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Lakeland, Florida’s Industrial Market Is Red-Hot Amid Rising Construction Starts

CoStar Market Insights: Developers Appear Bullish with 85% of Rentable Square Feet Under Construction Speculative
September 20, 2018

In early 2018, a joint venture between Blue Steel and PCCP broke ground on Key Logistics Center Building 100 without any tenants in place.

Lakeland, Florida’s industrial market is in the midst of a construction boom, with nearly 3.5 million square feet underway and another 8.5 million square feet that has completed since 2014.

Factoring in only the space slated to deliver from 2014 to 2019, this represents nearly a 25 percent increase in the overall inventory. The pipeline, however, remains full with additional proposed projects and doesn’t appear likely to slow down soon.

Perhaps even more notable, speculative starts have been on the rise. Approximately 85 percent of the space underway was begun on a speculative basis. This is a stark contrast to this time last year, when only 20 percent was speculative. Additionally, Lakeland had few speculative starts this cycle prior to late 2015. The approximately 2.8 million square feet of available space under construction is the most in over a decade.

The early results have been promising, with spaces filling up well before delivery. In early 2018, a joint venture between Blue Steel and PCCP broke ground on Key Logistics Center Building 100 without any tenants in place. The 520,000-square-foot warehouse isn’t expected to complete until later this year, but DHL Supply Chain has already taken down the entirety of the building, with 326,000 square feet to be used by Ikea’s new distribution center.

CoStar research has verified that both sites at the Key Logistics Center are currently in the midst of ground clearing, though no slabs have yet been poured.

Certainly encouraged by the success of Building 100, Blue Steel and PCCP recently announced plans to deliver the final two phases, approximately 840,000 square feet combined, by the end of 2019.

Despite the promising results, it remains to be seen whether this explosive pace is sustainable. As measured by square feet underway as a percent of the total existing inventory, Lakeland’s 5.5 percent is roughly four times the national average.

The relatively high construction is even more apparent when comparing to the closest industrial metropolitan markets. In Orlando and Tampa, both are building at roughly the U.S. average with 1.4 percent and 1.5 percent of stock, respectively.

Even at the elevated construction levels, Lakeland appears well-positioned to absorb the new supply. With the vacancy rate hovering around 5.5 percent, fundamentals are the healthiest in over a decade.

Lakeland’s recent industrial demand has been fueled by robust job growth, particularly in wholesale trade, transportation and warehouse sectors. Given the job growth is projected to continue outpacing the national average over the next five years, there appears little reason to expect employment to fall off significantly, barring an economic shock.

The market is also perhaps uniquely situated as a hub for regional distribution. Lakeland is not only in the geographical center of the peninsula, but it is also halfway between Tampa and Orlando along Interstate 4, one of Florida’s most essential transportation arteries. This prime location should ensure sustained demand.

CoStar Market Insights provides a snapshot of recent real estate trends. The CoStar Market Analytics team monitors commercial and multifamily real estate across 390 metro areas, with a granular understanding of the projects, players and economic trends that move these markets.

Learn how CoStar Market Analytics can add to your market knowledge, helping to minimize risk and maximize returns.

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