SOUTHEAST SNAPSHOT, SEPTEMBER 2006

Tampa, Florida Industrial Market

Several ongoing trends in Tampa’s industrial market bear watching going into the last months of this year. One of the most significant is the growth of deal size and volume. Historically, transactions have averaged 25,000 to 50,000 square feet with an occasional 100,000-square-foot deal. These days Tampa’s industrial market has upwards of 3 million square feet in the market involving spaces of 75,000-plus square feet and as large as 400,000 square feet.

One factor fueling this trend is the growth in residential construction as Florida’s population continues to explode. Despite some recent cooling of the residential real estate market, people are still moving to the state at the net rate of about 1,000 per day. A significant number of industrial transactions are on behalf of distributors of building products and construction materials who are simply trying to keep up with demand.

Large industrial tracts are becoming scarcer – and more expensive – as sites are being acquired for other uses such as residential and retail. In 2003, even though the industrial market was experiencing double-digit vacancies, the lack of available land and the increase in deal size was still recognizable.

Those factors led to Trammell Crow Company and ING Clarion Partners’ development of Port Ybor, which began in 2004. The U.S. Postal Service leased the 281,600-square-foot Phase 1 building last fall for use as a logistics and distribution center. The space was the largest speculative warehouse building ever built in Tampa Bay and was noted for being Tampa’s largest industrial lease transaction of 2005. In addition, Carrier recently leased 107,925 square feet in the second Port Ybor building, leaving a balance of 48,075 square feet of available space.

Expanding beyond Port Ybor, Trammell Crow and ING are moving ahead on two speculative industrial buildings at Madison Industrial Park along U.S. Highway 41, one at 297,500 square feet and the other at 382,500 square feet, to be delivered in third-quarter 2007. Parksite Inc. recently signed a multiyear lease for 210,000 square feet, the largest industrial transaction so far this year.

Fueled by the need to consolidate its Orlando and Tampa operations, The Home Depot Supply has leased a new 240,000-square-foot distribution center at Lakeland’s First Park at Bridgewater, a 130-acre industrial center at Interstate 4 and State Road 33. The new facility is significantly larger than the 56,000-square-foot center The Home Depot Supply has occupied at the Fairfield Distribution Center in east Tampa. All American Container is set to take over that space in early 2007.

In the airport submarket, FedEx Corp. leased two-thirds of the 110,710-square-foot Building 1 at Eagle Creek. The company is expected to move later this year from its current 13,842-square-foot site at Fairfield.

Another trend to watch is the upward swing of rental rates. Rates for Class A Bulk distribution space have risen from an historical $3.50 to $3.75 per square foot just 3 years ago to breaking the $5 barrier today. The scarcity of land and rising construction costs are driving rents upward, but the market is tolerating the increases because companies want to do business in Florida.

Specifically, companies are looking to the Tampa area and portions of west central Florida as a location for distribution centers to be in closer proximity to their growing customer base. With diesel fuel prices topping $3 a gallon and still rising, companies regard rent and real estate costs as minimal compared with transportation costs.

— Clay Witherspoon is vice president of Trammell Crow Company in Tampa, Florida.

©2006 France Publications, Inc. Duplication or reproduction of this article not permitted without authorization from France Publications, Inc. For information on reprints of this article contact Barbara Sherer at (630) 554-6054.