Tampa Industrial Vacancy Up

The latest report from Cushman Wakefield shows a noticeable gain in industrial vacancies the Tampa Bay area. Some eye-popping numbers: the area market shed almost 54,000 jobs, nine consecutive quarters of vacancy increases and six consecutive quarters of declining rents. Link to the article and FREJ is below.

TAMPA - The Tampa industrial market continued to weaken in the second quarter of 2009 primarily due to the decrease in industrial-related jobs and the sustained deficit of demand from tenants in the market looking to lease or buy space.

Since mid-year 2008, the Tampa Bay market lost a total of 53,900 positions, with the construction industry losing 13,800 positions, manufacturing employment decreasing by 6,800 jobs and trade, transportation and utilities losing 2,700 jobs. The negative job growth, coupled with the current economic slowdown has resulted in a continued lack of new and expansion leasing activity, increased vacancy and a decline in rental rates during the quarter.

Additionally, sales activity has been nearly non-existent due to the dip in prices buyers are currently willing to pay and their difficulty to obtain financing.

At the close of the second quarter, Tampa’s industrial market fundamentals continued to grow weaker, following the trend which began over a year and a half ago when the national and local economy both took negative turns.

For the ninth quarter in a row, overall vacancy throughout the market increased. The marketwide overall vacancy rate of 9.5% at the close of the second quarter of 2009 increased a full percentage point from the initial quarter of 2009 and increased an astounding 3.4% from the vacancy documented at mid-year 2008.

As can be anticipated with such a significant increase in vacancy throughout the market, overall absorption posted negative 623,026sf over the past three months, bringing the year-to-date total to negative 943,309sf. Although the current negative absorption total appears dramatic, when compared to the year-to-date total recorded this time last year, year-to-date 2009’s negative absorption increased just 107,207sf or 11.5%.

The feeble tenant demand currently being experienced in the market has resulted in a decrease in asking rents for the sixth straight quarter, bringing average asking net rental rates down to levels that haven’t been recorded in the market since the first quarter of 2006.

Marketwide, the direct net asking rental rate averaged $5.95 psf at quarter-end, a decrease of $0.41 psf since last quarter and $1.10 psf from this time last year. Warehouse/distribution space, which accounts for 70.4% of the industrial space in the Tampa market, experienced the largest decrease in asking rents, declining $0.44 psf since last quarter and a much more substantial $1.09 psf since this time last year to an average of $4.89 psf by the end of the second quarter of 2009.

Forecast

Clearly, this economic downturn has lasted much longer than originally anticipated. While much of the fallout in the industrial market can be traced to companies tied to the construction and manufacturing sectors, Cushman & Wakefield believes that the fallout from these segments is largely, if not almost completely, behind us.

Though the effects of the prolonged slump in the economy will continue to have a negative impact on the market well into 2010, current industrial market fundamentals are definitely favoring tenants in the market. Competition between landlords will continue to drive down asking rents and increase lease concessions, decreasing the tenant’s effective rental rate costs over the term of their lease.

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