Industrial construction returning to pre-pandemic levels in Tampa Bay
Build-to-suits account for a sizable portion of new construction
As Tampa Bay’s industrial vacancy rate has risen over the past two years, causing developers to adapt to a changing market. Roughly 3.5 million square feet of new warehouse and distribution space is under construction in the Tampa Bay industrial market, a 35% drop from this time last year. Further, Tampa Bay’s construction pipeline has decreased since reaching its peak of 7.5 million square feet in 2022.
Two of the three largest industrial buildings currently under construction are build-to-suits, a trend that has been true in the Tampa Bay region over the past five years. Both projects are for food distributors, Sysco and Bauducco Foods.
Sysco’s new 517,000-square-foot cold storage facility in The Sudler Companies' Southern Oaks Business Park in Plant City should wrap up construction in the coming months. Bauducco Foods broke ground earlier this year on its 400,000-square-foot production and distribution facility on 72 acres at the Zephyrhills Airport Industrial Park in Pasco County.
Excluding those projects and a few smaller build-to-suit facilities, roughly 2.6 million square feet of speculative development is underway in the Tampa Bay market, the lowest level in four years.
The pullback in new development coincides with a multi-year run-up in Tampa Bay’s industrial vacancy rate. As of May, the region’s vacancy rate was 6.0%, the highest level since 2015. Tampa Bay’s industrial vacancy rate hit an all-time low of just 3.5% in late 2021 and has been climbing ever since.
Encouraged by the region’s record-low vacancy rate in 2021, developers became very bullish on the Tampa Bay market. Throughout 2021 through 2023, more than 16.6 million square feet of industrial product broke ground across the region. While that included several one-million-square-foot-plus build-to-suits for the likes of Lowe's, City Furniture, and Target, most of the buildings were built on a speculative basis, without signed leases before starting.
More recently, developers in the region have shifted their attention to focus on a part of the market that has remained very active: users leasing under 50,000 square feet.
The bulk of Tampa Bay’s industrial pipeline is comprised of buildings that are between 100,000 and 200,000 square feet. While developers would prefer to sign a single user, many are marketing these new buildings with the option to demise the space and split the building between two or three tenants.
“Developers are getting smarter, targeting smaller footprints that match both the physical constraints of available sites and the segment of the market that’s remained active and resilient. The sub-50,000-square-foot space isn’t just an operational choice. It’s a strategic response to where the real demand still lives,” said Julia Silva, president and founder of Lee & Associates Tampa Bay.
Over the past two years, the number of tenants signing large leases measuring over 100,000 square feet has slowed. Only one new lease of that size was signed in the first quarter, Cirkul’s full-building deal at 301 Industrial Center, a 175,500-square-foot warehouse in Temple Terrace developed by Ares Industrial Real Estate Income Trust.
Full-building industrial pre-leases have been rare, and several buildings completed in 2024 are sitting vacant. New construction in the pipeline will likely continue to add to the region’s vacancy rate over the near term. Roughly 95% of the 2.6 million square feet of speculative development currently in the pipeline remains available for lease. However, lease-up timelines could improve if developers continue to be more adaptable to changing tenant demands and cater to smaller industrial tenants who are still active in the market.
(CoStar Analytics | By Michelle Rumore)
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