Colliers International, Tampa Bay – Activity in Tampa Bay’s industrial market showed moderate growth over the previous quarter with continued positive growth anticipated throughout 2015. The industrial market continues to see interest from out-of-state users and investors seeking to relocate business operations to Florida due to the state’s improved economic growth, affordable tax structure and low costs of doing business. Quality industrial buildings remained in high demand throughout the second quarter with little existing class A inventory available for users seeking facilities meeting updated codes and features including higher clear heights, ESFR sprinklers and sensored lighting.
- In Tampa Bay’s largest industrial sale of 2015 to date, Agellan Capital Partners Inc. purchased a 683,777 square foot industrial property, located at 6422 Harney Road in East Tampa from Regions Bank for $18.25 million.
- Coca Cola leased a 150,000 square foot industrial facility at 1141 US
Highway 301 in East Tampa.
- RJ Schinner leased a 100,000 square foot building at Madison Industrial
Park located at 4409-4429 Madison Industrial Lane in East Tampa.
- Hillsborough County purchased a 90,408 square foot industrial center at
1220-1238 Tech Drive in East Tampa for $8.7 million. The selling entity
included: Leder Realty and Management, Musa Realty Group and Ramaekers Group.
Vacancy & Absorption
385,239 square feet with total vacancy remaining at 8% for the second quarter. Pinellas County became considerably more active with the Gateway submarket having the region’s highest net absorption at 113,358 square feet. The North Pinellas County submarket reported the lowest total vacancy in the region for the second quarter in a row, holding steady at 3.9%. Across Tampa Bay, quality industrial buildings were in high demand, with little inventory available that met the needs of users. As a result, many companies considered build-to-suit properties in the 15,000 to 60,000 square foot range to accommodate their growth.
The market moved further toward a landlord’s market. The dividing line between the two was based on the quality and location of the property. Class A properties or those in prime locations tended to be characteristic of a landlord’s market, while Class B and C properties or those in less desirable locations produced deals forged under a tenant’s market The manufacturing sector remained strong throughout the region. Small users were very active with buyers and tenants in the 5,000 to 15,000 square foot range driving activity. The flex market in Hillsborough County continued to gain momentum. The airport flex market saw an upswing in activity for users seeking space in the 10,000 to 12,000 square foot range.
A number of industrial tenants began expanding in their current locations. In addition, demand for space in the 5,000 to 10,000 square foot range increased. Technological advances continue to allow some manufacturers and distributors to operate more efficiently, as smaller equipment that requires less space to operate. The average asking rental rates on industrial leases in Tampa Bay increased to $4.40 per square foot, while the average asking rental rate for flex space decreased slightly to $7.73 per square foot. Concessions remained consistent with the previous quarter, with many landlords offering less than one month of free rent per year of the lease, outside of the lease term. In addition, tenant improvement allowances, on average, were $2 to $3 per square foot on second generation space and $3.50 to $4 per square foot on new space.
Sales & Development
Investment demand for industrial space continued to be high, with properties sought after by private capital and institutional investors of all types despite the limited supply of industrial investment properties in the Tampa Bay area. MetLife has generated a high level of interest as it brought to market 955,000 square feet at Tampa Distribution Center. Companies that want to own their facilities are once again looking for industrial land sites to satisfy their current need for quality space; developers are also seeking land for future development. Construction costs increased due to rising material and labor expenses (related to a shortage of skilled tradespeople). Cost increases the risk of new development; as higher rental rates need to be achieved to be profitable.
At present, more than 450,120± square feet of mostly spec industrial construction continued in the Tampa Bay area. Aforementioned Aspyre Properties completed construction on a 175,000 square foot spec building at Interstate Commerce Park in Lakeland, and East Group completed construction on two buildings at Madison Distribution Center; 59,000 square foot and 68,000 square foot distribution facilities in East Tampa. Ridge Development has broken ground on the Lakeland Logistics Center, a 46.5 acre industrial park. Currently a 245,000 square foot spec building is under construction and slated for year-end delivery.