In regard to noninvestment / end-user sales and leasing, we saw the continued demand for smaller commercial real estate spaces and an increase in demand for larger spaces above 20,000 SF. However, an interesting dynamic appeared and we found that despite an increase in demand for both industrial and retail space, we did not find the same demand for offices. Compared to the Retail and Industrial market, the Office market has not continued to recover at the same pace. One factor that could be the direct result of the office market lagging could be the trend for home-based office environments. This provides benefits to both the company overhead and the employee – offering them flexibility with their schedules and daily commute. It’ll be interesting to see if the home office trend for office professionals continues to grow, and how it will affect the Office market in the coming years.
In the Retail market, there is a valid concern that big boxes and malls will become obsolete. We have seen a number of retailers close in the last year, including Sam’s Club, Sports Authority, and Toys R Us. The direction of retail with the expansion of internet-based shopping could be problematic. Commercial property owners are looking for alternative ways to utilize the big box properties. One interesting proposition that was recently discussed was to utilize the big boxes as regional growing centers for produce to feed surrounding households. The premise is that the food supply to feed growing future populations will become more challenging. The idea is to provide a place where the public can get freshly picked produce from local growers/farmers. Another concept would allow customers to pick their own produce in what might become a big box “greenhouse”, either owned by large companies or owned as a co-op between households in the immediate area. It is an interesting concept to offset the changing the retail trends.
The industrial real estate market saw an increase in absorption, sale prices, and leasing rates in the Tampa Bay market, making it an owner’s market. It had been a lessees/buyers real estate market for so many years, that the concept of having to make a quick decision about moving forward with a space had become alien for prospects. Many tenants and purchasers lost out on property opportunities by making low offers and dragging their feet. It was a learning curve for many to realize that the market was tighter and commercial property was moving very quickly at increased prices. By the last quarter of 2017, we saw the market shift in the Industrial sector. In the Tampa Bay region, many areas are completely built out, especially in Pinellas County and West Hillsborough County. The only opportunities to increase supply will be to redevelop the older commercial real estate properties. So if the demand for Industrial continues, it will bring significant opportunities for development.
Contributed from our Tampa, Florida office.