Tampa Bay Industrial Market Report – Q3 2016
Development Continues at a Rapid Pace
The Tampa Bay industrial market began with a typical summer slowdown in third quarter of 2016, then took off with increased activity in September. Leasing activity was steady to higher throughout the market, resulting in a low vacancy rate of 6.7 percent. Net absorption in Tampa Bay totaled 2,854,466 square feet, the highest level in more than two years. This was primarily due to the delivery of Walmart’s 1,200,000 and 800,000-square-foot distribution buildings located at 4900 and 5100 North Ridge Trail in Davenport, Florida. Investor interests remained robust with an increase in activity from institutional and foreign capital buyers. More than 1.6 million square feet is under construction throughout Tampa Bay. Polk County leads construction with more than 700,000 square feet underway.
- Liberty Property Trust sold a national portfolio consisting of 108 assets to Workspace Property Trust. Thirty-four of this 1,799,568 square feet are predominantly office/flex properties located in Tampa.
- Turtle Creek Acquisitions purchased a 145,817-square-foot warehouse from First Industrial for $9.6 million, or $66 per square feet (PSF). The property is located at 13300 49th Street North in Clearwater.
- Exeter Property Group acquired a 51,947-square-foot warehouse from RT Oaks, Inc. for $3.1 million, or $60 PSF. The property is located at 4531 Oak Fair Boulevard in Tampa and was constructed in 1990.
Vacancy and Absorption
Net absorption in Tampa Bay’s industrial market totaled 2,854,466 square feet, which is significantly higher than the previous year. The North Pinellas submarket reported the lowest vacancy for the seventh consecutive quarter at 2.2 percent. Due to the amount of new product introduced into the submarket, Polk County had the region’s highest vacancy rate at 8.8 percent as well as the most absorption at 2,270,197 square feet. Polk County continues to be the distribution hub of the industrial market in Tampa Bay with a significant number of large national users in the market seeking 200,000+ square feet. Polk County continued to lead the area in the amount of new speculative construction. In Pinellas County, industrial rental rates have surpassed $6 PSF, demonstrating the submarket’s limited supply and strong demand. Vacancy in this area has dropped to 1.8 percent. Similarly, the Airport submarket saw rental rates as high as $5.45 PSF with an accompanying vacancy of 3 percent. In East Tampa, activity remained strong, but rental rates were flat as a number of new deliveries were brought to market. This is reflected by the submarket’s 286,079 square feet in positive absorption. With more than 1,679,689 square feet under development, vacancy and absorption will continue to fluctuate as new product enters the market.
Leasing activity remained strong through the third quarter of 2016. An uptick of activity and momentum occurred following the Labor Day holiday. Rates continued to gradually rise for modern industrial spaces, but remained flat for older product. The average asking rental rate for industrial space maintained its price of $4.71 PSF, consistent with the previous quarter’s rental rate. The Airport submarket held the highest asking rental rate at $6.49 PSF and a 4.8 percent vacancy rate. Polk County reported the lowest asking rental rate at $4.42 PSF. The average asking rental rate for flex space in Tampa Bay increased to $8.50 PSF, up from $8.38 PSF in the previous quarter. Properties ranging between 40,000 and 100,000 square feet were in highest demand, especially tilt-wall buildings with EFSR fire suppression. However, the supply of these spaces are limited. Additional tenants are also in the market for large blocks of space 200,000+ square feet. These tenants typically are evaluating multiple markets in addition to the Tampa Bay region. Tenants have begun to pay closer attention to the primary cost of drivers for their distribution needs as part of their site selection. These include labor costs, technology investments and transportation. Additionally, tenants are beginning to emphasize the stem times of potential sites when selecting future space. Stem time is the amount of time between when a truck leaves a distribution center and when it makes its initial delivery. Especially in the e-commerce sector where the last-mile delivery is extremely pertinent for operations. In many cases, the increased transportation costs outweigh the real estate savings of a location. Concessions, such as free rent, average three months outside of the term on a five-year lease. Tenant improvement allowances on existing space average $0.50 PSF per year of the lease term. Active tenants include manufacturing, construction and building services, e-commerce and self-storage.
Sales & Development
Investor demand for industrial product in Tampa Bay remained very active through the third quarter of 2016. Institutional investors and foreign capital buyers have increased their focus on acquiring assets, adding additional competition to private capital investors who have maintained their activity through past quarters. The health of the Tampa Bay industrial market is evident through several key factors. Notably, the Tampa Bay region’s vacancy rate dropped 0.4 percentage points despite Polk County introducing more than 2,000,000 square feet of new product. More than 1,679,000 square feet is still under construction throughout Tampa Bay. These developments include:
- A two-building, multi-tenant, 100,000-square-foot property being built by Mosk Development at 12161 62nd Street in Cross Bayou Corporate Park in Pinellas County. The building has received high interest from tenants and is expected to be delivered in the first quarter of 2017. Thevenin J. Campton, CPMC, CPRC Client Services Coordinator 407.362.6135 firstname.lastname@example.org Sales & Development
- Construction is underway on a 55,000-square-foot build-to-suit property by Regent Properties on Belcher Road and 124th Avenue in Largo, Florida.
- A 275,226-square-foot, cross-dock facility is underway at Highway 33 and Interstate 4 in the master-planned lakefront community of BridgeWater in Lakeland. Seefried Industrial Properties is expected to deliver the project by December.
- Aspyre Properties is developing an additional 100,000 square feet at Interstate Commerce Park in Lakeland. This delivery is anticipated for the first quarter of 2017.
- 2815 Drane Field Road at Ruthven Parkway Center in Lakeland will deliver a 97,890-square-foot, dock-high building in the fourth quarter of 2016. A 27,000-square-foot lease is pending.