Tampa Bay Industrial Market Report – Q4 2016

admin  /   February 3, 2017

Tampa Bay Industrial Market Report – Q4 2016

Net Absorption Surges Ahead in 2016

Executive Summary

The Tampa Bay industrial market reported steady growth through the close of 2016, ending with the highest absorption in ten years. We attribute this to Tampa Bay’s economy, which has remained strong with positive job growth, a robust construction and building-services industry, expanding companies and new e-commerce firms entering the region. While new product became available for lease rents remained level. 2,926,000+ square feet of construction is under way in the Tampa Bay area.

At year end, net absorption hit the robust historical 2006 milestone: a total of 6,181,076 square feet. This was boosted by the last quarter’s 1,416,346 square feet of absorption. All submarkets are below nine percent vacancy.

Investor demand for industrial product continued to be strong through the close of the year. High-quality assets were in high demand and short supply as private capital buyers dominated the buyer pool. We also saw an increase of small manufacturers looking for space to purchase.

Highlighted Transactions

  • Prudential Real Estate Investors sold Thomas Center and Benjamin Center to iStorage for $37.3 million, or $66 per square foot (PSF). The flex asset consists of 561,707 square feet in the Airport submarket.
  • Cabot Properties acquired a 55,730-square-foot single-tenant warehouse located at 10325 Windhorst Road for $3.8 million, or $67 PSF. The warehouse was built in 2001.
  • CUNA Mutual sold Gateway Professional Center to iStorage for $15.7 million, or $50 PSF. The center consists of three buildings comprising 313,395 square feet located in Largo, Florida.

Vacancy and Absorption

6,181,076 square feet of net absorption was reported for 2016 – the highest it’s been in more than a decade. However, the Airport Northwest, East Tampa and South Pinellas submarkets all saw negative absorption.

The North Pinellas submarket reported the lowest vacancy for the eighth consecutive quarter at 1.8 percent. Due to the amount of new product entering the submarket, Polk County continued to have the region’s highest vacancy rate at 8.4 percent as well as the most absorption at 474,938 square feet. Polk County continues to lead the area in the amount of new speculative construction as it has vacant land centrally located between Tampa and Orlando.

In Pinellas County, industrial rental rates maintained their position at approximately $6 PSF.With more than 2,926,025 square feet under development, we anticipate that vacancy and absorption will continue to fluctuate as new product enters the market.

Leasing Activity

Leasing activity remained strong through the fourth quarter of 2016. However, lease rates have remained largely flat for the past three quarters. Five-year leases are typical. The average asking rental rate for industrial space maintained its price of $4.71 PSF, consistent with the previous two quarters. The average asking rental rate for flex space in Tampa Bay dropped to $7.60 PSF, down from $7.92 PSF in the previous quarter. Polk County reported the lowest asking rental rate at $4.45 PSF.

Properties ranging between 40,000 and 80,000 square feet were in high demand. The majority of space leased in the past 12 to 18 months went to supply chain-related companies. Concessions, such as free rent, were limited and are declining. Tenant improvement allowances are available, but often are reflected in higher rental rates.

Active tenants include small manufacturers and building-supply companies. Pinellas County had strong activity through the fourth quarter due to these types of tenants. The county continued to be a landlord’s market as rates climbed due to a short supply of space. The . Airport submarket has more available space without increase in rates. Polk County saw increased tenant interest from large users, but none have committed to space. For larger users in Central and East Tampa, the market tilts toward a tenant’s market with large available blocks of space.

Sales & Development

Investor demand for industrial product in Tampa Bay remained strong with a preference for high-quality buildings. These properties when offered for sale and broadly marketed, received multiple offers in a short timeframe. The value and number of offers dropped significantly as building quality decreased.

For owner/user buyers, buildings between 15,000 to 25,000 square feet were in demand. Many of these prospective buyers were small manufacturers who preferred owning versus leasing. Private capital buyers, many of whom are backed by sophisticated capital partners, dominated the buyer pool.

Investors began shifting their investment interests toward last-mile properties, such as facilities that serve e-commerce and supply-chain users.

2,926,000 square feet is under construction throughout Tampa Bay.

These developments include:

  • Brennan Investment Group’s first building at CenterState Logistics Park is a speculative 605,000-square-foot, 36-foot clear, state-of- the-art building at Exit 38 on Interstate 4 in Lakeland. The site plan calls for 1,200,000 square feet on a 112-acre land parcel. Building 1 at CenterState is the largest speculative development project ever built in Lakeland, the high demand I-4 Corridor.
  • Harrod Properties has began construction on Phase I, a 160,000 square foot building within Gatewood Corporate Center located in Lakewood Ranch. The project is fully entitled for 500,000 square feet.
  • Aspyre Properties is on schedule for an additional 100,000 square feet at Interstate Commerce Park in Lakeland. Delivery is for the first quarter of 2017.
  • A two-building, multi-tenant, 100,000-square-foot property is 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.

Want more commercial real estate news and advice? Contact Tampa Bay Industrial Advisors here and connect with us on Social Media!


« Previous  Next »