State of the Market - Fall 2019

Industrial properties are the latest commercial real estate sector in the Sarasota area to experience positive momentum. Driven by low unemployment, job gains and population in-migration, the types of properties that “house jobs,” namely warehouses, distribution and logistics centers and “flex” space – a mix of both office and industrial space, typically occupied by small businesses, start-up entrepreneurs and sole proprietors – are enjoying a decided uptick in activity. Most notably this economic cycle, health care-related tenants have begun occupying industrial spaces, which until the past year or so have lagged behind other sectors in regards to growth, such as multifamily rental communities, offices, retail and restaurant space and hospitality projects. Industrial rental rates have inched upward over the past 18 to 24 months and now many properties command rental rates of between $8 and $12 per square foot. Even more glaring than the hike in rents, however, is the considerable lack of availability of industrial buildings and land. Although absorption of existing space in the Sarasota area has grown stronger, there have been very few new industrial properties that have been constructed and added to overall market inventory. That, in turn, has pushed rents upward. Several new projects are being contemplated, but when or if they are built, don’t expect rental rates to dip. Instead, they will likely take another hike upward as construction costs for labor and commodities have skyrocketed for all construction. Also, if you’re looking for vacant industrial land, don’t be surprised by the relatively few solid options available in this market.