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Southwest Florida's Sunny Construction Biz

June 1, 2006
Residential construction may be showing some signs of slowing on Florida's booming southwest coast, but distributors, reps and electrical contractors are excited about a surge in commercial construction.

In a land where posh seaside golf resorts, luxury-harbor developments and upscale retirement communities seem to grow faster than kudzu vines, it's the new commercial projects in southwest Florida that have many in the construction market really stoked.

Home builders in Florida's Cape Coral, Naples, Fort Myers and surrounding communities have enjoyed one of the nation's best housing markets over the past decade. Although residential construction will remain strong in southwest Florida, it probably won't maintain the manic pace of the past few years. However, commercial construction is starting to sizzle.

The Cape Coral-Fort Myers metropolitan statistical area (MSA) ranked as the 12th hottest single-family housing market in the nation, with 22,210 single-family home building permits issued in 2005, according to the National Association of Home Builders (NAHB), Washington, D.C. This MSA had 29,330 total building permits in 2005.

This year the region's 9,140 total building permits year-to-date through April are down 7 percent from April 2005. A few miles down the Gulf Coast, the Naples-Marco Island MSA saw 2,060 total building permits year-to-date through April, which is up 9 percent over April 2005.

Residential construction for Cape Coral and Lee County is still strong, but it's slowing down a bit from its peak in 2005, said Wayne Kirkwood, owner and CEO of Kirkwood Electric, an electrical contractor in Cape Coral. Kirkwood is also chairman of the board of the Community Bank of Cape Coral. “We're anticipating our numbers being 10 percent to 20 percent off last year, but you have to keep in mind last year was the busiest year in the history of the community by a significant number,” he said. “When you take a number from 2004 to 2005 and it doubles, and you back it off by 10 percent to 20 percent in 2006, it's still a banner year.”

Flipping property — or buying and selling it quickly to make a profit — was a contributing factor to the booming residential construction market. But that practice has stopped because prices reached a plateau and are now beginning to recede, said Willis Milner, a principal of United Electrical Sales Ltd., an Orlando-based manufacturer's rep. He said the residential market is off about 15 percent from its peak about nine months ago, and it's now a buyer's market. “Prices are receding a little bit as the buyers and sellers are trying to get together on a price,” he said.

Hurricane rebuilding was another factor contributing to residential construction. Buddy Miller, an outside salesman for United Electrical Sales, said there has been a tremendous amount of rebuilding since Hurricane Charley devastated Charlotte Harbor in August 2004. Supplies have been difficult to get in the aftermath of other natural disasters, such as last year's Gulf Coast hurricanes. “We're going to be last on the supply chain down here because those people are in real trouble,” said Miller. Many areas in southwest Florida that had their overhead power lines destroyed by the hurricane just recently agreed to go with underground distribution systems.

Construction in Cape Coral and Lee County is following a historical construction pattern with residential home building coming first, followed by construction of local services, such as gas stations, stores, medical offices and other light retail and commercial construction.

“When you put in rooftops real hard for four or five years as we have done, it creates demand on the commercial side,” said Kirkwood Electric's Wayne Kirkwood. “Where our residential had some softening, our commercial is just polar opposite,” he said. “It's going gangbusters. Residents are saying, ‘We want services. We want storefronts. We want office space.’ So our commercial is going crazy.”

This new demand for services has a direct impact on the electrical market. Herm Isenstein, president of DISC Corp., Orange, Conn., forecasts that electrical distributors in the Cape Coral-Fort Myers and Naples MSAs will sell approximately $160 million in electrical products this year.

Mixed-use construction projects with a blend of condos, stores, restaurants and marinas have become an important element of the region's construction market. For instance, Kirkwood says approximately eight high-rise condo developments are being built in Cape Coral. The condo towers go up to 24 stories and are priced at $900,000 to $4 million per unit.

Two of the Cape Coral projects, Tarpon Landings and Cape Harbor Condos, include marina communities. Both subdivisions have high-rise and low-rise housing units, single-family homes, townhouses, motels, hotels, restaurants and full-service marinas. “They're complete waterfront marina-type communities with all the amenities,” says Kirkwood. “Cape Harbor is putting in four or five restaurants with offices on the second floor. Tarpon Point has the same thing going in. They are both first-class, five-star communities, real high-end.”

Another popular construction project in southwest Florida are “condotels,” which offer a mix of hotel rooms and time-share units. Other big commercial projects in the region include two big shopping malls, each with more than 1 million square feet. Hospital construction is also active, with more than $200 million in new construction and expansions planned for Cape Coral Hospital, Lee Memorial and plans for the new combined Gulf Coast Hospital and Southwest Florida Regional Medical Center.

One of the biggest construction projects in the region was completed last year. The Midfield Terminal at Southwest Florida International Airport in Fort Myers, which opened last fall, took more than 10 years of planning and is said to be the largest public works project in southwest Florida history.

School construction is also booming. An average of five to six schools in the county are expected to be built each year for the next five years,” said Kirkwood.

Southwest Florida is also seeing an abundance of university construction. Florida Gulf Coast University in Fort Myers is only five years old but already has 7,000 students. Expansion plans are in the works for the next five years, said Miller of United Electrical Sales. Another university planned for construction in the Naples area, Ave Maria University, has caught national attention. Tom Monaghan, founder of Domino's Pizza and chairman of the Ave Maria Foundation, is putting $400 million of his own money into the planned community, which in addition to the large Catholic university, will include 11,000 housing units, a huge church, stores and offices.

Although there is no shortage of building in southwest Florida, finding skilled labor in that area is a huge problem because laborers often can't afford to live there, said Miller. “You can look at a Sunday paper or go online to a local paper here and see want ads three pages long for each category of electricians, carpenters and (other trades),” he said. “It's just a huge problem getting help.”

Southwest Florida is also missing out on local revenue, he said, because companies from outside the area will come into the area to do the work and then leave to go back home.

James Yore is a manufacturers' rep with Electrical Marketing Services, Altamonte Springs, Fla. His agency historically had focused on the industrial specification market, but last year opened a warehouse in Orlando and got into the commercial side. “The southwest Florida market was not real big industrially, but it sure has taken off commercially,” he said. “I think the market is going to continue to be strong. It's really exciting for us because we've never participated in any of this pie. Now we're going after a much bigger market. There are Wal-Marts and residential construction and fast-food restaurants. We had to change to make sure we had products that are down there.”

Southwest Florida by the Numbers

2006 sales through electrical distributors

$160 million in sales, according to DISC Corp., Orange, Conn.

Building permits

The Cape Coral-Fort Myers metropolitan statistical area (MSA) had 9,140 total building permits (single-family and multi-family) year-to-date through April, down 7 percent from April 2005. The Naples-Marco Island MSA saw 2,060 building permits year to date through April, up 9 percent over April 2005.

Major construction projects now underway

Big jobs include two Cape Coral projects, the Tarpon Landings and Cape Harbor Condos waterfront marina communities; $200 million in new construction and expansions planned for Cape Coral area hospitals; and university and school expansion. Ave Maria University in the Naples area is catching national attention. In addition to the large Catholic university, the Ave Maria planned community will have 11,000 housing units, a huge church, stores and offices.

If you need additional sales forecast data, building statistics, related demographic data, or contact information for the electrical distributors, independent manufacturers' reps, electrical contractors and other end users serving specific markets, check out Market data is available for sale either by individual market or on a national basis.

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