The industrial real estate sector is experiencing sustained growth | Business Observer


More than 40 million square feet of new industrial real estate – modern warehouses, distribution and fulfillment centers and so-called “last mile delivery outposts” – have been delivered along the Gulf Coast and in Central Florida since 2015, according to data collected by area commercial real estate brokerages.

This roughly equals all office space in Hillsborough and Pinellas counties, and speaks to the strength of location and population clustering in Central and Southwest Florida.

But while the scope of the new product has been enormous, experts say the sector is poised for even greater growth in the future, the result of continued macro-economic evolution in the logistics industry.

“Consumer demands and consumer habits have pushed industrial developments in new directions,” says Ed Miller, executive managing director of Tampa-based commercial real estate brokerage Colliers International, which specializes in industrial properties.

In concrete terms, the design of industrial buildings is also changing to adapt to new, more efficient methods of distribution – a trend which has resulted both in buildings being larger than ever before, with an increased emphasis on trucking lots and parking, and smaller “last mile” buildings positioned closer to population centers.

Combined, the new product and the increasing functional obsolescence of old buildings could sustain the current boom in industrial real estate for years to come.

Most recently, Orlando-based Parkway Property Investments LLC opened Lakeland Central Park last week, a 740-acre industrial hub that will contain more than five million square feet of distribution and related space when completed in Polk County circa 2028.

Parkway Property officials say the new industrial scheme will incorporate ‘state-of-the-art’ designs that are fast becoming a hallmark of the logistics industry as it increasingly moves towards trade execution consumer electronics.

“We believe that Lakeland will continue to grow due to its location in Central Florida and its ability to reach a wide range of consumers, and likewise Lakeland Airport’s cargo capacity will grow,” said Jim Heistand, CEO. of Parkway Property.

“So we wanted a property that would give us a big enough scale to accommodate that.”

To meet the growing demand for space as quickly as possible, the company’s first development under the 4045 Old Tampa Highway project will be a 708,000 square foot distribution center, which it is building on a speculative basis without tenants in place.

So-called ‘specific development’ has become popular in recent years in response to the immediacy of tenant needs. Many companies say they simply can’t wait to develop new outlets on a ‘tailor-made’ basis.

“E-commerce has been a game changer, and it’s not going away,” says Whit Duncan, managing director of Parkway Property. “By 2040, it is estimated that e-commerce will account for 90% of all retail sales, up from around 15% today.

“That, in turn, requires more inventory and space for logistics,” adds Whitman. “And, at the same time, we are seeing a flight to quality among distributors who want higher ceiling heights for shelving, more robust truck traffic, trailer parking and car parking.”

The Parkway Property development, for example, will feature a modern 40ft ceiling height. Ten years ago, most industrial buildings were capped at a clear height of 28 feet. The extra height provides tenants with greater capacity to store more goods on site for shipping.

Although central Florida has become the epicenter of retail space, it’s not the only place on the Gulf Coast where industrial development has taken hold.

In the Ellenton section of Manatee County, Benderson Development Co. constructed four such buildings totaling 450,000 square feet, all 100% leased.

Over the next 16 months, he plans seven more buildings with an additional 800,000 square feet, said Benderson, Industrial, Office and Warehouse executive director Larry Fineberg.

“Last year’s pandemic accelerated business focus on home deliveries. Traditionally, online shopping was 10-15% of a company’s business, but now that whole equation has changed dramatically,” says Fineberg.

The trajectory of increasing online shopping has also led Benderon to develop a new industrial product in the North Port section of Sarasota County and fill a long-available warehouse in East Naples, Collier County.

In North Port, Benderson is constructing the first of two planned buildings that will total 285,000. The first building is expected to be completed next month; the second towards the end of the year.

“We don’t limit it to ‘last mile’ tenants, but we certainly see that component,” says Fineberg. “Now it’s all about getting to the customer quickly, and proximity to Interstate 75 to both Ellenton and North Port makes that possible. The savings generated are enormous, because for these logistics companies, time is money.

In east Naples, meanwhile, online giant Amazon is preparing to start ‘last mile’ deliveries from a Benderson project early next month.

The 104,860 square foot building, on more than 18 acres at 8760 Davis Blvd., had been available for several years prior to the Seattle-based company’s engagement.

Miller of Colliers International notes that a construction shortage from 2006 to 2015, combined with technological improvements in cargo tracking, influenced new industrial designs.

“When business picked up in 2013, people realized that many buildings had ceiling heights that were too low, that there weren’t enough dock doors or parking for trucks,” says Miller.

“Now labor, transport and technology matter a lot more in industrial projects.”

For example, Miller is marketing a 1.01 million square foot building, with a ceiling height of 40 feet, in Lakeland on behalf of developers Brennan Industrial Group and Grandview Partners.

The $90 million, 165-acre CenterState Logistics Park East represents the largest speculative industrial development in Central Florida’s history.

Miller predicts that in the future, developers will continue to adapt building designs to reflect improved technologies and increased efficiency.

“Buildings are getting bigger and bigger because they are now more efficient to manage,” he says. “That’s been the impact of technology on the industry.”


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