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Despite several touch-and-go years, the industrial market appears to finally have a stable pulse. How long it spends in the I.C.U. is up for debate, but brokers are starting to get more than a little excited about hints at an improved market.
According to data supplied by CBRE, the Tampa and Pinellas, Manatee and Sarasota counties market finally started recording positive absorption in the first quarter of the year after nine consecutive quarters of negative absorption. Figures for the southern counties appear to follow this pattern as well. Even more importantly, that absorption has extended into the two following quarters.
WHAT'S HOT: Space for health care and defense related businesses. The Interstate 75 corridor in eastern Tampa has also seen a number of sizeable transactions, including deals from Chadwell Supply (167,316-square-foot acquisition) and VF Imagewear (222,000-square-foot lease).
WHAT'S NOT: Flex, the office and warehouse mix, is still facing heavy inventories and competition.
TRANSACTION TRENDS: Sales numbers have also mirrored that absorption growth.
In Tampa Bay, sales transactions have increased each quarter over the same quarter a year ago since the fourth quarter of 2009, according to data provided by the CoStar Group. Sales transactions hit their lowest level in the third quarter of 2009 at 90 sales, down from 253 in the fourth quarter of 2006.
Meanwhile, Southwest Florida transactions are running at their highest levels in the past five years. Sales bottomed out in the first quarter of 2009 and have climbed steadily ever since. Transactions hit their high point in the first quarter at 39, and have stayed above 35 since.
PRICING TRENDS: A big impetus for the sales volume increase comes from prices, which are at their lowest level in at least four years. The median price per square foot in Tampa Bay has tumbled from $201.87 in the fourth quarter of 2006 to $87.88 as of the third quarter. That actually represented a recovery a from the median price in the first quarter of just $77.42 per square foot, the lowest level since the fourth quarter of 2006.
Southwest Florida has seen its year-over-year median prices tumble every quarter except one since the second quarter of 2008. Values have declined from a high of $143.32 in the first quarter of 2008 to a low point of $44.98 in the first quarter of 2010. However, median prices are improving somewhat this year with an increase reported in the second quarter and a tiny, less than a dollar decline in the third quarter over a year ago.
“Investors are buying at what they perceive to be very good prices,” says Carl Wise, president of Sarasota-based Preferred Commercial Inc. “Rents have also followed prices. “One [negative] impact this has had is there's virtually no market for industrial lots. You can buy a building for a lot cheaper than you build them. The biggest obstacle [to sales] right now is getting financing.”
The majority of new sales transactions in the market have been by end users, according to Brian Rettig, an industrial specialist in CBRE's Tampa office.
“These are the buyers that are willing to pay more than bargain basement,” he says. “Investors are challenged right now. There is plenty of capital on the sideline that wants to get placed. Most of the institutional grade doesn't trade very often, because it's usually in larger national portfolios and the value-add investors that are looking for bargain basement deals are getting beat out by users.”
Ultimately, Rettig says, the improvements that are occurring are part of the natural market cycle that's driven in no small part by population and retail growth.
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