In spite of the COVID-19 pandemic — or perhaps even because of it — distribution space along the Interstate 4 corridor is flourishing.
Of all the commercial real estate trends that the COVID-19 pandemic has accelerated, none has picked up more velocity along the Gulf Coast and into Central Florida than industrial development, as retailers and other suppliers shift increasingly to e-commerce sales and distribution from sophisticated, centralized locations.
In the Interstate 4 corridor alone, between Tampa and Orlando, more than 7 million square feet of new industrial and logistics space either is under construction or in serious planning stages.
And because e-commerce merchants’ needs are shifting so rapidly, much of the new product is being developed on a speculative basis without tenants in place prior to construction.
At the same time, industrial building sizes and stacking capabilities are increasing significantly to respond to the most modern logistical demands for storage and efficient transportation, experts say.
Brennan Industrial Group’s planned CenterState Logistics Park East, in Lakeland, epitomizes the trends.
At 1.01 million square feet and with a clear ceiling height of 40 feet, the $90 million project with Grandview Partners slated to delivery at the end of this year represents the largest “spec” industrial development in Central Florida.
The project also is being built on 165 acres to accommodate both expansion and trailer and other vehicle parking, which has become an integral part of every distribution property.
“The movement to e-commerce is really what’s driving these industrial deals to get leased up,” says Bob Krueger, a Brennan partner and co-founder of the Illinois-based company who operates from Tampa.
Distributors ranging from Amazon — which single-handedly has plans for another 3.7 million square feet of fulfillment and related space in Seffner, Lakeland and Temple Terrace — and Walmart, Best Buy Co., Ace Hardware, Home Depot Inc. and Pepsico, to name just a few, have been drawn to Central Florida primarily because of its proximity to roughly 20 million residents within a day’s drive time.
Interestingly, too, each of the companies named above have opted to occupy or develop industrial properties within the past five years that are in excess of one half million square feet of space. A decade ago, a standard “large” development in the corridor consisted of about 300,000 square feet.
“The big story in this area has been the number of industrial projects over 500,000 square feet, says Robyn Hurrell, managing director of industrial services at commercial real estate brokerage firm Colliers International Tampa Bay.
Although names like Amazon and Ace garner much of the attention, their projects are but a fraction of the total space being contemplated or built.
A partnership between Native Development Group of Georgia and Crescent Communities, of North Carolina, are constructing a two-building project slated to contain 300,000 square feet in Lakeland.
The first building in the Lakeland North Business Center, just a few minutes away from Interstate 4, is schedule for delivery by the middle of next year, says Joseph McGorrey, Native Development’s founder.
Like Brennan Investment’s project, Crescent and Native have opted to build their project speculatively.
Additionally, Duke Realty Co. has been marketing a planned 442,874-square-foot building in East Tampa, the latest offering from its Tampa Regional Industrial Park project.
And most recently, Los Angeles-based Xebec Realty Co. unveiled plans for a new 403,000-square-foot, bulk logistics project, also in Lakeland. Logistix Hub at County Line, being developed on a speculative basis within the West Lakeland Industrial Park, is slated for completion in April 2021.
Xebec also is working to deliver a 537,000-square-foot industrial project elsewhere in Lakeland before the close of this year, according to its website.
Meanwhile, New Jersey-based Sudler Cos. has proposed a 727,000-square-foot project for 225 acres in Polk County. Southern Oaks, as it is being called, would be delivered in the third quarter of 2021, according to Colliers International data.
Sudler’s project and the others join Ackerman & Co. and TransWestern’s Lakeland Dragstrip Logistics Center, at 711,000 square feet, and Red Rocks Development’s 510,272-square-foot County Line Distribution Center.
Both projects, which are expected to be wrapped by next March, were developed on spec and have yet to announce tenants for the space.
In all, more than 2.5 million square feet of industrial space was underway as of June 30, according to Colliers International data, and another 700,000 square feet of space was completed during the three-month period.
Another roughly 2.4 million square feet of space, in Lakeside Logistics, Key Logistics Center, Central Florida Intermodal, County Line Logistics Center and Four Corners Business Park remain available, as well, with offerings ranging from 500,000 square feet to 215,000 square feet.
Much of the development has been spurred on by notable successes of the past few years.
In 2018, Brennan Industrial landed a full-building lease with Pepsico for 605,000 square feet — at the time the largest spec development in Central Florida. And earlier this year, TransWestern and Crow Holdings convinced HCA Healthcare to take down their entire 713,000-square-foot, speculative development University Park at Bridgewater.
“Statewide distributors, especially, are electing to put a single (distribution center) in the center of the state and then operate a series of smaller, final-mile projects in other major metros,” says Ryan Vaught, a Colliers International executive managing director of industrial services, in Tampa.
“The clustering (of projects) is a validation that those who developed earlier in the corridor picked the right location,” adds Vaught.
At the same time, rising rental rates and availability of inexpensive capital have also fueled the level of development.
But Brennan Investment’s Krueger frets that the Interstate 4 corridor could become a victim of its success.
“For top-quality, ‘A’ sites, it’s getting to be pretty slim pickings,” Krueger says. “As a result of a lot of prime spots along the corridor having been built on already, the Ocalas and Apopkas of the world have done, and will likely to do, well as a result.”
For his part, Vaught isn’t overly concerned with the availability of land. Developers, he says, will find creative ways to access properties just as they’ve done in major distribution markets like Atlanta.
And while change has occurred relatively rapidly, he contends that technological advancements will push additional development in the years to come. Amazon’s four-story Temple Terrace project, for instance, is expected to be among the most technologically advanced distribution hubs in Florida when it is completed.
“I think Polk County will grow exponentially over the next decade, as retailers and logistics companies further refine their operations and integrate new technology,” Vaught says. “It takes a while to reconfigure a supply chain and make industrial space more a part of it, and not everyone can move as fast as Amazon, Walmart or Pepsico can.”