By Dan Fischer | Published October 13, 2020 | My Tampa Bay Broker
The Tampa Bay Real Estate Market overall has been strong as we head through October 2020, although some sectors of the market have out performed to pick up the slack left behind by others.
While the public perception that the Florida real estate market has boomed through the first 9 months of 2020 is true for some segments, the same cannot be said for others. Industrial space owners have continued a hot year after posting 2% rent growth in the third quarter after following 4% rent growth earlier this year. While the leasing of industrial space and apartment units have been consistently strong, the same cannot be said for sales of industrial or investment real estate products.
Industrial Sector
As Brian Alford of Costar Analytics states, “Supply was the big story in the Tampa industrial market during the third quarter. More than 1.7 million square feet completed, the highest quarterly total in the past 20 years. That brings the year-to-date total to over 3.5 million square feet, also the most in two decades.” That increase in supply was a real concern for the industrial sector as COVID-19 threatened to shut down businesses for extended periods, but that concern was never realized.
The average 2% rent growth posted in the Tampa Bay Metropolitan Area is twice the 20-year rent growth average in the industrial sector. While it is a drop from the 4% rent growth that industrial space landlords have become accustomed to, 2% is well received when considering the number of possible pitfalls that the segment has had to face this year.
The first quarter of 2020 saw record sales numbers, posting almost $300M in closed transactions in the industrial market. The pandemic was felt strongest in the second quarter by posting around $50M in closed transactions and has continued to lag in the third quarter with just more than $100M in sales. Not as poor as seen during the Great Recession over a decade ago, but far less than what was expected after the last five years of phenomenal performance.
Investment Sector
The positive effect that low supply has had on the residential market has not been felt by the investment property market. While home buyer and renter demand has stayed consistent, the uncertain horizon and difficult forecasting environment has stifled investor demand for multi family purchases.
Landlords have enjoyed extremely low vacancy (0-3%) as well as less than expected collection losses this year. As reported in a recent article on My Tampa Bay Broker, “Local property managers have been reporting collections at 85-90% over the last few months”, as property managers were forecasting 20-30% losses. While some states and cities around the country have been hard hit economically, Tampa Bay and Florida multi family properties as a whole have performed exceedingly well.
Because of great performance, coupled with historically low interest rates, multi family property values have stayed steady or increased during 2020. Even with lower demand from buyers, the low supply of properties for sale has had a positive effect for landlords. Investment property owners that decide the liquidate during this time will benefit from recent performance and lack of competing supply.
If Florida is able to bounce back to pre-coronavirus economic levels, buyers that continue to invest might find themselves benefitting from a lack of buyer demand and competing offers. As the New York Times reported last month, “Federal Reserve officials expect to leave interest rates near zero for years — through at least 2023 — as they try to coax the economy back to full strength after the pandemic-induced recession”, lowering interest rates usually push sales prices upward.
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