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Second Quarter 2024 Tampa Bay Office Market Report and Forecast

2nd Quarter Tampa Bay Highlights:

Office Market:

  • Westshore and Downtown Tampa asking rents are +/- $6.75 PSF above the average of the surrounding areas, proving the demand for these particular submarkets for their location, amenities and quality buildings.
  • Vacancy rate in Tampa CBD is 15.5% and Westshore in 14% is substantially lower than the major metropolitan cities around the country including New York and Chicago.
  • Companies are continuing to come back to the office more on a regular basis as flexible work schedules continue to be tested. Mondays and Friday seem to be the day remote is most commonly occurring.

Let’s Talk Rent Numbers:

Submarket Overall Ave.  Asking Rent-All Classes Overall Ave. Asking Rent Class A
Westshore $32.50 Sq. Ft. $40.10 Sq. Ft.
Downtown Tampa $41.50 Sq. Ft. $43.36 Sq. Ft.
Northwest Tampa $24.50 Sq. Ft. $26.59 Sq. Ft.
South Tampa $25.25 Sq. Ft. $30.54 Sq. Ft.
I-75 Corridor $25.75 Sq. Ft. $28.57 Sq. Ft.
Downtown St. Petersburg $32.25 Sq. Ft. $37.52 Sq. Ft.

New Development Highlights:

  • Gas Worx: Ybor City real estate investor Darryl Shaw’s Gas Worx is a mixed-use development remaking older industrial and vacant properties between Ybor and the Channel District into a walkable area planned to have over 140,00 square feet of retail and 500,000 square feet of office space is 50% preleased before ground breaking. Grow Financial and Masonite, are the two current anchor Tenants in preleasing.
  • Midtown East: Second phase of Midtown with 177,000 Square Feet of mixed use space is under construction with expected completed in 2024.

2024 3rd Quarter Forecast:

  • More sublease space with longer, 3+ year remaining lease terms will come to the market while Tenants are restructuring their office needs and might have taken on more space during an expansion in a building they no longer need.
  • Asking face rates will remain of the same and decrease slightly in the Westshore, Central Business Districts

What Does This Mean for Tenants?

Advantages:

  • Landlords are more willing to give Tenant concessions of free rent and Tenant Improvement allowance. Depending on the Landlord, some are more flexible than others on the asking face rate, depending on the deal terms.
  • Leveraging sublease space can be a great solution for some Tenants who are targeting shorter lease terms and/or often lower rates. Increase in subleases with longer lease terms remaining 3+ years, can still provide a good solution with Improvements already completed in the Suite, lower asking rent or free rent.

Challenges:

  • Asking rates increased in first quarter and have maintain steady in the second quarter. Not as many tenants have vacated their spaces when their lease expires, although asking rental rates have gone up over the last five years.
  • Although many employees have returned to the office, identifying the right balance of in office and working remotely is a normal conversation for deciphering what best for the company culture. Important to note, each company is different and not one solution is best. Reimaging the purpose of your office space and what role do you want it to play within the company is a great start for this conversation.
  • If a Tenant has a Base Year prior 2022, they are experiencing significant pass thrus from Landlords due to surge in Real Estate Taxes and Property Insurance.

What Does This Mean for Landlords?

Opportunities:

  • Class A and amenity-focused buildings in areas like Westshore, South Tampa and the Central Business Districts are performing better due to the focus on the office experience by Tenants. Tenants are adjusting their office footprint, tend to prefer amenity focused buildings where common areas like conferencing centers and be utilized for meetings vs leasing larger space.
  • Having spec suites ready for Tenant’s to lease a turn key office, positions Landlord to provide an immediate solution for Tenants who have quick deadlines to relocate their office vs the continued delay in permitting process and unexpected cost of Tenant Improvements.

