Essentially all industrial demand is going to new buildings in Tampa Bay
Weakness in older properties contributes to vacancy rising to the highest level since 2016
Older buildings have been shedding tenants at a brisk pace so far this year. For industrial properties larger than 100,000 square feet, pre-2020 built properties have recorded negative 1.3 million square feet of absorption year to date. In comparison, properties completed since the start of 2020 have accounted for 3.4 million square feet of absorption.
The second quarter of 2024 was the first quarter this decade that the Tampa Bay industrial market recorded significant negative absorption with roughly negative 1.2 million square feet. A few tenants made up the bulk of the second-quarter move-outs, all leaving buildings over 40 years old.
Coca-Cola, Wes-Flo, and Breakthru Beverage vacated over 740,000 square feet combined in the second quarter. In contrast, PolyGlass USA was the only move-in larger than 100,000 square feet, occupying 215,000 square feet in I-4 Midway Logistics, which was completed in 2022.
However, much of the negative absorption recorded in the second quarter was wiped out just a few months later. The completion and subsequent move-in by Target into its 1.4 million-square-foot distribution hub in Pasco County has brought trailing 12-month absorption back into positive territory.
The Target project is one of several large build-to-suits that have fueled absorption over the past year. Tenants like City Furniture, Lowes, Sysco, Feeding Tampa Bay and Hit Promotional Products have committed to new buildings ranging from 250,000 square feet to over a million square feet over the past few years.
Some of the demand filtering to new construction is simply due to the amount of space available in the recently completed stock. In addition, new construction provides an opportunity for tenants to become more efficient in their space. Higher clear heights, speculative office pods, more loading options and better truck courts or parking configurations are just a few of the advantages that new construction offers.
Of the 20.2 million square feet completed since the end of 2019, 14.5%, or just under three million square feet, is vacant. In comparison, the overall Tampa Bay industrial market has a 5.6% vacancy rate as of September. The vacancy rate jumps to over 20% when looking at properties completed since the end of 2022.
In comparison, properties completed prior to 2020 have a vacancy rate of 4.8%. However, that is an increase of nearly 200 basis points over the past year, and much of that increase is occurring in larger buildings. For instance, properties of that vintage over 100,000 square feet have recorded a 250 basis point increase in vacancy and negative 1.7 million square feet of absorption over the past year.
Roughly 3.7 million square feet are under construction in Tampa Bay, excluding build-to-suits. Of that, over 85% is available for lease, including two 500,000-square-foot-plus projects. If all else remained the same and all these buildings were completed now, it would balloon Tampa Bay’s industrial vacancy rate to nearly 7%.
Further, all 13 speculative buildings under construction larger than 100,000 square feet are 100% available for lease. However, given recent leasing trends, these buildings are likely to attract tenants relatively quickly, potentially at the expense of older buildings in the market.
(CoStar Analytics | By Michelle Rumore)
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