West Central Florida Industrial Market Report

Overview of West Central Florida

Central Florida, encompassing vibrant cities like Tampa, Clearwater/St. Petersburg, Lakeland, and Sarasota MSA, is a dynamic and diverse region with a unique blend of economic opportunities, cultural richness, and natural beauty. Here is the latest update on West Central Florida’s industrial market.

Tampa

Tampa’s economy, has shown resilience in recent times and remains one of the strongest in Florida. The primary indicators of its success include job and population growth. In 2023, both GDP and job growth placed Tampa among the top 10 out of the 50 largest metropolitan areas in the nation. Job expansion in the next few years is expected to be led by industries such as management consulting, employment services, and construction. Key sectors like finance, real estate, and professional services are anticipated to drive much of the projected economic growth until 2028.

Over the past decade, Tampa has seen a population increase of over 412,000 people, translating to roughly 790 new residents per week. In 2023 alone, the population grew by nearly 38,000 new residents, representing a growth rate of 1.2%. Projections indicate that the area’s population will continue to grow, mainly fueled by net in-migration. Oxford Economics forecasts an average annual population growth rate of about 1% through 2028.

Clearwater/St. Petersburg

Clearwater and St. Petersburg in Florida’s Tampa Bay area are vibrant coastal cities known for their stunning beaches, cultural attractions, and lively communities. Clearwater boasts pristine white sand beaches like Clearwater Beach, perfect for water activities and beachfront entertainment. Meanwhile, St. Petersburg offers a rich arts scene with museums like the Salvador Dali Museum and a bustling downtown filled with galleries, boutiques, and dining options, making both cities popular destinations for residents and visitors seeking a dynamic coastal lifestyle. In terms of economic activity, the submarket is home to various industries, including tourism, healthcare, education, and technology.

Lakeland

According to the Census Bureau data from April 1st, 2020, to July 1st, 2022, Lakeland saw the addition of more new residents than any other area in Florida, with over 57,000 newcomers, equivalent to about 70 new residents daily. The economy of Lakeland was projected to have expanded by 4.7% in 2023, following a 1.8% growth the previous year. From 2024 to 2028, it is anticipated to grow by approximately 0.7% annually. The wholesale and retail, along with finance and real estate sectors, are making significant contributions to Lakeland’s GDP, while robust job creation has been observed in the utilities and transportation sectors. Looking ahead, GDP is forecasted to average 1.8% growth through 2028.

Sarasota

The Sarasota metro area economy, covering Sarasota and Manatee Counties, is the largest among the Southwest Florida markets. The region has seen significant increases in jobs, population, and home values, ranking among the top in the nation. Factors such as warm weather and no income tax contribute to a high quality of life. Oxford Economics predicts that the area’s economy will experience an average growth of approximately 2.1% from 2024 to 2028, indicating a stronger growth outlook compared to the national average during the same period.

The Tampa Industrial Market

Tampa’s industrial market is the second largest in Florida, with 212 million square feet located along central Florida’s I-4 corridor. It also boasts the strongest rate of demand in Florida, with the market recording 1.9 million square feet of net absorption over the past year. Tampa’s industrial market has seen its vacancy stabilize in Q1 2024. This is largely due to a shift in the construction pipeline towards build-to-suit projects. Growth in asking rents has also stabilized, with a forecast suggesting continued growth through 2025.

Industrial rental rates have surged by an impressive 69.1% over the past five years, reaching a new peak of $12.50 per square foot in Q1 2024. Speculative construction in Tampa has slowed down over the past year. This accounts for less than 40% of the current active pipeline, totaling 5.6 million square feet as of Q1 2024. With the construction pipeline being 75% pre-leased, Tampa’s vacancy is expected to hover around 4.5% through the end of 2025. These fundamentals of Tampa’s industrial market indicate ongoing confidence in the market’s stability and growth potential.

Industrial property sale prices have not slowed, averaging $140 per square foot in Q1 2024, showcasing a 5% increase year-over-year (YOY). As of Q1 2024, the 12-month sales volume is $895 million. Private buyers, usually consisting of high net-worth individuals, family offices, or fund-level equity, constitute over 80% of the buyers in the sub-$10 million price range.

Tampa By The Numbers | Past 12 Months | Source: CoStar Group

• Vacancy Rate: 4.8%
• Rent Growth: 10%
• Deliveries SF: 3.7M
• Sales Volume: $906M

Clearwater/St. Petersburg Industrial Submarket

The Clearwater/ St. Petersburg submarket stands out as a major industrial hub in Tampa, boasting more than 59 million square feet of product. Historically, it has been a top-performing area in the region, maintaining vacancy rates below market averages and commanding rental rates above market norms.

Clearwater/St. Petersburg By The Numbers | Past 12 Months | Source: CoStar Group

• Vacancy Rate: 4.2%
• Rent Growth: 8.8%
• Deliveries SF: 641K
• Sales Volume: $243M

The Sarasota Industrial Market

Sarasota experiences one of the largest disparities between supply and demand compared to its market size. Approximately 1.6 million square feet of industrial space was completed in the past year, while only 460,000 square feet were absorbed. This substantial gap has led to a 300 basis point increase in vacancy rates compared to the previous year. Looking ahead, vacancy rates are expected to rise throughout 2024, reaching close to 7% by Q4, particularly as over 700,000 SF is projected to become available from ongoing construction projects.

Rent growth has slowed down in recent quarters due to the completion of new industrial space from ongoing construction projects. Rent growth currently stands at 7%, with the fastest pace of rent growth taking place in the Manatee Outlying area. Investment activity has been consistently increasing, with approximately $234 million worth of transactions occurring in the past year.

Sarasota By The Numbers | Past 12 Months | Source: CoStar Group

• Vacancy Rate: 3.7%
• Rent Growth: 7%
• Deliveries SF: 1.6M
• Sales Volume: $234M

The Lakeland Industrial Market

The industrial market in Lakeland, covering Polk County, plays a crucial role in Florida’s goods distribution network due to its strategic location along the I-4 Corridor. Vacancy rates have risen in the past year as new construction completions have exceeded tenant demand.

Lakeland’s market has been heavily influenced by new construction, with an impressive addition of 25.6 million square feet over the past decade, representing more than a quarter of the region’s total inventory. About 2.6 million SF was completed in the past year, with an additional 730,000 SF currently under construction.

Over the past decade, the influx of new properties has kept Lakeland’s vacancy rate consistently above 4%, averaging around 8.8%. Rent growth has slowed down compared to the rapid pace seen in 2022 but remains significantly above historical averages, rising by 8.1% year over year. Despite these increases, industrial rents in Lakeland remain notably lower than in neighboring Tampa and Orlando markets, making it an appealing option for expansion, with an average asking rent of $8.80 per square foot.

Investors continue to show interest in Lakeland’s industrial sector, although concerns about economic uncertainty and fluctuations in interest rates have impacted sales volume. Total sales volume in the region reached $161 million over the past year, a decrease from the record high of $1.1 billion in 2021.

Lakeland By The Numbers | Past 12 Months | Source: CoStar Group

• Vacancy Rate: 8.8%
• Rent Growth: 8.1%
• Deliveries SF: 2.6M
• Sales Volume: $161M