Q2 2022 Industrial Real Estate Report: Central Florida
Specializes in providing actionable insights into the commercial real estate space for investors, brokers, lessors, and lessees. He covers quarterly market data reports, investment strategies, how-to guides, and top-down perspectives on market movements.
Central Florida has been the scene of quite an industrial real estate boom in recent years, and the rate of growth isn’t showing any signs of slowing down.
Because of its centralized location, Central Florida’s industrial real estate sector seems immune to global economic uncertainty: Overall vacancies are continuing a downward plunge as NNN lease asking rates for warehouse space skyrocket.
Among other things, this report shows how Central Florida fared in terms of leasing rates, development activity, and cost per square foot over the second quarter of 2022.
General Area Overview & Demographics
The population demographics of Central Florida are about 57% white, 24% black, 5% Asian, and 5.5% of other races and ethnicities.
The population of Central Florida is about 320,000 as of 2022.
The region saw its employed population grow by 9.8% between the third quarter of 2020 and the third quarter of 2022, according to the Bureau of Labor Statistics (BLS).
As it currently stands, Central Florida’s unemployment rate is about 3.0%.
How much is warehouse space in Central Florida?
The average cost to rent warehouse space in Central Florida in 2022 is about $8.25 per square foot, up from Q1 2022’s average of about $7.80 per square foot.
The average cost to purchase warehouse space in Central Florida in 2022 is about $160 per square foot, up from Q1 2022’s average of about $150 per square foot.
The average cost per square foot of flex space in Central Florida was about $12.02 per square foot, up from Q1’s average of about $11.80.
Occupancy & Vacancy Rates
Industrial vacancy rates in Q2 2022 were about 3.6% on average in Central Florida, down from 3.8% in Q1 2022.
Falling unemployment, increased leasing activity, and increased investment in Central Florida’s industrial sector from businesses are putting downward pressure on vacancy rates, increasing competition and encouraging developers to deliver new industrial projects to the market.
Industrial vacancy rates in Central Florida are expected to continue their plunge until some of the 8.2 million square feet of projects currently under construction reach delivery.
Central Florida Industrial Real Estate Net Absorption in Q2 2022
Despite global economic headwinds and inflation still salient concerns, net absorption in Central Florida’s industrial real estate market remains largely unaffected in Q2 2022 amidst healthy tenant demand and strong market indicators such as growing employment in the transportation and utilities industries.
Approximately 670,000 square feet of positive net absorption occurred in Central Florida’s industrial market in Q2 2022, down from Q1 2022’s total of about 1.17 million but still positive overall.
Year-to-date industrial net absorption in Central Florida sits at about 1.8 million square feet.
The Pacing of Industrial Rents in Central Florida
Industrial rents for warehouse space in Central Florida have been riding a steady increase since Q2 2020. Flex space rents have hovered around a stable average, with some occasional spikes.
- Average direct asking rent per square foot for warehouse space in Q2 2020: $6.40.
- Average direct asking rent per square foot for warehouse space in Q2 2021: $7.00.
- Average direct asking rent per square foot for warehouse space in Q2 2022: $8.20.
- Average direct asking rent per square foot for flex space in Q2 2020: $11.50.
- Average direct asking rent per square foot for flex space in Q2 2021: $12.10.
- Average direct asking rent per square foot for flex space in Q2 2022: $12.00.
These year-over-year increases are indications of strong tenant demand and a healthy industrial sector in Central Florida.
Competition among tenants for existing space is expected to continue amidst slowing capital markets making it more difficult for development projects to deliver, placing upward pressure on direct asking rents in future quarters.
Industrial Leasing Activity in Central Florida in Q2 2022
Several notable industrial leases took place in Central Florida in Q2 2022, including:
- FedEx’s leasing of about 216,000 square feet in the Southeast Orange submarket;
- Coca-Cola’s leasing of about 295,000 square feet in the Southwest Orange submarket;
- DHL’s leasing of about 170,000 square feet in the Southeast Orange submarket.
These are only a few among many industrial leases that took place in Central Florida in Q2 2022.
Industrial Purchase Activity in Central Florida in Q2 2022
A couple of significant industrial purchases in Central Florida during Q2 2022 include Related Fund Management’s purchase of about 1 million square feet in the Northwest Orange submarket as well as Starwood Real Estate Income Trust’s purchase of about 800,000 square feet in the Seminole submarket.
Central Florida’s Industrial Development Pipeline
The Northwest Orange submarket of Central Florida currently houses about 5 million square feet of new industrial projects currently underway.
Southest Orange currently houses about 1 million square feet of industrial development project; behind that, Oscealo County houses about 640,000 square feet of new industrial development projects.
Takeaways for Industrial Real Estate Investors
Central Florida’s industrial real estate market is showing no signs of slowing down amidst increased tenant competition, rising direct asking rents, and the favorable location and economy of Central Florida.
Moving forward, rising interest rates and the Fed’s aggressive fight against inflation may continue to slow down capital markets as well as new industrial development projects, placing even greater competition among Central Florida’s industrial sector.
Do your research, stay diligent, and happy investing.
Methodology
All figures presented in this article are based on MyEListing.com’s commercial real estate listing data in corroboration with other freely available data and information covering the commercial real estate industry.
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