Hillsborough County’s Industrial and Office Market in 2019: Key Insights
Overview of the Industrial Economy
As of February 2019, Hillsborough County’s unemployment rate improved, dropping to 3.3%—a 30 basis points decrease from the previous year. The industrial sector experienced significant employment growth, particularly in the transportation, warehousing, and utilities industries, which collectively added 1,600 jobs and achieved a growth rate of 5.3%. This positive momentum is further emphasized by a thriving housing and commercial construction sector, benefiting the industrial market and meeting rising consumer demand.
Market Highlights
- Absorption Rates: The total absorption rate for the first quarter of 2019 stood at 52,146 square feet, with warehouses and distribution leading at over 70,000 square feet absorbed. This marks a notable recovery compared to the first quarter of 2018, which saw a decrease of approximately 60,000 square feet.
- Leasing Activity: The quarter closed with over 362,000 square feet leased, reflecting a slowdown after a historic 2018. Warehouse and distribution spaces accounted for 69% of all leasing activity.
Vacancy Rates
The overall vacancy rate saw a modest increase to 6%, maintaining a continuous streak of fewer than 7% for 15 quarters, while the direct vacancy rate dropped to 4.8%.
New Developments
New construction projects have become crucial in Hillsborough County’s industrial landscape. Noteworthy developments include:
- Central Florida Development: Completed a 137,500-square-foot speculative warehouse in Plant City, adjacent to Amazon’s expansive fulfillment center.
- Major Projects in the Pipeline: A built-to-suit facility for Tredit Tire spanning 176,000 square feet is anticipated to open later this year.
- Construction Surge: With nearly 2.6 million square feet newly available and 2.8 million square feet under development—the highest in over 20 years—confidence among developers continues to rise.
Sales Performance
Industrial sales activity slowed down in early 2019, with around 583,000 square feet sold, marking a decline following a vibrant trading period from 2014 to 2017, where over 16.1 million square feet changed hands. However, Cushman & Wakefield forecasts a potential uptick in sales as the market stabilizes.
Office Market Overview
The office rental market in Hillsborough County saw a year-over-year rent increase of 7.1%, averaging $26.59 per square foot. Class-A office spaces recorded a rise of 2.3%, reaching $29.86 per square foot, with the Central Business District and Westshore submarkets seeing even higher rates ($32.49 and $33.59 respectively).
Vacancy Analysis
The overall office vacancy rate reached 11.5%, slightly higher than last year. Notably:
- The Central Business District increased occupancy, dropping to 9.2%, while Westshore’s vacancy grew due to additional available spaces, including a significant shutdown from Laser Spine Institute.
Leasing Activity
Leasing activity remained vibrant, with 470,000 square feet leased by the end of the first quarter, prominently featuring suburban markets. A standout lease included WeWork’s acquisition of 60,000 square feet in 501 E. Kennedy.
Construction Boom
The first quarter marked significant office construction activity with over 730,000 square feet underway, the highest since 2008. Ongoing large projects include:
- Heights Union: Two mixed-use buildings with major leasing activity already secured.
- Water Street Project: A high-profile mixed-use initiative, including a substantial 180,000-square-foot office component.
Upcoming Developments
- MidTown Tampa: Development plans for a mixed-use space encompassing retail, apartments, and an office building are set to begin soon, aiming for completion before the 2021 Super Bowl.
Conclusion: Market Outlook
- Strong Market Fundamentals: Hillsborough County’s industrial and office markets continue to exhibit positive trends, driven by strong leasing activities and rising rents.
- Anticipated Growth: Experts predict further increases in rental rates, particularly for Class-A office spaces.
For more insights on the real estate market, check Cushman & Wakefield for updated reports and analyses.