(Carl Cronan is editor of Real Estate Florida.)
TAMPA, FL-The Tampa Bay industrial market used to be strong enough to absorb 1.5 million square feet every year. Now the trend has turned opposite, with more than 2 million square feet of negative absorption in 2008 and more space expected to return to market as this year rolls forward.
"We weren't used to the numbers going into a downward trend," observes Brian Rettig, first vice president with CB Richard Ellis in Tampa. Even though there remains demand for warehouse and similar space locally, the pipeline of interest by prospective tenants across the country has slowed considerably by economic conditions, he says.
The latest example of the Tampa Bay industrial slowdown became cited earlier this week, as Milwaukee-based Smithfield Foods Inc. announced closings at its meat-packing plants nationwide, including a 760-employee operation in Plant City that is the town's largest employer. Smithfield owns the 170,000-square-foot local plant that it has operated since 1996 and will close by Sept. 1.
Industrial sector performance in the Tampa Bay market is a mixed bag, with roughly 1.5 million square feet of negative absorption last year in both Hillsborough and Pinellas Counties being offset by 936,000 square feet of positive net absorption in Polk County, according to CBRE research. Year-end vacancy measured 6.5% in Hillsborough, 9% in Pinellas and 10.6% in Polk, with average asking rents ranging between $5 and $7 per square foot over all three counties.
Plant City, with more than 10 million square feet of industrial capacity, is actually among the lowest submarkets in vacancy at just 2%, CBRE figures show. It is uncertain what effect the Smithfield shutdown will have there, since the company would need to find a suitable owner to buy the building and equipment.
"This is an agricultural market, so there may be some backyard expertise that could make use of that space," Rettig tells GlobeSt.com. He adds that CBRE is currently marketing a 1.1-million-square-foot grocery distribution center in Plant City currently owned and operated by Boise, ID-based Albertsons LLC, which laid off 121 workers last summer, and has already noticed decent interest in the space.
The Tampa Bay market is continuing to suffer job losses early in 2009, with construction, professional services and manufacturing shedding the most positions, CBRE reports. Reduced spending by consumers is forcing companies to lay off workers.
Another effect of the slowdown is seen in new space, with only 184,000 square feet under construction at the end of 2008 compared with nearly three million square feet the previous year. New space deliveries remained stable from year to year, at around 2 million square feet, CBRE states.
From an investment standpoint, sales volume in the Tampa Bay market fell by more than half last year to $233 million, with more than 3.7 million square feet changing hands at an average price of $63 per square foot. Cap rates increased slightly over the past year to an average of 7.5%, CBRE reports.
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