact between the state and the tribe where legal wagering can only take place on tribal land is also is a possibility. If in-person sportsbooks at its six casinos become legal, look for the Seminole Casino Hotel in Immokalee to seek to become a go-to destination to watch and bet on the biggest sporting events. That will require a build-out of a sportsbook complete with wagering and seating areas and multiple TVs.
Employee shortages, an issue carried over from previous years that is predicted to perpetuate through 2022, is a phenomenon produced from stimulating the economy, FGCU’s Westley said.
“We’ve overstimulated the economy. There are so many job openings that in many markets the unemployment rate is well below the natural rate because of the overstimulation. And that places upward pressure on wages,” he says. “The inflation itself is also placing an upward pressure on wages. I don’t think that would have happened if the economy had been just allowed to grow and correct on its own like it’s trying to do anyway, absent the stimulus. It’s a really, really tight labor market right now.
“What’s the point of overstimulating the economy if there’s not enough workers for it? And then it just puts an upward pressure on prices and causes workers not to stay in any one position very long as other options become available,” Westley says. “Doesn’t that defeat the purpose of stimulus anyway?”
Especially feeling the pinch are small local retailers and restaurateurs, already affected by a minimum-wage jump last fall and facing an additional $1-per-hour increase in 2022. “The smaller mom-and-pop operations and the local restaurants already have very narrow profit margins and they don’t have the luxury of raising wages to keep those workers with them,” Westley says.
Ironically, the jobs created with some of the new development projects may cause more staffing shortages in the hospitality industry, at least in the short term. Although many of these new jobs may not come online until 2023, the hiring process for them may start at the end of 2022, conflicting with the annual hiring for the new season a year from now.
Wherever you are, you’re feeling the effects of inflation. Not only is it likely to continue in 2022, but it could even get worse before it gets better. According to Westley, the inflation we’re seeing also is an indication that the economy is being overstimulated.
“These periods of stimulus have happened since 9/11 when [Federal Reserve Chairman Alan] Greenspan lowered interest rates down to 1% for a two-year period,” Westley says. “That stimulated a lot of economic activity that eventually led to the housing boom and the bust. But, when that happened, a lot of that money made its way down to Florida. A lot of it came down to Southwest Florida. As the economy became stimulated, we became way overstimulated. And you can see it happening again right now.”
The overstimulation then is blamed for leading to the dot-com bubble and the subprime mortgage crisis, which triggered the Great Recession, a downturn that acutely affected Southwest Florida.
“We live in a region that overheats during booms and overcorrects during busts,” Westley says. “This area is heavily dependent on the rest of the country’s economy. So, if the U.S. is doing well, Florida is doing really well. If the rest of the country is falling into recession, we’re falling into a deeper recession.
“The analogy economists sometimes use about this is that the economy is sometimes like a zombie, and by just pumping money into it we’re pumping life into the economy, when we really want it to correct. We need industries to shut down and assets converted to other uses. That’s what normally happens during a correction. We’re putting off that process by continuously stimulating the economy. My point is, as a region, we really react to those policies, so in 2022 I wonder … it can’t go on forever.”
Many people, though, have saved up equity to move it down here, taking advantage of extremely low interest rates. They want to live here, of course.
“During the boom phase, when all this money is coming down here and being spent, it’s going to add to our economic activity, but the problem with stimulating the economy with low interest rates is that people have less incentive to save,” Westley said. “So, eventually, things are going to start coming to market and people will not have saved in order to purchase the output and that’s when things start to slow down again. And we’re not at that point yet.
“Given that we live in a region that tends to overheat during the boom, 2022 could be a good year in the short term. But the problem is, when the bust comes, and people stop bringing their equity down here and economic activity slows down, that’s when we’ll probably overcorrect. So, no one has a crystal ball to know if that will be in 2022, 2023 or 2024.”