By now we’ve gotten used to the news and the “pace” of this recovery, right? It’s no secret the world has changed and is deliberating on how to grow and gain traction. Difference in markets is also very obvious, and as we await a jobs recovery locally, it’s more of the same. Just like the labor force cant make up it’s mind whether it’s going up or down, looking for work or not looking, so go our local users searching for space. From the sound of recent conversations and general activity, it seems most deals happening are smaller deals. This could sum up to positive news in terms of absorption and increased demand later this quarter, if there’s volume, but it has not turned into any larger requirements being fulfilled so far.
Most of our larger user prospects are sitting on their hands currently, with no movement on the requirements they’ve put out there over 70,000 SF. Some even pulled their needs off the table as they re-evaluate internally. As for smaller user activity under 50k SF, there’s a trend where users are still trying to figure out what they really need. Multiple users looking for 25-30k SF are coming back saying they might only need 14-20k SF, and there’s been a 40k SF user who has ranged from needing 20-70k SF and still is unsure. I’ve even seen 1,400 SF users ask me to also look at 6,000 SF, and a 100,000 SF user end up leasing 16,000 SF, so who knows where these deals will end up!
As I opined lately about the stages of our market recovery, here are some anecdotal thoughts of how to approach the “stages” of negotiations during the cycles. 1) In the downturn you do whatever it takes to get prospects to look at your product. 2) In recovery you do whatever it takes to get them to stay interested in your product, once they’re there. 3) During a noticeable upturn you do whatever it takes to increase your price. Hint: We aren’t at a noticeable upturn yet. That’s all I know…
Here’s a quote and stat we’ll all want to be knowledgeable about: “Although there are signs of broad-based improvement [in employment], 42% of job gains over the past year have been in low-wage professions,” Mark Vitner, senior economist at Wells Fargo Securities, said.
Also, an interesting bit of info is that almost 70% of homes sold in April went to investors, and under 20% went to first-time homebuyers.
Both pieces of info are positive in that sales are happening and jobs are being created, BUT they are in areas that don’t push the needle towards full-scale recovery just yet. So….we wait some more. At least until we see 200,000 jobs created per month, in order to REALLY make a difference!
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Hope you all had a GREAT holiday weekend and relaxed as summer begins…
Last week started slow, then picked up with some dormant prospects finally calling back, and then slowed up again for the holiday weekend. There were also further meetings with land developers considering on preparing land sites for future construction, which can definitely be seen as a positive sign, but buildings won’t come out of the ground until 2014.
If you scan national media headlines and take note of the sentiment, things are sounding better around the country and the globe. What we don’t have are spotlights on bad news and “black swan” events. We still feel the repercussions of European crises, U.S. tax increases and sequestration, but more good news about housing, U.S. based manufacturing, and upticks in primary metro areas are coming out while bad news subsides. Balance is being restored and we aren’t fighting as many headwinds going forward, although we still have to deal with the lasting effects of what the previous black swans have brought us. That is a reminder that we’re not out of the woods yet, although we are walking towards daylight…
Locally, all it takes is a few good deals over the summer to boost this slow, stagnant market and then confidence will return. Sustaining it once that happens will be the next focus, and that comes on hopes that new prospects will decide to locate in our area. Signs of companies moving to the area to serve current drivers are starting to appear, whether it be medical users working through the EDC for incentives, a new auto parts distributor building a 380,000 SF facility to employ 400 people, e-commerce retailers considering our state, or construction trades following hedge funds that are purchasing 1,000s of housing units and will need repairs and maintenance.
It’s starting to feel better, and yes my reminder is that it’s SLOWLY starting. Multiple brokers and prospects have been asking the right questions, and there’s a hint of optimism regarding absorption in the 2nd quarter, considering a 40,000 SF tenant moved in the Airport market and usually those are East Tampa deals at that size. Let the competition begin!!
We had an internal company conference out west, and the trip to Vegas was insightful! We were able to talk to brokers from around our network and hear how they’re markets are doing. It was obvious that Industrial real estate is doing better around the country mostly in primary distribution markets, and it was also obvious that Tampa is still waiting. It’s the calm before the storm…the lag that tertiary markets feel…and the reality that confidence is coming back, but in small doses locally.
There are rumors floating about Amazon landing a warehouse in our fine state, and some news broke that Gov. Scott rejected a deal with them. What’s unclear is whether Amazon will still consider Florida without that incentives package, and choose to locate here primarily due to logistical demographics and consumer demand. I hope so because it could be a catalyst the we need to cause momentum and ancillary businesses to pick up.
The Conference Board released it’s Leading Economic Index late last week, which improved, and has worthwhile factors to review. Click here for that info.
Switching gears, here are some quotes below found in articles from research done around the country:
“The headlines say housing is on the mend. But it’s important to remember they’re coming off extreme lows.”
“online retailers [have] relied on local distribution companies to ship goods to the customer. Those middlemen, primarily located in secondary markets, are being cut out of the equation. That is causing higher industrial vacancy rates in [some] markets”
“Retailers are looking for warehouses in gateway hubs/primary markets preferably built in last 5 to 10 years that have 24- to 30-foot ceilings, favorable column spacing, multiple doors and expansive truck courts. These properties will experience the majority of absorption and uptick in rent during 2013.”
In addition, there was a very poignant quote I saw on Twitter this week – @samchandan: “When the day’s economic data is weak and stock markets then rise on hopes of more easing, things aren’t as good as you think.”
Please feel free to call or email any questions about the info you read…have a great week!
Eureka! I know what’s going in Tampa finally, and this is based on feedback from prospecting calls we’ve been making. Users have excess space they couldn’t give back in the downturn, and as their businesses grow they are putting that excess space back into use. This doesn’t explain why we aren’t seeing new deals come to our market, but it’s helping understand our current base.
