Pinellas industrial reflects bleak economic conditions

The economic outlook on both the national and the local Tampa Bay fronts has been nothing short of bleak through the third quarter of 2009, though there was a hint of improvement observed during the month of September.

The area unemployment rate continued on a steep incline, jumping to 11.3%, up by 4.4% from the unemployment rate recorded at this point in 2008. As the economy continued to stumble, a total of 56,000 positions were lost in the Tampa Bay job market since this time last year. Relevant to the Tampa Bay industrial market, the construction industry lost 11,000 jobs, manufacturing employment decreased by 7,300 positions and trade, transportation and declined by 13,900 jobs during the last 12 months.

Overview

During the third quarter of 2009, market fundamentals continued to deteriorate, further reflecting the negative influence the persistent downturn the economy has had on Pinellas County’s industrial market. Asking rental rates and absorption levels have all decreased significantly, and vacancy rates increased substantially since this time last year.

Demand for space in the Pinellas County industrial market has remained below typical levels experienced over the past several years, which is demonstrated by the 24.2% decrease in leasing volume from the second quarter of 2009. Numerous large and small move-outs over the past three months far out-weighed any new or expansion activity, resulting in a substantial increase in overall vacancy.

Marketwide, vacancy closed the third quarter at an appreciably high 6.8%, and up a substantial 1.6% from the vacancy recorded this time last year. As a result of the space newly vacated during the third quarter, overall absorption for the quarter was negative 62,277sf, bringing the year-to-date absorption figure to negative 988,528sf.

As demand continued to remain extremely soft, asking rents continued to trend downward, bringing the market’s average asking rental rate down to $6.56 psf at quarter-end, a slight decrease of $0.16 psf since last quarter and decrease of $0.33 psf from this time last year. Office service space, which comprises 12.1% of the industrial space in the Pinellas market, experienced the largest decrease in asking rents over the last year, decreasing $0.72 psf from the third quarter of 2008, to a current average of $8.95 psf.

Forecast

The Pinellas County industrial market will continue to experience the negative affects of the uneasy local and national economy. Cushman & Wakefield anticipates vacancy rates will increase further in the final quarter of the year as tenant demand, particularly from larger uses, continues to wane and the fact that many companies are remaining extremely hesitant in making any long-term leasing commitments until the economy strengthens and the credit markets stabilize.