Considerations:

  • Maintain asking face rates or be willing to adjust face rates depending on the feedback from Tenants.
  • Providing 3 year lease options for as-is Suites can be solution for smaller Tenants under 2,500 RSF, who are unsure about future growth.
  • Consider adding Tenant amenities such as conferencing center to a building for Tenants is a great competitive advantage. Based on the research, employees are coming into the office for team, department and company-wide meetings.
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Why You Need A Commercial Real Estate Broker To Represent You, Even When You Know The Landlord

Venturing into a new office space lease can feel intimidating. There are so many questions you may have, concerns about things unknown. That’s why having a Commercial Real Estate Broker working on your side is crucial to a successful journey in finding your next office space for rent in Tampa.

Landlords will always have their best interest in mind as the owner and investor of the building. Brokers, on the other hand, are working with your best interest in mind. Even when you have a good working relationship with the Landlord, they are still focused on protecting themselves and their property first and foremost at the end of the day. You could be in a position of thinking you are getting a pretty good deal on your lease and your commercial property for rent in Tampa but are you really? Here are a few things to consider:

Are you aware of current marketing conditions, concessions by Landlords and standard business terms? 

Do you have comparisons to a deal on the table with other possible small office space for rent in Tampa?

When you have concerns about a potential space, who is going to give you honest feedback and real insight about what will work best to meet your real estate needs?

When you don’t have the full overview of the Tampa Bay real estate market, it’s nearly impossible to really get the best possible lease. That’s why having the right Broker can educate you on the market as a whole and advise on business points they are experiencing and seeing at competing properties. Understanding what is a market norm is very important in negotiating a commercial lease and choosing which Landlord to have a long-term business relationship. 

Commercial Real Estate Brokers are also skilled in negotiating terms. They will seek to get you the office space of your dreams with a lease and terms that are not full of deal breaking concessions. Your Broker will help ensure that you are not paying exorbitant Common Area Expenses, hidden fees and other thumbs-down terms but instead that you are treated to a fair lease with all the amenities, parking spaces and square footage you need.

When you need an office space, you need Office Space Brokers.

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Why Did Common Area Expenses (CAM) Invoice Increase?

What are Common Area Expenses?

If you are looking for office space to rent in Tampa, this information will be most helpful to you. Common Area Maintenance (CAM) refers to the shared upkeep and maintenance costs for the common areas of a property. Several examples of common CAM include:

  • Utilities
  • Lawn care and landscaping
  • Bathrooms
  • Sidewalks
  • Elevators
  • Unique property needs such as administrative costs, building repairs, property management fees, property taxes and insurance

Commercial real estate throughout the state of Florida has experienced record highs in two main categories which are causing increases in CAM. Whether you’re looking for a small office space for rent in Tampa or a large office space lease near downtown Tampa, an increase in CAM can impact you. Both categories that have increased are what we in the commercial real estate world refer to as uncontrollable, which are Real Estate Taxes and Building Insurance.

Real Estate Taxes:

Especially, if you are renting space within city limits in Tampa or St. Petersburg, the real estate taxes are higher than those within Hillsborough county and surrounding Pinellas, Pasco and other counties. The specific location of your office space in the greater Bay area can be a factor into your increased CAM.

Insurance:

At the time this blog is being published, there are approximately less than twelve insurance companies that are writing insurance policies for commercial buildings in Florida. The increased hurricane activity over the past three years has caused insurance pricing to increase to the point where insurance companies are removing Florida from their coverage list.

What can you do as a Landlord?

It pays to do due diligence when it comes to selecting who insures you. Shop around to get pricing from several companies and if you own more than one property, bundling insurance can often give a discount. Happy tenants lead to happier Landlords. As such, it is in your favor as a Landlord to keep the CAM invoice from increasing when possible. 

What can you do as a Tenant?

When looking for commercial space, having a Landlord who owns multiple commercial properties might not a better deal on insurance premiums. Especially the larger Landlords in Florida and those who may own buildings across the country can actually lead to a higher CAM for you. Keep this in mind as you search for your best fit for an office space to rent. 

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First Quarter 2024 Tampa Bay Office Market Report and Q2 Forecast

Q1 2024 Important Highlights:

Tampa Bay:

Office Market:

  • Leasing activity and demand has been focused on Class A buildings in Westshore and Central Business District (CBD) in Downtown Tampa, with over 60% of the leasing activity.
  • Westshore and Downtown Tampa asking rents are +/- $7.00 PSF above the average of the surrounding areas, proving the demand for these particular submarkets for their location, amenities and quality buildings
  • Leasing activity is +/- 11% down Year-over-year
  • Vacancy rate in Tampa CBD is 12.8% and Westshore in 19%.