Two great articles about local growth and how we are marketing ourselves are linked here below. I’m happy to see the Port of Tampa and Lakeland both marketing themselves in ways I believe show their potential in years to come!
On a national level, if you want to read the News Release regarding the Advance Estimates of the 1Q13 GDP, please click here. This release is subject to change on May 30 when the “second” estimate is released.
Employment reports and press releases for Florida and Tampa Bay came out showing Florida’s unemployment dropped by .3% to 7.5%. Most of the growth in jobs has been retail, professional, business, technical services, and hospitality related. Most of the drop in unemployment nationally though has been due to the labor force shrinking and not actual overwhelming job growth.
Most people in our business we’ve talked to this past couple weeks have been humbled yet optimistic after the first quarter, sensing that things weren’t better yet, but moving towards increased activity and more promise as the year progresses. As we start to get into our typical Florida summer slow-down in a month or so though, progress will likely come later in 2013.
As insight into lease transactions completed in the area, there were 35 new deals done across the market in 1Q13 with only 1 over 20,000 SF, and it was 68,000 SF in East Tampa. Of the remaining, the range was from 500 to 19,000 SF with an average size of 6,200 SF, and 26 of the deals being under 10,000 SF. Small users are returning and they span from electronics components, consumer goods, construction related trades, recycling, freight forwarders, engineering, food related and auto sales.
It’s clear the world is improving as a whole, albeit slowly, as economic markets are coming back, lending and revenue are returning to businesses and development is occurring in our housing market. The rub is that locally we are still waiting in the wings for the need for warehouse space to increase as retail sales get better and housing contractors need more space for the operations. It is definitely proving itself to be a lagging effect.
It’s happening though, and users are in the market more. Even on the larger size, there are multiple users over 70,000 SF looking between Pinellas, Hillsborough and Polk counties, which is good news for potential absorption gains. Now to keep at it with a disciplined approach to qualifying those opportunities that come our way.
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Here comes another reality check on market dynamics and economic statistics. As active participants in our area we try to be optimistic, but when things take negative turns we have to be realistic and open about our gut feelings. This is one of those times, where we realized our 1Q13 industrial statistics reported negative absorption in our market. That is proof activity has been deceiving this year, and most tenants looking either didn’t make a decision yet or they ended up renewing in place. Nothing new has yet to break-through here locally.
There is still about a full $1 in movement with negotiations, due to parity in the confidence of owners in the market. You never know how aggressive one owner will get compared to the other, so if you have a deal in hand you have to do what it takes to close it quickly before the prospect loses focus due to the multitude of other options that still exist. Asking rents are hardly where deals are being signed at, and significant reductions are still prevalent.
Nationally, the jobs report also came out under-performing, but mostly due to retail jobs and where the sequester is being felt in the government jobs. The good news is the January and February jobs numbers were revised upwards, mostly in office-using areas. There are positives that still remain strong though.
Auto sales were still strong, consumer confidence is still rising, corporate profits continue to increase, and the effects of sequestration outside of governmental organizations is still minimal.
Housing supply inventory locally is still around 3.5 months and showing no signs of increased supply soon, which should push demand from both the current institutional buyers as well as private buyers competing with those institutions.
That should push construction and pricing up, which are good signs for industrial real estate. The perspective to keep in mind is that nothing is happening quickly in today’s world though, so this could take some time to materialize once this news breaks. First comes the forecast…then comes validation of those estimates…then comes results. Right now we are still in the “forecast” stage trying to validate whether private buyers will come back in mass.
None of this has translated into a noticeable uptick in the Tampa market though, and we are hustling trying to figure out what is keeping us back while other areas around Florida and the country are seeing spec construction for Industrial property. It’s a quagmire…and my personal opinion is, it’s going to be much of the same slow growth for 3-4 more years.
If you look around Tampa lately, you might be surprised to see the development going on. Retail, hotel, apartments…it’s impressive to see cranes within our populous from Downtown to South Tampa to the Westshore districts. There are multiple retail and multi-family projects going on downtown along with boutique hotels, plus new banks and restaurants popping up on corners in South Tampa and Westshore. It goes to the term I heard of “quiet confidence” and a good sign that somewhere there are demographics showing consumers willing to spend now and in the near future. From my office, I can even see container ships coming into the Port and unloading cargo and aggregate material, so let’s watch those Port facilities start demand for overflow space as shippers bring in more product over the coming years.
Nationally, I keep hearing about manufacturing coming back to the U.S. due to our cheap natural gas supply as compared with Europe and Asia, so that focus will be in the regions with shale. Let’s hope that rising tide brings the rest of the country up as well, in areas where natural gas might not be prevalent, but still looking for a boost from some positive GDP news.
Fewer and fewer signals are pointing to negative news in the national economy as well, and forces are still forecasting momentum in the 2nd half of 2013. The Conference Board issued its Leading Economic Index report, which increased for the 3rd consecutive month and states that “the economy continues to expand slowly, and may be developing some resilience against headwinds…. However, this latest report does not yet capture the recent effects of sequestration, which could dampen the pickup in GDP.”
The general expectation for 2013 is what has been termed “life in the slow lane,” where we continue to see modest growth. My favorite comment about the cautious forecast is that if there is any risk to this forecast, it is on the upside with a greater probability the economy will be stronger than expected.
We still have to keep an eye out on the small business sector, that isn’t seeing the type of confidence and earnings that Fortune 500 companies are. Wall Street companies can ignore the crises that come out of Washington D.C. and lobby against those changes, but Main Street companies still see these as uncertain and fearful times.
Oh yeah, and for bragging rights…Cushman & Wakefield took top honors, again, this year as the #1 Commercial Real Estate Broker on the list in Tampa Bay, for the 11th time out of 29!! WOOHOO