Executive Summary
The national and global economy experienced its fair share of fluctuations during the quarter, from geopolitical events and increased interest rates to the ongoing war in Ukraine and recovery from the pandemic. However, activity and demand for industrial space in Tampa Bay remained relatively constant in light of the fluctuating economic forces globally. The Tampa metro area unemployment rate hit 3.2%, falling 120 basis points (bps) year-over-year (YOY), on the addition of 30,898 jobs, for a job growth rate of 1.2%. In addition, industrial landlords benefited from steady employment gains in sectors that positively impacted demand. Those sectors included an increase in manufacturing of 3.7%, construction of 1.9%, and trade, transportation, and utilities of 5.4%.
Employment growth will remain strong as population and business migration continues to benefit the Tampa Bay region. The overall vacancy rate for industrial and flex properties in the market was 4.1% in the 2nd quarter. Industrial (non-flex) properties, which comprise 91% of the market, had a vacancy rate of 4.1% and have remained in the single digits for eleven consecutive years. Flex properties are less than 10% of the industrial market, dropped to a vacancy low of 3.6%. The shrinking vacancy rate positively impacted asking rates. Warehouse and distribution space averaged an asking rental rate of $6.57 per sq. ft. during the year’s first half. These rates were 20% higher than three years ago when rates were under $5.50 per sq. ft. The region recorded 560,000 sq. ft. of absorbed space during the 2nd quarter, while year-to-date absorption stood at 2.2M sq. ft.
Healthy tenant demand, combined with a decline in the vacancy rate, continued to create a ripe environment for industrial development in the region. As a result, industrial construction tripled over the last three years, with over 6.3M sq. ft. currently under construction and another 3.6M sq. ft. proposed and near-term construction, as developers attempt to meet the growing demand for space.
Year-to-date investment sales were also 46.1% higher than last year. Interest from local, national, and foreign investors in Central Florida’s industrial products remained active for all industrial types and product categories, ranging from value-add opportunities to stabilized assets. Several assets have recently traded, albeit investment activity remained vibrant during the year’s first half, with lenders remaining cautious/conservative for office products due to worldwide events affecting the market.
