Southwest Florida Industrial Market Has Plenty of Space—But is it the Right Kind

Commercial real estate is cyclical by nature, and the industrial market throughout Southwest Florida and the surrounding areas is proving that once again. Over the past several years, developers from around the country responded aggressively to pandemic-era demand for warehouses and distribution space. Larger industrial users were expanding rapidly, supply chains were shifting, and developers raced to build bigger facilities to meet the moment. Today, we’re seeing the effects of that wave of construction settle into the market.

In the 10,000+ square foot range, there is noticeably more availability than we saw just a few years ago. Much of that product was developed during or immediately following COVID, when larger users were absorbing space at a record pace, especially along the I-75 & I-4 corridors. Now, some of those tenants have scaled back, consolidated operations, or simply slowed expansion plans, leaving a surplus of larger industrial inventory in many Florida markets. Nationally, vacancies for large-format industrial space have climbed significantly compared to smaller bay product.

What continues to remain extremely tight, however, is the smaller industrial sector — particularly spaces in the 1,000 to 5,000 square foot range. Contractors, service companies, local distributors, light manufacturers, tradesmen, and small business owners continue searching for functional warehouses and flex space with very limited options available. That segment of the market was largely overlooked during the development boom because larger warehouse projects were easier to finance and build.

Infill industrial product in desirable locations throughout Southwest Florida remains difficult to replace. Many of the smaller industrial buildings in our region were built decades ago, and there simply has not been enough new small-bay construction to keep pace with demand. A driving factor in the shortage of new smaller industrial buildings is due to the shortage of improved Industrial zoned vacant lots. The remaining vacant industrial lots that are 1 to 5 acres in size are sold at a premium which drives up the total cost of the new building.

The reality is that industrial demand never disappears — it shifts. Markets adjust. Developers follow trends. Then the cycle eventually corrects itself again. We are already beginning to see more conversations centered around smaller bay concepts, multi-tenant industrial projects, and flex space designed for local business users rather than massive distribution centers.

That is the nature of commercial real estate. Timing, supply, and demand are always moving targets. The key is to recognize where the market is headed before everyone else catches up.

Loyd Robbins is a lifelong Sarasota resident with 53 years of experience in commercial real estate and business brokerage. Trusted advisor to owners navigating meaningful transitions.