In dense Tampa Bay cities, scarcity fuels demand for commercial property

The land hit the market quietly last summer: a 39-acre parcel off busy Gandy Boulevard in Tampa, on which stood a Macy’s warehouse and furniture gallery. Even with minimal marketing, it didn’t take long to draw attention.

“The demand was super robust,” said Rick Brugge of commercial real estate firm Cushman and Wakefield, which listed the property. “It’s one of the largest contiguous pieces of land in South Tampa. It’s the size of parcel that’s hard to come by, because South Tampa has such high barriers to entry, and the demographics are very good. Having retail frontage on Gandy Boulevard made it a very attractive site.”

Last month Macy’s sold the site to a California real estate firm for $32 million in one of Tampa Bay’s splashiest recent commercial land deals. The new owners, Brugge said, plan to sit on the land for a bit, leasing part of it back to Macy’s, but could one day develop housing, warehouses or more retail.

“We don’t see sites like Macy’s very often,” Brugge said. “It’s very rare.”

A year into the coronavirus pandemic, restaurants and retail shops are still struggling, and the future of office space is uncertain. But demand for large tracts of urban dirt has not waned, as investors and developers are still clamoring for the rare chance to grab land in dense cities like Tampa and St. Petersburg.

“The only way we can add new supply — and this is office, retail, everything — is by taking something down and putting something else there,” said Mack Feldman, a vice president with commercial real estate development firm Feldman Equities.

Over the last five years, only 14 commercial and industrial parcels between 25 and 100 acres have sold within the city of Tampa, according to commercial real estate data analysts CoStar. St. Petersburg has seen zero transactions that large in that time, and Pinellas County has only seen three.

More large tracts could hit the market in the near future, as businesses hit hard by the pandemic realize that now might be the time to sell long-held industrial land, said Nancy Surak of real estate brokerage and advisory firm Land Advisors Organization.

That was the case for the Big Top Flea Market, a 32-acre site in Thonotosassa that sold last month for nearly $6.6 million to a firm planning to build a 292-unit housing development. Surak, who facilitated the sale, said a broader cultural shift to e-commerce was a big factor in the owners’ decision to sell.

“I’ve seen a significant uptick in that business in recent months as a result of COVID,” Surak said. “(For) owners who are sitting on something that may not be producing the income levels that they’re wanting, monetization of that property, or divesting that property and selling it to somebody else, might be the right thing to do.”

One such tract that’s about to hit the market: the Tampa Bay Times’ printing plant at 1301 34th St. N, which encompasses about 27 acres in crowded St. Petersburg. Brugge recently signed on as its listing agent.

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The Times this month announced plans to close the 61-year-old plant and outsource printing operations to a Lakeland facility owned by newspaper chain Gannett, a move that will cut 160 jobs amid heavy revenue losses over the past year.

The plant is largest remaining tract in the Times’s real estate portfolio. In 2015, the company sold a chunk of the property abutting 34th Street for $3.8 million; that land was developed into an Aldi, a Culver’s, a Thorntons and other businesses.

“Everything we have heard, over and over again, consistently, is it is a red-hot time for the market in terms of industrial properties, multi-family housing,” said Conan Gallaty, president of Times Publishing Company. “There’s a few areas of development that are in need for large parcels of land, and the location of our property seems to be in high demand as well, given that it’s in a very dense part of Pinellas County, with a lot of residential surrounding it. That tends to be what developers are looking for.”

Land like the Times tract is “definitely rare,” Feldman said, but it’s far from certain what will happen with it. Surrounded by retail and neighborhoods, the plant is not in a flood zone. It’s zoned for industrial use, and with rail access once used to cart in newsprint — another uncommon property feature — it could stay that way. It could be an attractive last-mile delivery site for a company like Amazon, which is already developing a 1 million-square-foot warehouse in Auburndale and another 700,000-square-foot distribution center in Lakeland.

Then again, said Surak: “I don’t personally believe an industrial user can pay what that property is ultimately worth.” Apartment and condo developments often yield a greater return on investment. And while St. Petersburg is in need of affordable housing, there’s no guarantee the city would rubber-stamp a rezoning from industrial to mixed-use or multifamily.

“Oftentimes, municipalities will look at trading industrial or office land — in other words, job-producing sites — for residential or homes as not a good trade-off, because they need to protect that land for future jobs,” Brugge said. “If a city doesn’t want to rezone a property, it can get tied up for years.”

In the current climate, with large tracts of urban land selling for eight figures, that might not matter. The Times property has already attracted significant interest, Gallaty said. Surak, who is not involved with the sale, said she, too, has already heard from prospective buyers.

“Where do you get 28 acres, contiguous, in Pinellas County?” Brugge said. “It’s hard to find, especially in the most densely populated county in the state.”