TAMPA, Fla. (May 13, 2019) – Expect the Central Florida industrial real estate market to stay red-hot for the next several years, and look for the growth of warehouse and distribution space in Lakeland, Orlando and Tampa to dramatically expand north to Ocala and east to the Space Coast.
Those were among the major takeaways from 75 high-level industrial real estate owners and developers at the Central Florida Industrial Summit, hosted April 27 by Colliers International at the Centre Club in Tampa. Colliers invited representatives of companies that are each involved with significant holdings of Central Florida industrial real estate.
“The last 50 years was all about the I-95 corridor for industrial real estate,” said Steven McCraney, CEO of Palm Beach-based McCraney Property Co. “We see the next 50 years being all about the I-4 corridor.”
As consumer demand for next-day delivery continues to drive the growth of distribution centers, industrial real estate sales are red-hot and developers are eying more opportunities for new construction in prime locations. Manufacturing locations also continue to proliferate around Central Florida, and many occupiers are looking for flex industrial space that can be shifted to accommodate users’ changing needs.
Overall, conference attendees were bullish that industrial real estate activity will continue to hum for at least the next several years along I-4 from Tampa to Lakeland to Orlando.
“The supply situation is favorable in the Tampa and Orlando markets compared to many other parts of the country,” said Ben Brudney, a principal at KKR. “Combine that with population growth and the transportation network, and market trends are favorable.”
The northern and eastern edges of the Central Florida market are beginning to emerge, said associate David Wilson of Colliers International’s Orlando office. “We are seeing major growth in the Ocala market because of its key logistics location and strong labor force,” he said. “And with private companies driving the ‘Space Race 2.0,’ we are seeing more and more industrial activity on the Space Coast.”
In the past year, the Ocala area has seen significant growth in industrial real estate activity. Just as one example, Florida Crossroads Logistics Center, a 617,046-square-foot spec distribution center, is being developed by Red Rock Developments, Westport Capital Partners LLC and Wharton Industrial on 46 acres at the intersection of I-75 and US Highway 27 in Ocala. The location allows for same-day distribution to nearly the entire state – one hour from Orlando and Tampa, two hours from Jacksonville and four hours from Miami.
Meanwhile, a new emergence of space industry growth is occurring along the Space Coast, driven by private industry. As one example, Colliers’ David Wilson is working with a satellite manufacturer to locate a facility near Cape Canaveral for the storage and maintenance of equipment prior to launches. This group will be new to the Central Florida region and is just one example of the wave of businesses moving to this area.
Other interesting observations from the Central Florida Industrial Summit:
• If an economic slowdown occurs, it’s expected to have a muted impact on the Central Florida industrial real estate market. “The last recession was a 50-year event,” said broker Ed Miller of Colliers International’s Tampa office. “If there is a dip, we don’t expect it to be anything like an extended recession. And if there’s a dip, it would actually create a buying opportunity.”
• Developers and owners increasingly want industrial facilities that stand out in the crowd. “People are realizing that a discerning buyer will notice the differences between one property and the next,” said John Barker, President of Red Rock Developments. “We want to build an asset that stands out vs. the neighbors.”
• Developers are realizing that trucks need sizable areas to wait their turn off the street. These “queue lines” are essential for a facility to avoid negatively impacting traffic in surrounding areas, and this focus shows how developers spend significant time and resources studying the distribution business to understand what a facility needs. Another example: A move to 12-inch-high curbs that will serve to stop trucks when they are about to back up too far.
• Tenants consistently want 30-foot clearances for their distribution facilities, and some are requesting 36 or even 40 feet. And even though most users don’t need that much clearance on a day-to-day basis, a minimum of 30 feet has become a new standard.
• Compression of cap rates is continuing, and buyers are often having to adjust their expectations for yield to make deals work. This hasn’t dampened sales activity, though: 80 percent of the conference attendees classified themselves as buyers.
“Overall, we saw a bit of a step back in the industrial real estate market in the fourth quarter of 2018, and that carried into the first quarter a bit,” said Joe Rossi, Executive Managing Director of Investment Services in Colliers International’s Orlando office. “But now it’s ‘pedal to the metal’ again, and I don’t see that ending anytime soon.”
About Colliers International Group Inc.
Colliers International (NASDAQ: CIGI) (TSX: CIGI) is a leading global real estate services and investment management company. With operations in 68 countries, our 14,000 enterprising people work collaboratively to provide expert advice and services to maximize the value of property for real estate occupiers, owners and investors. For more than 20 years, our experienced leadership team, owning more than 40% of our equity, has delivered industry-leading investment returns for shareholders. In 2018, corporate revenues were $2.8 billion ($3.3 billion including affiliates), with more than $26 billion of assets under management. To learn more about how we accelerate success visit corporate.colliers.com, Twitter: @Colliers or LinkedIn.