Tampa Industrial Market Is on a Roll

Fourth-quarter absorption totaled 314,597 sf versus 507,564 sf in the third quarter; 356,422 sf in the second quarter; and a negative 414,405 sf in first quarter 2004. The current 7.3% vacancy level compares with 7.3% in third quarter 2004, 7.2% in second quarter and 7.3% in first quarter 2004.

"If the current pace of growth continues, the Tampa Bay industrial market should see vacancy rates near 6% at year end 2005," says Melanie Garlock, marketing and research manager at Grubb & Ellis. Average warehouse rents are $4.78 per sf compared to $4.54 in third quarter 2004. Flex rents are averaging $8.34 per sf versus $7.88 per sf in third quarter of last year.

Garlock says the market's three quarters of positive absorption was achieved despite Winn-Dixie Co.'s closing of its 948,572-sf distribution center in Sarasota and placing the entire facility on the market for sublease in the fourth quarter.

"The bigger news lies in the numerous economic indicators pointing to an even stronger and more robust market in 2005," the researcher says. As evidence, she notes manufacturing activity expanded for the 19th straight month; 2.2 million new jobs were created in 2004, including 157,000 in December; 10 straight months of increased construction hiring; and a national industrial vacancy rate down for the third consecutive quarter.

"In 2005, the current pace of absorption will lead to single-digit vacancy for the first time in three years," Garlock says. Locally, "absorption should exceed new construction, resulting in rental rate growth and the reduction of vacancy rates."

Kelly Offutt, senior analyst in the Tampa office of CB Richard Ellis Inc., notes a relatively new trend in medical companies occupying larger spaces to keep up with increased productivity. "Tenants are taking advantage of the new and existing available space and paying market rates," Offutt says.

She also is seeing free rents and other incentives by building owners being reduced. The analyst anticipates "demand for space will continue and raise market rents in 2005." Over 250,000 sf of speculative development will be completed in the first quarter. "Prospects are already showing interest for potential 2005 occupancy," Offutt says.

Randy Smith, director of research at Advantis, says Tampa Bay's industrial investment market reached new heights in 2004 with transactions totaling $120.7 million. "Year-end activity was robust," Smith says. The biggest deal in that period was the $10.37-million sale of the 201,620-sf, seven-building Executive Industrial Park in the Airport submarket to First Industrial Realty Trust of Chicago.