Tampa's Construction Pipeline Is Moderating in 2020, Though More Starts Likely Looming
Industrial Market Saw Supply Influx and Record-High Sales Volume

By Brian Alford
CoStar Group
Published: Feb 20, 2020

In 2019, the Tampa industrial market added more than 3 million square feet of new product, the largest annual supply in more than a decade.

Despite this influx of new space, the average vacancy rate barely moved, rising just 30 basis points over the past year. Tampa’s industrial market is effectively in equilibrium as its average vacancy rate has remained below 5.5% for the past four years.

Although Tampa’s industrial vacancies have been largely unaffected thus far, annual rent growth has been dampened by the recent construction. Annual rent growth finished 2019 just under 5%, down roughly 300 basis points from just two years ago.

And Tampa isn’t likely out of the woods yet, as nearly 2.7 million square feet remains under construction and the proposed industrial pipeline contains millions of additional square footage. While the flow has thus far been manageable, another round of industrial starts could begin to strain demand.

However, from a historical standpoint, rents are still growing at a healthy pace and remain more than twice Tampa’s long-term average. The tight market conditions should allow rent growth to remain elevated in 2020, though rents would appear to be one area at risk from any increase in industrial starts.

Investor demand, on the other hand, did not slow at all. In fact, 2019 posted the largest sales volume year on record with roughly $1 billion in completed transactions. Perhaps even more impressive was the liquidity increase, with more industrial square footage changing hands than at any point in the past decade.

One large transaction contributing to this total was the Amazon distribution center in Ruskin that sold for roughly $125 million. However, discounting for this relative outlier, the market still broke the prior annual record sales volume by over $250 million.

It will likely prove tough to equal or best the roughly $1 billion sales volume from 2019, though sales volume in 2020 is still expected to remain historically high. The tight market fundamentals, elevated rent growth and strong economic indicators, such as high job and population growth rates, are likely to continue fueling investor demand.

Industrial market indicators across the Tampa market were at, or near, record marks in 2019 and are likely to remain near those levels throughout 2020. The wildcard that bears monitoring is the supply pipeline, though it has remained manageable thus far.