Publix plans to expand its existing 320,000-square-foot corporate headquarters in Lakeland, Florida by an additional 190,000 square feet, one of the most significant office construction projects for the Lakeland area in more than a decade.
Florida Gov. Rick Scott announced this week that the grocery store chain’s headquarters expansion is set to bring more than 700 jobs to Lakeland by 2027. Currently, Publix is the state’s largest private employer and has expanded rapidly over the past two decades. When the Lakeland-based, 4-Star office headquarters was completed in 2002, the firm had approximately 650 locations. Today, that number has nearly doubled, with approximately 1,250 stores across the southeastern United States.
Office construction in Lakeland has been notably down this cycle. The market had explosive office inventory growth in the decade leading up to the recession. From 1999 to 2008, Lakeland’s office market grew by nearly 25 percent, adding approximately 2.5 million square feet of office space.
Even so, in the last 10 years, construction projects have been somewhat scarce. Since the start of 2009, there has been a little less than 450,000 square feet of office construction. Perhaps even more telling, this translates to only a 3.4 percent increase in total stock.
Build-to-suit projects for relocations or expansions, such as the one planned by Publix, could be Lakeland’s most realistic chance to expand its office inventory. The average office asking rents have increased steadily over recent years, but still have not recovered from the recession.
As of the third quarter of 2018, the market’s average office market asking rent was $16.38 per square foot. This is approximately 20 percent below prerecession peak levels. Additionally, the average rents in Lakeland trail comparably sized office markets such as Pensacola and Daytona Beach, and are well behind Florida’s average of $24.56 per square foot.
Given the relatively low office rents and rising construction materials and labor costs, it could be difficult penciling out office construction projects in Lakeland. Speculative projects would be even more challenging, likely leaving build-to-suits as the best chance for office growth.
This article was originally written & published by Brian Alford of the CoStar Group