Tampa Bay Industrial Outlook

The Tampa Bay industrial market is one of many nuances. There are some systematic similarities, but as real estate goes, location makes a difference.

As a whole, the industrial market has continued to see strong growth as increased demand has resulted in higher property values and lease rates. As a result, new construction has continued throughout the region with most new products geared towards the institutional-grade building types, which is generally defined as tilt wall, large-scale developments geared towards large regional or national tenants. With interest rates still low and financial institutions still willing to fund industrial deals, the sales market has become extremely competitive.

Hillsborough County is home to two robust industrial cores: the East Tampa and Airport markets. These two areas combine to total over 75 million square feet of inventory and with just over 5.6 million vacant or a single digit vacancy rate of 7.46% the sales prices and lease rates have continued to climb. Institution-grade warehouses have been trading above the $100 psf threshold with A/B grade masonry buildings trading at $80-95 psf and metal buildings topping out at an average of $70-85 psf. Manufacturing NNN lease rates are around $8.00 psf, flex properties at $11.00 psf and storage warehousing at $5.65 psf.

Jumping across the bridge to Pinellas County the trends continue, but the numbers differ slightly. Pinellas has three industrial markets, the South, Mid and North Markets. The Mid-Pinellas market is the largest at over 25 million sf, followed by the South at 5.7 million and then the north at 5.3 million. The vacancy rates for each are as follows: Mid – 6.6% South – 9.2% and North at a historic low of <1%. NNN lease rates are detailed for each market below:

In regard to Pinellas industrial sales, the property values mimic much of the same values seen in Hillsborough, with some new construction block buildings being sold for over $115 psf. The tight market has made bidding on sales listings highly competitive and properties are being sold routinely over asking price. 

On the investment side, industrial buildings have typically traded for double digit cap rate returns, however in the recent years those rates have compressed. Industrial investment deals are now trading in the 7.5-9% range, dependent upon type of structure, lease terms, and quality of tenants. 

With the shift of online retail and the consumer need to have their goods in the fastest means possible, last-mile distribution and the manufacturing of these items will continue to drive demand and we may continue to see values climb for our regional industrial properties. The scarcity of land and limited resources to build new buildings will work to only push existing structures’ values higher.