Commercial real estate is booming in Tampa Bay. here’s why
Danny Rice is market leader for real estate company Colliers. He oversees all of Central Florida, which includes Orlando, Sarasota, Fort Myers, Tampa, and Clearwater.
His team focuses on all aspects of commercial real estate. Their clients range from corporations looking to rent office space, to developers looking for land to build student accommodation, to large retailers looking for warehouses to store their wares.
In the past two years, Rice said she’s seen more growth in the Tampa Bay area than in her 14 years working in the industry. While people and businesses once had to be convinced to move to Tampa, “now we’re definitely on everyone’s radar,” he said.
How have the different types of commercial real estate – offices, retail, industrial – been impacted by the onset of the COVID-19 pandemic?
The pandemic has been an accelerator of trends that were starting to happen or were already happening.
From an office perspective, there were already trends around remote working and making better use of office space.
On the retail side, there was already an acceleration around the experience. This experience is all the more important since they have to bring people back to physical stores. Consumers are frankly a little more disloyal because they can find things online. They can shop much more easily.
For manufacturers, the e-commerce logistics component was already gaining momentum. When the pandemic first happened, you really couldn’t shop in physical stores. People went online, and big e-commerce retailers needed warehouses to keep up with it.
It has been two years since the pandemic began. What changed during this period?
Prices have increased significantly over the past 24 months. There has been a growth in general activity. There is not enough supply to meet demand, especially in the industry.
People doubled down on their willingness to move to Florida. Renters looking to the area are also bigger than they have ever been. For us, a 300,000 square foot industrial lease about five to ten years ago was a big lease. Now we’re seeing million square foot leases and it’s become common.
Office space has seen the biggest softening effect with more people working remotely. For the most sought-after areas, like Water Street for example, the market is still very strong. People are looking for spaces that have amenities in the building or near amenities.
What is the impact of population growth in the Tampa Bay area on commercial real estate?
Tampa has become one of the hottest markets in the state, if not the entire country.
The more people here, the more retail businesses will be needed. We will also need more industrial distribution centers for products to pass… to reach the final consumer. And of course, more multi-family housing so they have a place to go.
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Which parts of the region have experienced the strongest growth? Where are the hotspots?
Lakeland and East Tampa from an industrial point of view are probably the most active. Logistics and highway access are really the driving force behind this.
North of Tampa at Pasco and Wesley Chapel, to (State Road) 54 – this area has seen substantial growth from both residential growth and retail growth. This is partly due to the fact that housing becomes more expensive closer to the city center.
But there’s still a ton of demand in South Tampa and downtown St. Pete. Developers are taking advantage of wealthy individuals moving to these core areas and re-developing older retail buildings into newer concepts that are more experiential.
The buying frenzy that was happening in the residential real estate market is now starting to slow down. Do you expect commercial real estate to experience a cooling as well?
I think everything is connected in one way or another. The reason you’re seeing signs of a slowdown in the residential market is that mortgage rates have gone up, so buyers are more hesitant and sellers less eager to sell.
If you have a loan to buy commercial property, it’s similar. Interest rates are rising, which means it will cost more. Maybe the pool of buyers is lower than it was 6 months ago or a year ago. But I would say that we are stabilizing rather than softening.
We’ve been driving 200 miles an hour for 12 to 24 months. Now we’re going 150 miles an hour. So it’s still a very active market, but the growth we’ve seen just wasn’t sustainable.