Central Florida Shows Signs of Recovery

Real estate consultant Newmark is reporting this week that Central Florida industrial market is showing modest growth in demand with over 325,000 square feet of positive net absorption recorded in the first quarter of 2020. The warehouse/distribution segment accounted for over 70% of the region's absorbed space, while general industrial space followed with 145,000 square feet of absorption.

The R&D/flex sector struggled with over 48,000 square feet of space returned to the market. Development reached record levels never seen in the region's history with approximately 7.7 million square feet of new inventory under construction at the close of the quarter, increasing almost 3.0 million square feet over last quarter.

Robust completions of new inventory over the past year pushed the overall rate upward 110 basis points from one year ago, to settle at 5.4%. Average asking rents held level from the previous quarter but dipped slightly from the $6.24/SF all-time-record high recorded this time last year.

Newmark Knight Frank further reports warehouse/distribution space saw growth of $0.07/SF from $6.30/SF one year ago, while general industrial saw a $0.08/SF increase from $5.59/SF and R&D/flex fell from $9.14/SF with a $0.39/SF decrease from one year ago. Although effects from the economic slowdown as a result of the COVID-19 global pandemic have not surfaced yet, the market could see a shift in the second half of 2020.

According to Newmark, there were 270 lease deals totalling 3.0 million square feet in first-quarter 2020, a slight increase from the 2.8 million square feet seen one year ago. Warehouse/distribution space led with over 2.6 million square feet, followed by general industrial with 351,000 square feet of leasing activity. This was in stark contrast to the 45,000 square feet of R&D/flex deals. The retail/wholesale industry comprised the bulk of mid- to large-size lease deals in the first quarter, accounting for 408,000 square feet, while home and building supply companies followed with 400,000 square feet. The logistics and distribution sector rounded out the top three with 102,000 square feet.

Sale activity more than doubled from this time last year, as 13 transactions over 1.7 million square feet sold for a combined $149.8 million at the start of 2020. The increase in properties changing hands translated into increased sale prices, as the average price increased from $64/SF to $88/SF. Warehouse/distribution buildings led sales activity, with 1.5 million square feet trading hands.