Mega-deals by institutional buyers spark concerns about a lack of supply in the market.
Commercial real estate analysts say recent industrial deals in Tampa and St. Petersburg could usher in a new wave of institutional buyers along Florida's Gulf coast.
But the acquisitions by Evergreen Industrial Properties and High Street Realty also point to a shortage of newer, well-located and high-caliber warehouse space regionally, brokers say.
Evergreen spent $103 million to buy five business parks in St. Petersburg, containing 34 buildings and comprising nearly 1.7 million square feet.
“Pinellas County is the most densely populated county in Florida, and there are fairly high barriers to entry to develop new industrial product there,” says Rick Brugge, a senior director with commercial real estate brokerage Cushman & Wakefield, who worked together with teammates Mike Davis and Michael Lerner on the Evergreen and High Street deals.
“With few quality sites available, replacement costs are higher,” Brugge added. “The same is true in Tampa.”
High Street's roughly $40 million purchase of the 955,000-square-foot Tampa Distribution Center, at 1212 N. 50th St. near the Lee Roy Selmon Expressway and Interstate 4, has many of the same attributes.
“It's very near Main and Main, from an industrial perspective, and the product fits the heart of the market where tenants want to be,” Brugge says.
Both deals also offer their new owners the chance to hike rents amid an ever-tightening market and to lease uncommitted space.
Tampa Distribution Center, the largest single-site industrial deal in Tampa since early 2010, is currently 85% leased to Lansing Building Products, Motion Industries and others.
Evergreen's portfolio, which includes the Gateway Business Centre and Metropointe Commerce Park, also is roughly 84% leased, to Lockheed Martin Corp., Jabil and others.
Evergreen is now among the five largest industrial real estate owners in the Tampa Bay area.
“The Tampa and St. Petersburg areas exhibit many of the characteristics that Evergreen targets — including robust population and job growth and above-average household and small business formation,” says Peggy Toppin, a company spokeswoman.
Rian Smith, a first vice president with brokerage CBRE Inc., contends institutional buyers are looking to new markets because of a dearth of available properties in Chicago and Atlanta.
“The investment feeding frenzy in so-called 'Tier One' markets have caused buyers to look to Tampa and Charlotte, North Carolina, for value-added opportunities,” Smith says.
Neither Evergreen nor High Street are strangers to Florida commercial real estate, however.
Earlier this year, Evergreen — a subsidiary of the giant Texas investment firm TPG, with more than $74 billion in assets under management — bought the Jacksonville International
Tradeport, in Jacksonville, for roughly $40 million. The property's eight buildings total roughly 1.2 million square feet, according to company data.
High Street bought several Florida properties and sold them a decade ago. Company officials did not respond to telephone calls for comment.
“Institutional investors have kind of a herd mentality,” says Jan Boltres, managing director of industrial services for brokerage firm Colliers International, in Tampa.
“Florida is on their radar screens now because of our population growth, but there's very little product to buy. And big institutions need to deploy large amounts of capital; it doesn't make sense for them to buy one building in Tampa. But vacancy rates are going down and rents are going up, like in 2005, so you'll see more of these big deals.”
“Industrial in general is in favor now as an asset class,” he says. “And these deals are indicative of where the market is. I think you'll continue to see strong institutional ownership in the Tampa Bay market.”
- K.L. McQuaid