Photo courtesy of Wikimedia Commons
The limited supply of office and industrial properties in the months ahead will cause businesses needing space to be methodical in their approach to expansion plans. There are few buildings under construction, so competition for anything coming available will be strong. Today's market is proving to be a tough market to get a deal done, properties are being leased or put under contract as quickly as they’re being listed and shown.The pace at which properties for lease or sale are being absorbed is astounding! The fear is there isn’t time left in the current cycle to develop new product to match demand before it slows. That’s the risk and the real estate timing conundrum, but it’s clear that preparing land for development in the next cycle is key to continued growth. There are hardly any secret spots left in our area, we will eventually run out of developmental land.
Investor money and capital markets are currently flowing toward the development of new product, rather than the purchase of existing buildings as returns are being achieved with new construction and rent growth.
Because of the 2016 slow growth environment we are in, economists feel interest rates and cap rates will remain low for some time. We have been experiencing expansion for several years, the fact we’re approaching full employment along with other macroeconomic factors creates a forecast which indicates 2018 is likely to be when the next downturn occurs, not 2017. The latest Conference Board Leading Economic Index report shows that strengths are outweighing modest weakness, and the economy should continue expansion at a moderate pace through early 2017.
Nationally, the GDP at 2% is probably as good as it’ll get due to slower productivity and population growth; job gains are bright enough to keep consumers confident, minimizing a possible recession in 2017. The manufacturing industry is improving, and East Coast ports are increasing activity while volumes are surpassing West Coast ports. This is driving demand for logistics as well, with industrial buildings seeing low vacancies compared to previous cycle lows. This will clearly push rent growth.
Different regions of the country are humming at different paces. The Northeast is slowing down, but the South is gaining jobs at record speeds; Florida is the beneficiary of most of those new opportunities with the Tampa Bay Area leading the state with over 33,000 new jobs since Oct 2015! Florida’s 3.1% year over year gain was 3rd behind Oregon and Washington, both on the west coast.
Our pace of job growth and construction will last longer as long as population growth continues with strength through the year. Vacancy rates in existing buildings are so low it makes sense to be building for demand, however fears of recession are hindering supply. Those fears are irrational, simply believing “recovery can’t last this long”, is not sound nor based in fact. Fear should NOT enter the equation.
There should be optimism that the next 12-18 months will be good times ahead! Recessions don’t just happen because “a recovery lasted too long!”
Tampa is in the top 15 markets for industrial real estate occupancy gains, so pay attention to the competition as word gets out and institutional money moves into the I-4 Corridor between Plant City and Orlando. The nation is watching this Corridor for economic industrial development and population growth, resulting in demand for consumer goods, and commercial development.
Locally, we are in a great location with great leadership and mounting momentum for organic growth. Nationally, if infrastructure projects begin as a result of the new administration, then added construction will add work as well. Who knows…maybe this cycle even turns into a weird combination of events where we keep progress going rather than receding. Time will tell…
Moral of the story….call me, so we can talk expert advice on where your real estate focus should be in West and Central Florida. Are you curious what the value is in a good broker? Fortress Commercial Real Estate helps add value to business owners who are looking to grow. With over 560 closed client deals in the past 6 years, Fortress Commercial Real Estate brings you the experience you need. We may be a new commercial real estate brand in Tampa Bay, but we have over 30 years of experience in Florida and extensive local commercial real estate knowledge. At Fortress we pay attention to the ups and downs of Florida real estate so you can pay attention to growing your business and make strategic well-informed decisions when it comes to investing in real estate.
Fortress Commercial Real Estate is a Full-Service Commercial Real Estate Firm, based in Tampa Bay, specializing in office and industrial properties for small, medium, large and corporate businesses. Theyhelp businesses with their marketing, leasing, purchase, sale and investment needs as they relate to commercial real estate. If you have a business location, office or warehouse then you have a need for a real estate strategy. Fortress can help, give them a call today or click over to their 813area business page and follow the link to their website for additional information. Feel free to email the author kostas@FortressCRE.com or call 813.444.3330.