By Gary Tasman
Utter the words “industrial property” to someone outside the world of commercial real estate, and they’re likely to picture concrete jungles with enormous drab buildings, smokestacks and air pollution. In some parts of the country, that might be an accurate impression. However, when we talk about industrial property here in Southwest Florida, smart developers and investors realize that a very different picture is emerging.
Industrial real estate is a broad term that covers commercial uses like manufacturing and production, research and development, and storage and distribution. Industrial real estate demand is on the rise, driven by consumption, trade, transport, and e-commerce.
Cushman & Wakefield’s U.S. Industrial MarketBeats Report for Q1 2022 shows exactly how popular these properties are. For the sixth straight quarter, demand for industrial property is outpacing supply, driving the vacancy rate to an unprecedented 3.3% across the country. Here in Southwest Florida, the industrial vacancy rate is a stunning 1.7%. Although there are nearly 2.5 million square feet of industrial buildings under construction in our region, high demand for industrial property is expected to continue for the next few years.
Industrial Market Drivers in Southwest Florida
What’s driving our industrial real estate market surge? To start, changes in the supply chain and delivery trends during COVID restrictions have made warehouses, self-storage facilities, and multi-million square foot fulfillment and distribution centers highly-prized properties. Thanks to our strategic location between Tampa and Miami, Amazon, Uline, and FedEx have built or are building major facilities in Lee, Collier and Charlotte Counties. With both Southwest Florida International Airport and the Punta Gorda Airport expanding, we can expect to see continued growth in storage, logistics, and transportation. But supply chain reconfiguration is only part of the equation.
Despite our region’s reputation as a haven for vacationers and retirees, the industrial sector in Southwest Florida is actually quite diverse and developing. Of course, construction has always been vital to our region, but our industrial sector reaches far beyond bricks and mortar. Thanks in part to our region’s aging demographics, medical manufacturing is a large part of the industrial sector. Companies like Lee County-headquartered NeoGenomics, which conducts diagnostic, prognostic and predictive cancer testing all over the world, are expanding their presence in Southwest Florida. Arthrex, a global medical device manufacturing company, is based in Collier County with a large logistics center in Lee County. Numerous smaller medical and biotechnology companies have followed their lead and dot the Southwest Florida landscape.
Whether producing medical devices or consumer products, light manufacturing is on the rise in our region, absorbing millions of square feet of industrial space. Like the region’s medical manufacturers, these companies often produce products vital to the Southwest Florida economy. Manufacturers like MY Shower Door/D3 Glass and Storm Smart thrive in part because of Florida’s explosive residential growth. As long as residents continue to flock to Southwest Florida, we should anticipate more manufacturers in our area that produce construction supplies and similar products.
Opportunities in the Industrial Market
With the manufacturing sector growing across Southwest Florida, demand for industrial property should remain high for the next several quarters. Supply chain issues have slowed the pace of construction, and thus delayed the pipeline of new industrial properties emerging on the market. However, even after supply and demand reach a state closer to equilibrium, there are many benefits to owning industrial property.
Industrial properties tend to garner longer-term tenants, creating a more stable income stream. Industrial spaces typically need less maintenance and fewer amenities than other types of commercial spaces. With low tenant turnover and maintenance costs, these properties have the potential to produce higher yields for investors.
The industrial real estate market in Southwest Florida—and across the nation—is experiencing its highest demand in history. Are you an industrial property owner looking for an opportunity in our current market? Cushman & Wakefield | Commercial Property Southwest Florida (CPSWFL) has the knowledge, data, and resources to stay abreast of current commercial real estate trends in our region. The Commercial Property Experts at CPSWFL are ready to assist you with determining your best strategy for your property. Contact us by calling 239-489-3600 or reach us by contact-us.