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Industrial Market
Among the state's major markets, Jacksonville and Tampa stand out for their effort to lure back-office operations for banks, insurers and other service companies. "Jacksonville has done a superb job of elevating its profile as an up-and-coming place to do business," Moss says. Jacksonville has the lowest industrial vacancy rate in the state, just 3.8 % in a first-quarter CB Commercial survey. "The market is as tight as I've ever seen," says Jerry Frockt, president, Summit Commercial Properties, Jacksonville. Gran Central, the development arm of Jacksonville-based Florida East Coast Industries, is launching a new business park there, while several other developers are putting up new multitenant warehouse buildings. But the majority of construction remains build-to-suits.
Tampa's industrial market has tightened considerably, according to Jack Brubaker, industrial specialist, Grubb & Ellis, Tampa. In 1996, he expects about 800,000 square feet of industrial space to be absorbed in Hillsborough (Tampa) and Pinellas (St. Petersburg) counties, up from about 700,000 square feet in 1995.
"However, leasing activity has declined because many tenants are getting ?sticker shock' at the new rates and deciding not to move," Brubaker says. Space priced at $3.50 to $3.75 a square foot last year is now being quoted at $4.50, he says, adding that actual rates remain below the $4.00 mark.
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Only one or two choices
Throughout the state, the pace of industrial land sales is picking up, signaling an increase in construction over the next few years. "Every developer has plans drawn for new construction and is looking to tie up land," Brubaker says. "But the only ones who can build today are the public companies, the REITs [real estate investment trusts], who don't have to ask anybody else for money."
In Orlando and Fort Lauderdale, distribution companies make up the largest share of demand. "Orlando is the logical intrastate distribution point," Moss says, "while Fort Lauderdale is centrally located to serve South Florida." Major industrial land sales are occurring in both markets.
The I-595 corridor west of Fort Lauderdale remains a particularly hot area. In the Miramar Park of Commerce, for instance, quoted rental rates have climbed to $6.75 a square foot, according to Michael A. Rice, industrial broker, Grubb & Ellis, Miami. However, most regional developers are leery of building significant new space on speculation and prefer build-to-suits, Rice says. "We have little space available to lease, especially for companies that need 75,000 or more square feet. At any one time, you may only have one or two choices. We had one 50,000-square-foot tenant recently who wanted to move, but had nowhere to go. Today, there's just not enough space to take care of all demand."
Industrial markets in Miami and Palm Beach County are projected to be among the better performers in a nationwide Urban Land Institute 1996 market forecast. Boca Raton continues to absorb manufacturing and R&D space, while international trade drives Miami's market. "Miami has the most activity, the highest land prices and the highest rents," says Moss. "There are pockets around Miami International Airport where the vacancy rate is only 2% or 3%."
Any company that needs to be close to the Miami airport is facing fewer and fewer choices, Rice says. Only a few tracts of land remain available for development, and they should come on line in the next 12 to 24 months. Meanwhile, warehouse leasing rates near the airport are running up to $7.25 a square foot for new properties, among the highest rates in the country, Rice says.
"The unanswered question is, when does the hurricane-hit Homestead area in south Dade [County] begin to feel a spillover effect from the airport?" Rice says. "We expect to see increased interest in Homestead in the next five years, but the majority of that demand will probably be answered by facilities to the north in Hialeah, Medley and Miami Lakes."
Michael M. Adler, chairman and CEO of the Adler Group, which just completed a 150,000-square-foot freight forwarding and office facility for Hellman International near Miami International Airport, says some warehouse space may open up as large tenants move into their own buildings. "There will be many good deals on the vacated second-generation space," he says.
With financing for industrial projects readily available, Moss says the next year will see increased construction activity. "You'll see more projects that are well-conceived," he says. "There's no sign of a recession in this market. We're bullish on all fronts."
