Infill: Drive Rent Growth

The continued strong occupier demand for infill space – especially between 10,000 and 100,000 SF - is maintaining a landscape of minimal available space, strong rent growth, increased annual escalations, and minimal concessions. However, while velocity has slowed, it’s still strong – the users are just being more particular about what they’re needing.

Today’s Renewal Process

“Prologis has estimated a 10% rent growth for this year; believed to be conservative. In just Q1 alone, Prologis are reporting a 3.6% Tampa rent growth and 4.4% Orlando rent growth.”

In current conditions, we’re seeing some Tenants face upwards of 25 – 30% increases in their base rent. Those steep rent escalations are being faced primarily those occupiers who signed 5-, 7- and 10-year leases in the 2014 – 2016 period when the “Industrial Boom” was still in its infancy. The occupiers are generally aware that market conditions have tightened, however are rarely aware to what extent. Coaching them through that renewal process is becoming increasingly more challenging.

Every Landlord wants to minimize downtime and avoid the additional costs (heaver commissions and elevated improvement dollars) that come with a Tenant vacating. That said, the panelists all supported that the maintenance and condition of the asset should not be compromised in doing to. If there are improvements that the building would require if brought back to the market, include that offering in your renewal proposal (i.e. livable office space, working bathroom fixtures and HVAC, LED light conversion, etc.).