admin / May 9, 2019
The Tampa Bay economy accelerated over the past year, adding 26,200 jobs for an annual growth rate of 1.9%. As of February 2019, the unemployment rate in Tampa/Hillsborough County fell by 30 basis points (bps) over the past twelve months to 3.3%. Nearly all industrial-related industries saw employment growth. Transportation, warehousing, and utilities had the bulk of job gains, adding 1,600 jobs a job growth rate of 5.3%. The region’s pace for new housing and commercial construction projects benefited the industrial market with many in-and new-to-market users taking space to meet consumer demand.
Overall absorption through the first quarter of 2019 totaled 52,146 square feet (sf). Warehouse/distribution lead the market with over 70,000 sf of positive absorption. A significant improvement when compared to the first quarter of 2018, when absorption total approximately -60,000 sf. Leasing activity ended the quarter with over 362,000 sf, a sharp decline after a historic 2018. The lack of construction completions n the first quarter limited leasing activity, a distinct contrast to the trends set last year. Warehouse/distribution made up the bulk of the leasing activity, accounting for 69% of the total leasing activity.
Overall triple net (NNN) asking rents increased by 13.1% year-over-year (YOY) to $6.49 per square foot (psf). The rise in asking rents was due to inventory delivered in 2018 with above-market rents. The majority of rent gains were in flex and manufacturing space, which saw 19.1% and 31.9% increases YOY, respectively.
The overall vacancy rate slightly increased to 6.0% in the last 12-months, marking the 15thconsecutive quarter the overall vacancy rate has remained below 7.0%. In contrast the direct vacancy rate dropped to 4.8%, a 90-bps YOY decrease. The delta between vacancy rates originates from several new sublease spaces entering the market.Cushman & Wakefield anticipates vacancy rates to increase as several new spaces are expected to deliver before year-end.
New construction continued to be a key driver within Hillsborough County’s industrial market. Central Florida Development completed a 137,500 sf speculative warehouse in Plant City across from Amazon’s 1.0 million square feet (msf) fulfillment center. The developer also has a 176,000 sf built-to-suit for Tredit Tire that is expected to deliver later this year. Hillsborough County was late to the game for new industrial development but experienced a resurgence in construction over the past two years with nearly 2.6 msf delivered. In addition, 2.8 msf was under construction at the end of the first quarter, the highest square footage under development at one time in Hillsborough County in over 20 years. Unrelenting tenant demand bolstered further developer confidence in announcing additional phases and new industrial parks mainly focused along the I-4 corridor.
2.8 msf was under construction at the end of the first quarter, the highest square footage under development at one time in Hillsborough County in over 20 years.
Industrial sales activity fell in the first quarter of 2019, with over 583,000 sf sold. Sales activity continues to slow after a booming 2014 to 2017. The burst of sales from 2014 to 2017 saw over 16.1 msf traded. However, Cushman & Wakefield anticipates sales activity to increase some in 2019 as those assets bought pre-2018 while have adequate occupancy and cash flow to incentivize sellers and investors alike.