Economy Hammers Bay Area Industrial

(Carl Cronan is editor of Real EstateFlorida.)

TAMPA, FL-The national economic downturn is battering the Tampa Bay industrial market, pushing vacancy upward by nearly a full percentage point during the third quarter, based on research by local brokerages. At the same time, rents have managed to hold steady despite increased competition between local landlords.

Overall vacancy of industrial and flex buildings measured 7.8% through the last quarter, rising from 6.9% at midyear for Hillsborough, Pinellas and Polk Counties, according to Clearwater-based Colliers Arnold. While that is still below the US industrial vacancy average of 8.5%, it reflects that Tampa Bay is no longer as insulated from national market conditions as it used to be.

“Brokers are finding fewer prospective tenants and buyers in the market that are ready to make decisions,” says Karen Temmen, Colliers Arnold research director. Many tenants are looking to sign new leases or renewals for shorter terms lately, while some are focusing on consolidating operations requiring less space, she says.

More than a million sf came back to the market during the third quarter from 14 tenant move-outs, by Colliers Arnold’s count. The largest was the 500,000-sf Cargill citrus processing plant in eastern Polk County, which ceased operations last year but has just now gone on the market for sale.

Asking rents for warehouse space throughout the Tampa Bay region held steady over the quarter at $5.63 per sf, on par with the US average, while flex space rent rose slightly to an areawide average of $9.67 per sf, Temmen says. However, she notes that asking rents are only a base for starting negotiations and can vary widely between submarkets.

Speculative construction of industrial facilities in the Tampa Bay market has decreased by 44% over the past year, with just over 500,000 sf of new space now under development, according to Cushman & Wakefield. Just over half of the 1.5 million sf of new space delivered to the market so far this year has been filled, C&W says.

Industrial sales activity, although slowed by tight credit, continues in some parts of the local market, including the recent $2.8-million purchase of a 72,000-sf building on two acres at 5102 West Hanna Ave. in Tampa by Kennedy Investments Inc. “It’s encouraging to see there’s still investor confidence in the market,” says Jan Boltres, vice president and principal with Grubb & Ellis Commercial Florida, which handled the transaction.