admin / July 28, 2016
The Tampa Bay industrial market continued to improve through the second quarter of 2016, posting consistently low vacancy rates and logging a record amount of new construction to satisfy lagging supply from previous years.
Following the previous quarters’ trend, the market has fully shifted in the landlord’s favor. Florida’s attractive business climate has drawn interest from a number of out-of-state manufacturers and small companies, especially from high-tax states.
Five new buildings totaling approximately 1,100,000 square feet of new product were introduced to the Tampa Bay market in the second quarter, causing lease rates to remain flat. An additional eleven buildings are under construction totaling 3,500,000 square feet.
Like the previous quarter, the arrival of new industrial development continued to support and be supported by Tampa Bay’s business expansions, job growth and net migration to the area.
Net absorption in Tampa Bay’s industrial market was 595,691 square feet, which is consistent with previous quarters.
The North Pinellas submarket reported the lowest vacancy for the sixth consecutive quarter at 2.4 percent. Due to the most new product introduced in the area, Polk County had the region’s highest vacancy at 9.5 percent, and also reported the highest absorption at 334,017 square feet.
Approximately 30 percent of the industrial space on the market is functionally obsolete, as reflected by chronically vacant space throughout respective submarkets. Additionally, technology advances have enabled tenants to more efficiently utilize their space, allowing downsizing of their space, employee counts, component and equipment shrinks.
With more than 3,502,000 square feet under development, vacancy and absorption will continue to fluctuate as new product enters the market. Incremental improvements are anticipated throughout the Tampa Bay submarkets.
Leasing activity continued to steadily rise in Tampa Bay. The average asking rental rate for industrial space increased to $4.92 per square foot (PSF), up $0.31 from the previous quarter. The Airport submarket held the highest asking rental rate at $6.40 PSF. This submarket has slowed slightly, due primarily to the tight 6.2 percent vacancy rate and the inability for tenants to find spaces that fit their needs. East Side Tampa and South Pinellas submarkets had the lowest asking rental rate at $5.14 PSF. The average asking rental rate for flex space remained flat at $8.38 PSF.
The market has shifted in the landlord’s favor. Florida’s attractive business climate is drawing a number of out-of-state manufacturers and small companies to Tampa Bay, especially from high-tax states.
In response, landlords have pushed for longer terms, averaging 7-year to 10-year leases for available space. Concessions are averaging three months of free rent on a five-year term. Increased construction costs from previous quarters have stabilized, keeping tenant improvement dollar commitments viable.
Demand for industrial space was concentrated in spaces ranging from 20,000 to 80,000 square feet with ESFR and 26-foot plus clear height. Industrial properties with metal buildings are experiencing tepid demand.
Supply has tightened significantly in Pinellas County, following its broad- market strength in previous quarters. Tenants are having difficulty finding and leasing quality manufacturing and distribution space, as the majority of remaining available spaces are Class B and C product.
Institutional and private capital investor interest remained strong for core and value-add industrial product in Tampa Bay. A considerable number of lesser quality Class B and C product have come to market as owners anticipate that the strong existing demand will offset quality concerns associated with their buildings.
Many local tenants are seeking buildings ownership versus leasing. This change is likely due to Florida’s thriving economy, strong company balance sheets, availability of debt capital, and overall low interest rates.
Self-storage developers are extremely active throughout the market, seeking three- to seven-acre land sites to begin new construction. Market experts anticipate this will lead to pent-up demand for raw, developable land in key demographic areas where self-storage would likely thrive.
Several of the new buildings delivered are a 310,000-square-foot FedEx distribution center located on Waverly Barn Road in Davenport Florida; Prologis’ 394,513-square-foot site, located at Four Corners Business Park in Davenport, FL; and a 28,500-square-foot building in the East Tampa submarket, delivered by Industrial Development Company and located at 4550 Eagle Falls Place in Madison Business Park.
Buildings under construction include: Bridgewater Commerce Center in Lakeland, a 275,226-square-foot building developed by Seefried Industrial Properties, estimated delivery date October 2016; Ridge Development’s second building of 245,000 square feet at Lakeland Logistics Center; and Crossroads Commerce Center in Tampa, a 669 square feet industrial park, estimated delivery date summer 2017.Previous  Next »