As more people move to the region, they need more places to live and shop.
Danny Rice is a Market Leader for the real estate firm, Colliers. He oversees all of Central Florida which includes Orlando, Sarasota, Fort Myers, Tampa and Clearwater.
His team focuses on all aspects of commercial real estate. Their clients range from corporations looking to lease office space, to developers searching for land to build student housing, to major retailers looking for warehouses to store their goods.
In the past two years, Rice said he’s seen more growth in the Tampa Bay area than he had in all his 14 years working in the industry. Whereas people and companies alike once had to be convinced to move to Tampa, “now we are definitely on everyone’s radar,” he said.
How were the different types of commercial real estate – office, retail, industrial – impacted by the onset of the COVID-19 pandemic?
The pandemic was an accelerator for trends that were either starting to happen or already happening.
From an office standpoint, there were already trends going on around remote work and about the best utilization of office space.
On the retail side, there was already an acceleration around the experience. That experience is that more important because they have to get people back into brick and mortar stores. The consumers are frankly a little bit more disloyal, because they can find stuff online. They can shop around a lot easier.
For industrial, the e-commerce logistic component was already ramping up. When the pandemic first happened, you really couldn't shop at brick and mortar. People went online and the big e-commerce retailers needed the warehouses to accommodate that.
It’s been two years since the pandemic started. What has changed in that time?
Pricing has been increasing significantly in the past 24 months. There’s been a growth in general activity. There’s not enough supply to keep up with the demand, especially in industrial.
People have doubled down on wanting to move to Florida. The tenants that are looking in the region are also larger than they’ve ever been. For us, a 300,000-square-foot industrial lease about five to 10 years ago was a big lease. Now we’re seeing million square foot leases and that’s become common.
Office space has seen the biggest softening effect with more people working remote. For the most desirable areas though, like Water Street for instance, the market is still very strong. People are looking for spaces that have amenities in the building or are near amenities.
How is population growth in the Tampa Bay area impacting commercial real estate?
Tampa has become one of the hottest markets in the state if not the entire country.
The more people that are here, the more retail that’s going to be needed. We’ll also need more industrial distribution centers for products to get through...to get to the end consumer. And of course, more multi-family housing so they’ll have a place to go.
Which parts of the region have experienced the most growth? Where are the hotspots?
Lakeland and East Tampa from an industrial standpoint are probably the most active. Logistics, and access to highways are really the driving force behind that.
North of Tampa in Pasco and Wesley Chapel, up (State Road) 54 – that area has been growing substantially from both residential growth and retail growth. Part of that has to do with housing getting more expensive closer to the city center.
But there still is a ton of demand in South Tampa and downtown St. Pete. Developers are taking advantage of the high net worth individuals that are moving in those core areas and redeveloping older retail buildings into newer concepts that are more experiential.
The buying frenzy that was happening in the residential real estate market is starting to slow down now. Do you expect commercial real estate to experience a cool down too?
I think it’s all interrelated in some form or fashion. The reason you’re seeing some signs of slowing in the residential market is because mortgage rates have gone up so buyers are more hesitant and sellers are less eager to sell.
If you have a loan to buy a commercial property it’s similar. Interest rates are going up so that means it’s going to cost more. Maybe the buyer pool is less than it was 6 months ago or a year ago. But I would say we’re stabilizing rather than softening.
We’ve been going 200 miles an hour for the past 12 to 24 months. Now we’re doing 150 miles an hour. So it’s still a very active market, but the growth we experienced just wasn’t sustainable.