The commercial real estate industry is booming, and Tampa is one of the places on fire. The last two years have been robust for the construction of new warehouse facilities and for absorption within these new buildings. On a national basis, 2017 may prove to be the strongest year for industrial deliveries in the last ten years, and may also be the top of the market for this cycle. The largest industrial hubs nationally, Dallas, Chicago and Atlanta, have added millions of square feet of Class A product, the bulk distribution warehouses favored by the largest distributors and ecommerce fulfillment houses. These buildings offer the highest clear heights, at least 32’, abundant dock doors and massive parking for tractor trailers on site.
On a local basis, Plant City and Polk County have lead the region in delivery of bulk and distribution buildings. The I-4 Corridor between Orlando and Tampa is indeed filling in with new projects dotting the corridor from East Tampa all the way to Davenport, on the western edge of Orlando. This market has been in balance between deliveries and demand, a benefit for the landlords and a bit tougher on the tenants. Rents have been increasing as demand exceeds supply in these new buildings. Tenants thinking that new construction will also mean free rent and reduced rental rates are finding the opposite.
Rental rates have increased by about 5.3% in the last 12 months, though have not returned to the heights of 2006. The average for rents across all industrial property types is $5.80/sf/nnn. The Tampa Bay Industrial market is in balance and should be close to equilibrium for the rest of the year. If all of the projects on the books are constructed as planned, 2018 may see a slight oversupply in product.
Tenants looking to purchase buildings are finding that the inventory of available product offers few options. Thus, some tenants are leasing or renewing rather than buying as originally intended. There appears to be some upward pressure on existing buildings offered for purchase. Additionally, there are multiple buyers making offers on the same building at the same time. Suffice to say there is healthy competition in the existing buildings for sale arena.
There is also some competition for the purchase of vacant tracts for the construction of new buildings. I personally have had two tracts under contract with back up offers in the wings.
I love new development and think that the market conditions– constrained building supply and few fully developed sites on which to build—may actually bode well for build to suit activity in the marketplace.
The local Tampa Bay industrial market is bolstered by new home construction and home sales, as the subcontractors and vendors need space. This group is making 3-5 year commitments on leases, a strong sign of confidence in our local marketplace.
You may have noted our region is often cited as one of the top 20 cities in the country for job growth and places to live. Job growth in Tampa is the strongest of the major Florida cities, further creating demand across all sectors- apartments, retail, office and industrial. May the rest of 2017 be as prosperous as the first half?