The Tampa economy has come roaring back, and that has been great news in the commercial real estate arena. While the rest of the country recovered years ago, it was not really until 2014 that the momentum picked up in our area. The demand for retail space, office space and warehouse space came back in that order. The industrial market came back behind retail and office. At the top tier, many companies that are taking down large blocks of warehouse space are related to e-commerce. Amazon bought land, built two 1 million square foot facilities and is already contemplating expanding, at least at the Ruskin facility. Other logistics firms that play into the e-commerce world are leasing 100-200,000 SF blocks, in East Tampa, County Line Road in Lakeland and even further east in Davenport (US 27 at I-4). Both FedEx and Walmart have built 310,000 SF and 2,000,000 SF respectively. There are a variety of business parks that have broken ground on new facilities: 5 in Polk County with more announced, and 2 in East Tampa, with 4 more announced.

New construction bodes well for our market. In this cycle, it appears as though the stream of new product is matching up with the demand for it. Thus, prices for existing product have not dipped nor have the pricing for new projects been reduced. Tenants across the board are finding that “new normal” rental rates are up dramatically from five years ago, in the depth of the recession. This statement applies to flex/office space ($11.00/ sf/nnn), rear loading distribution space ($5.75-6.50/sf/nnn) and front loading bulk space ($4.25-4.95/sf/nnn). As long as supply and demand are in synch, tenants can expect to pay market rental rates, with limited concessions available. For those tenants who can see their way clear to the next 5,7 or even 10 years, there are benefits to casting longer leases; a bit of free rent and some added tenant improvement dollars are offered in these transactions.

Tenants looking to no longer lease and purchase a building are facing a constricted supply of good quality buildings. As rental rates increase and lending options remain attractive, a glance toward a purchase is a natural reaction. Most of the tenants I speak with have the cash initial investment they will need to buy a building and a financing commitment, if they can find one. I see more would-be buyers considering build to suits, or returning to leasing, as the existing inventory does not yield many good options.

Considering the build to suit option? It’s a good choice, provided a company has left themselves enough time for the breadth of the project. These can last a minimum of 9 months to over a year; with lease expirations looming, plan ahead, if at all possible. While the cost for a newly developed project is often far above the initial cost of purchasing an existing building, if done correctly, the project will be worth the extra investment. What I mean by “ done correctly” is 1)that the design matches your unique needs and enhances operations 2) includes plans for future expansion and 3) builds in life cycle components (better quality and insulation in the roof, efficient air conditioners, sturdier pavements specs, tougher exterior coating/paint) to reduce the costs of operation and thereby pay for themselves. By buying a building, you also control the variable components of common area maintenance, and avoid annual rental escalations. If you wanted to dive deeper, there are some favorable tax consequences from depreciation/accelerated depreciation and interest write offs that benefit the new owner.

In closing, the economy in the Tampa Bay region is growing stronger by the day. Our microcosm certainly reflects the greater national economy, although the effects tend to reach Florida and Tampa AFTER the rest of the country. Our state and local economy are not showing any signs of slowing down and the next two years ought to bode well for our community.