Tampa Bay’s Industrial Leasing Well Above Pre-Pandemic Norm
A major theme for the national industrial market over the past year or so has been a steady decline in leasing activity. Industrial assets became the darling of the real estate world in the years immediately following the pandemic, and that trend rang true in the Tampa Bay region. Tens of thousands of out-of-state residents moved to Tampa Bay, increasing the demand for housing and goods, which in turn drove record industrial demand.
At the time, the Tampa Bay industrial market did not have enough supply to meet the demand that the market was seeing. Industrial developers answered that demand in kind, breaking ground on millions of square feet of new development, consisting of both speculative and build-to-suit projects.
Since early 2022, those demand drivers have shifted, and the market has seen a steady decline in quarterly leasing activity. In the first quarter of 2022, the Tampa Bay market recorded roughly 4.1 million square feet of leasing activity, an all-time high. In comparison, the market saw approximately two million square feet of leasing activity in the third quarter of 2024.
However, while activity is certainly down from the historic levels seen in 2021 and 2022, the Tampa Bay market is still greatly outperforming pre-pandemic norms.
Through the end of the third quarter, the Tampa Bay market recorded roughly 7.8 million square feet of leasing activity. The comparable three-quarter average between 2014 and 2019 was six million square feet. The market is seeing approximately 30% more leasing activity than it would typically see pre-pandemic.
A key reason why leasing activity has been declining is the slowdown in large leases, specifically over 100,000 square feet. Through the end of the third quarter of 2024, the market saw eight new large leases executed, equating to roughly 1.2 million square feet. In comparison, 13 were executed over the same period in 2022, for a total of five million square feet.
One segment that continues to remain active is the under-50,000-square-foot market niche. Lisa Ross, managing director at Cushman & Wakefield, said, “2024 was dominated by small deals with over 90% of the leases signed being for space under 50,000 square feet.”
In fact, the number of transactions under 50,000 square feet has increased considerably compared to 2022. Through the end of the third quarter of 2024, nearly 380 new leases were signed for spaces under 50,000 square feet, up from 300 over the same period in 2022.
That increase in demand has caused some developers to shift their focus from a single large tenant to accommodate two or three smaller tenants. Ross adds, “We’re tracking almost 2 million square feet of unleased, speculative construction in the pipeline, and the majority of that consists of space divisible under 250,000 square feet. The direction construction is headed is aligning with the size of spaces tenants have been targeting over the past year.”
New construction has outpaced the rate of industrial demand over the past year, causing the vacancy rate to increase to its highest level in nearly eight years. However, there is optimism in the market that the momentum seen in 2024 will carry over into next year. “All indications point to 2025 being a strong and very active year for industrial real estate transactions”, says Ross.
(CoStar Analytics | By Michelle Rumore)
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