Market in outperform mode

The real estate market in Tampa and St. Petersburg — both commercial and residential — continued to outperform during the third quarter last year, notching milestones not seen since prior to last decade's economic recession.

Most notably, new home starts in the Tampa Bay area hit the highest quarterly level between July 1 and Sept. 30 in nearly a decade. Also, closings were at their highest level since early 2008, with 2,115 units sold.

Industrial real estate, meanwhile, had its best leasing activity since 2004, with 1.6 million square feet committed, according to the most recent Cushman & Wakefield Tampa Bay Land Market report. Bruce Erhardt, executive director of the commercial real estate brokerage's land sales practice, publishes the report quarterly.

In a show of market momentum, Erhardt and Julia Rettig, Cushman & Wakefield's director of industrial brokerage, say 907,000 more square feet of industrial space was leased last year vs. in 2015.
Meanwhile, warehouse vacancy rates in key submarkets such as Plant City and Lakeland have fallen dramatically, to 2.5% and 4.2%, respectively. That's the result of little new supply and continued positive absorption.

Multifamily properties also continued to make gains in the third quarter. Occupancy ended the quarter at 95.4%, and despite the addition of several new rental towers and complexes, occupancy is projected to remain around 95% through 2020.

As a result, rental rates inched upward 1.5% in the quarter, to $1,126, for an annual growth rate of 5.6%, Erhardt's report noted from an AxioMetrics Inc. survey. Rent rates are expected to increase this year, as well, by 3.3%.

But housing overall remained the market star, according to the report. New home starts in the 2016 third quarter increased 16.5% year-over-year, with an annual growth rate of 27%. Townhome starts performed even better — up 48%.

Median home prices as of August rose 13.6% vs. the same time in 2015, to $204,340.
Despite all the plaudits, Cushman & Wakefield maintains the area is building only 87% of its 20-year average when it comes to residences. And researcher Moody's Analytics believes Tampa and St. Petersburg's population will rise another 5.4% between 2017 and 2020.
Taken together, the two statistics seem to indicate that homebuilding, at least, has considerable runway left in this real estate cycle.