Over the last three to four years, the Tampa Bay area has seen a spike in both residential and commercial/industrial growth. Currently, there is less than six percent vacancy in Pinellas County for industrial properties. And, it is predicted that by 2018, the County will have less than one percent vacancy rate – almost NO vacant industrial space! Imagine that! So, where did this demand for industrial space come from? Since the recession ended, business owners are once again becoming more comfortable with making long-term lease investments. There is also a greater amount of new business opening in the area because Florida is such a low cost state.
“Tampa has always been called ‘America’s next great city’, and now it is becoming THAT great city,” said Bob Dikman. “The Tampa Bay area has been discovered; we are getting more retirees, new businesses, and young professionals relocating here. There’s virtually no neighborhood or part of town in either Pinellas or Hillsborough County that you can drive through without seeing some sort of construction,” said Dikman.
With such a demand for space, rental rates will go up significantly once capacity is nearly reached. In order to prepare for the rate hike, many of our clients are utilizing a strategy known as “blend and extend”. This strategy allows current tenants to extend their lease term and pay a blended rental rate that typically is lower than the current market rate. Utilizing “blend and extend” is beneficial to both the tenant and the landlord simply because in the long run both parties end up saving money. The landlord doesn’t have to deal with new tenant costs associated with bringing in a new tenant, such as marketing, tenant improvements, higher broker fees, etc., and the current tenant is compensated for previous years of possible inflated market lease rates by having a decreased rental rate.
As 2018 quickly approaches, industrial tenants are entering the last stretch to lock in rates for the foreseeable future. “The area is on the cusp of a magnitude of rental rate increases like we have never seen before, and it is being driven up by demand and construction cost increases, since construction costs have recently skyrocketed,” stated Dikman.