Our annual Lay of the Land Conference archive is full of helpful expertise for landowners. In this podcast from the 2018 conference, Brendon Dedekind, CCIM, provides a high-level view of Central Florida’s industrial market.
Brendon leads the Central Florida Prologis team, managing existing real estate assets and acquisitions development and dispositions of capital deployment. Prologis owns about $70 billion worth of warehousing space in 19 countries with customers like Amazon, DHL, FedEx, Walmart, and Home Depot.
Central Florida Industrial Inventory
Florida has about 750 million square feet of industrial inventory. Orlando and Tampa represent 125 million each, and Polk County has about 50 million.
All of these markets currently have a 5% vacancy rate. In office and industrial property, there’s something called frictional vacancy. When one customer moves out, there is a clean-up before the next customer moves in. Generally, the frictional vacancy rate is about 5%, so you could argue we are 100% occupied.
In 2017, new development of 15 million square feet came online, and the net absorption was 17 million square feet. So, the industrial market is very healthy and very steady. It’s competitive but not overheated.
Industrial Market Trends
Industrial trends here in Central Florida include cyclical trends like auto, construction, and home goods. Consumption and basic local daily needs also drive the market’s growth in e-commerce and even healthcare.
In the five million square feet that I oversee in Orlando, it is fascinating to me that almost all my customers are construction, convention, and tourism.
Polk County continues to grow as Florida’s distribution hub. Georgia once served distribution needs, but from Polk County, you can reach 95% of Florida’s population.
Industrial Market Balance
We are in a place where industrial is very healthy, and yet it’s still very disciplined. The supply and demand continue to be in balance with the quick absorption of new industrial products.
But at any point in time, because those are reasonably big numbers, if the capital dries up or the demand significantly slows down, we could be stuck in undersupply or overbuild.
Capital continues to be the driver of industrial growth, especially merchant developers with other people’s money chasing down institutional-grade development and or ownership.
A potential headwind is the labor supply. Warehouses used to be a place where someone off the street could go in and work. But today, that person would probably cause systems to crash and break. So you need skilled labor, and the level of skill continues to increase.
Positioning Land to Sell for Industrial Development
The challenge for landowners is that we live in a microwave society. We all want to buy something right now, hit a button on the phone, and receive it in an hour.
My clients are no different. They come into Florida looking for a piece of land where they can build a million square feet in 12 months. We don’t keep that kind of product sitting around on the shelf.
If you own land near road infrastructure that are extensive tracts of land, you must position the land well. Decide if industrial is the highest and best use, and then get that land set for production and industrial. The first one that’s ready to deliver is usually the person who gets the last look by the institutional buyers.