While debate rages on about what’s going to happen with the national and local economy, a panel of experts recently convened to talk about the Tampa Bay region’s current strengths and challenges.
The speakers brought a wealth of experience to the State of the Market discussion, organized by Hillsborough County Property Appraiser Bob Henriquez.
Tampa Mayor Jane Castor offered a snapshot of what’s happening in the City of Tampa’s economy, and nationally known economist Ryan Severino offered a big-picture outlook on the economy, during the June 23 event at the Cuban Club in Ybor City.
Other panelists talked about current local conditions and trends in industrial, commercial and residential real estate.
Julia Silva, managing director for JLL, has been involved in industrial real estate for 27 years in Tampa. She told those gathered that before the pandemic, about 12% of retail sales were attributed to e-commerce.
Before COVID-19 hit, e-commerce was expected to grow to about 35% over a 10-year period, she said.
“During the pandemic, we condensed that 10-year period into a six-month period,” she said.
“People who would have never ordered online are now very comfortable getting their groceries online, seeing the value and efficiency of not having to go to a store,” she said.
The online shopping trend is expected to continue, she said.
As population grows “which is the story in Florida, specifically Tampa — one of the hottest markets in the country,” she said, retailers are following that growth and need warehouse space to stock items for online orders.
The ability to deliver goods to 25 million people within an eight-hour drive time from Lakeland accounts for the surge in industrial warehouse space along the Interstate 4 corridor, Silva said.
The industrial real estate expert also told the audience that banks are taking back office parks in the suburbs and are considering knocking them down to create industrial space.
“I’ve never seen that in 27 years,” Silva said.
The pandemic also has had an impact on commercial space.
In some ways, companies are delaying leasing decisions by extending their leases for one- or two-year terms, said Brent Miller, managing director JLL.
But some companies are beginning to make longer-term decisions.
“There’s more clarity around a hybrid arrangement for employees. There’s more clarity about square footage,” Miller said.
Commercial real estate is changing
The notion that office is going away “is way, way, way overhyped,” said Scott Garlick, managing partner for Cushman & Wakefield.
“It’s a great headline,” he said. But he added: “Office space has been evolving since the first day they put an office in New York City.”
As the commercial office market moves forward, he said, companies are asking: “What does it look like? What is used for? How often will people use it? Where will it be located?”
Businesses also are recognizing that if they want employees to come back to the office, they need to offer amenities, Garlick said.
The commercial real estate expert is upbeat about the local economy.
“The beauty of the Tampa market, specifically, is we accelerated our decreased vacancies during the pandemic, which you can’t say for more than maybe a handful of markets in the world. That’s an exciting story,” Garlick said.
“The influx of new companies coming here is accelerating in a way that we have never ever, ever seen before that will soften some of the macro-negatives of office space,” he added.
Kyle Koller, a research manager for JLL, said the diversity of industries in Tampa’s market is a chief strength. The local economy has representation from tech firms, finance, health care, logistics and tourism, he explained.
“We’re not necessarily over-leveraged in any of those categories. So, when we saw the downturn, we weren’t hit as hard and we recovered faster again — from a commercial real estate and jobs perspective — than a lot of the other Florida markets,” Koller said.
Craig Richard, president and CEO of the Tampa Bay Economic Development Council, said “there’s no doubt that Florida, and Tampa, in particular, has been on a roll.”
He, too, touts Hillsborough County’s wide-ranging industries.
The county ranks No. 2 out of 3,200 counties across the country, in terms of the diversity of its economy, Richard said. That mix is important because it gives the county a greater ability to rebound, in the face of economic downturns.
“Case in point, during the pandemic, our economy fared very well compared to other economies our size,” Richard said.
In-migration is playing an important role, too.
“When you start putting together a spreadsheet, in terms of the quality of life, Tampa is high on that list. We have good-paying jobs. We have the type of life that people would admire,” he said. Plus, he added, the area’s weather is good for about nine months out of the year.
“We are on the map,” said Bob Glaser, president and CEO of Smith & Associates, a real estate company.
Tampa isn’t growing as fast as Miami or as some other cities, but is growing at the right pace, Glaser said. “A lot of smart things are happening,” he said.
Multifamily and industrial are the hottest sectors of the commercial real estate market, according to Todd Jones, a principal for Real Advisor, and a real estate appraiser by training.
The growth in multifamily, Jones said, has been fueled by “the highest levels of in-migration in the state” that he’s seen during his 40-year career.
Impact of interest rates
Lorena Colin, of JD Lending Group, works in the mortgage lending industry.
She said, “raising interest rates, of course, are affecting the affordability of the homes and they are creating an impact, also, on investors.
“However, I still see a lot of activity for people who have the knowledge or the cash.
“I think knowledge is power. If you know how to use your tools, for instance, there are products on the markets,” she said.
Regulatory costs can affect housing affordability, too.
Darryl Shaw, who has considerable real estate holdings in Ybor City, said there are ways the public sector can reduce regulatory costs.
He offered these suggestions: Accelerate the permit process; allow more administrative approvals; and, OK pre-approved plans, instead of requiring each plan to go through a process.
“There are a lot of levers we can pull,” Shaw said.
Doug Griesenauer, of the United Way Suncoast, addressed concerns about the lack of affordable housing.
“The biggest challenge is housing, right now,” he said.
“We’re not just competing with residents here,” he said.
The competition here includes a much broader pool, including people moving to the area, and investors from across the country and overseas.
Some local residents are losing the housing affordability battle.
“Right now, people are leaving. I know people who are moving up to Georgia. I have friends who have left to Ohio, for jobs. There are individuals who can’t afford to live here anymore, so they are leaving,” Griesenauer said.
It’s even worse in Sarasota County, he said, noting, “rents there, on average, for a two-bedroom are $2,200.”
Solutions are urgently needed, he said.
“Economists say you should be paying about 30% of your income on housing— that is not true in our community these days.”
Published July 13, 2022