Let’s Talk Rent Numbers:

Submarket Overall Ave.  Asking Rent-All Classes Overall Ave. Asking Rent Class A
Westshore $34.00 Sq. Ft. $39.25 Sq. Ft.
Downtown Tampa $41.45 Sq. Ft. $43.81 Sq. Ft.
Northwest Tampa $27.05 Sq. Ft. $28.38 Sq. Ft.
South Tampa $36.70 Sq. Ft. N/A
I-75 Corridor $26.37 Sq. Ft. $27.10 Sq. Ft.
Downtown St. Petersburg $33.64 Sq. Ft. $35.50 Sq. Ft.

New Development Highlights:

  • Gas Worx: Ybor City real estate investor Darryl Shaw’s Gas Worx is a mixed-use development remaking older industrial and vacant properties between Ybor and the Channel District into a walkable area planned to have over 140,00 square feet of retail and 500,000 square feet of office space is 50% preleased before ground breaking. Grow Financial and Masonite, are the two current anchor Tenants in preleasing.
  • Midtown East: Second phase of Midtown with 177,000 Square Feet of mixed use space is under construction with expected completed in 2024.

2024 2nd Quarter Forecast:

  • Labor Market and Economic Indicators: The tight labor market is expected to remain steady with Tampa Bay being with the unemployment rate likely to be around 3.2%, similar to the previous quarter.
  • Job Creation: Tampa Bay is anticipated to continue as a front-runner in job creation across the state and career growth in the US.
  • Supply:  Increased supply of office space in Suburban areas could and with relocation on larger Tenants between submarkets could lead to increased vacancy if the large footprints are not filled with new to market Tenants.
  • Demand: Demand for buildings in Westshore and Downtown Tampa and St Petersburg, especially Class A buildings will remain consistent and where majority of leasing will occur.

What Does This Mean for Tenants?

Advantages:

  • Increased rent concessions from Landlords: Higher Tenant Improvement allowance towards build outs and providing free rent to decrease overall lease value.
  • Favorable Economic Indicators: Low unemployment rate and steady job growth in Tampa Bay suggest a thriving economy. These indicators can lead to a growing customer base and a higher percentage of identifying qualified employees in the area.

Challenges:

  • Supply: Existing high-quality buildings will leave tenants with few options regarding new space.
  • Construction Costs: Construction costs remain high which increases rental rates for space that require Tenant Improvements.
  • Lead Time: Having timelines with buffer built in will give margin for continued slow construction timelines, for architectural drawings, permit approvals and supply chain issues. Tenants with shorter lead time are subject to focus on move-in ready office spaces.

What Does This Mean for Landlords?

Opportunities:

  • Low Vacancy Rates For Smaller Suites: Move-in ready Suites under 2,500 SF and are being leased quickly in the Urban Core.
  • Turn Key and Spec Suites: Turn key Suites under 3,500 SF for Tenants to quickly move into will provide a competitive advantage over other vacant competing Suites for Tenants who do not have enough lead time for long construction timelines.
  • Urban Core: The urban core continues to attract persistent demand. Tenants may be competing for the same Suites which positions Landlord’s to be more selective when evaluating Tenants.

Considerations:

  • Tenant Selection: Ensuring that potential Tenants have a strong financial standing and can alleviate risks associated with Tenant turnover or payment issues.
  • Tenant Retention: Historically, it is more cost effective to maintain a Tenant then marketing, leasing and Tenant Improvement costs to acquire a new Tenant. Maintaining positive Landlord-Tenant relationships and providing excellent customer service can help ensure Tenants choose to renew their leases, reducing turnover and associated costs.
  • Building Location: Buildings located in Suburban areas outside of Urban Core and Westshore will have to be more aggressive with giving free rent, adjusting asking rents and consider adding value ad common areas for Tenants such as shared conference room and etc.