1st Quarter 2023 Tampa Bay Office Market Report and Q2 Forecast

Important Highlights:

Tampa Bay:

Tampa Bay’s commercial real estate market is thriving, with a strong demand for office space, particularly in the downtown area. The growing population and job market in Tampa have contributed to the demand for office space, and many companies have relocated to the area in recent years. According to Forbes Tampa is ranked the number one city for small businesses and the number two emerging tech hub. 

• Pinellas County
  • Industrial vacancy rate is 3.2%
  • $12.62 SF NNN flex/warehouse
  • $7.86 SF NN warehouse distribution
  • 258,068 SF under construction
• Hillsborough County
  • Industrial vacancy rate is 5.2%
  • $13.98 SF NNN flex/warehouse is $13.98 SF
  • $7.04 SF NNN for warehouse distribution
  • 2,772,283 SF under construction

Office Market:

• $35.40 PSF Class A Average
• The direct asking rents for Class A Buildings. up Approx. 3.9% year-over-year
• Vacancy rate got Class A Buildings is Approx. 10%
• Turn-key spec office spaces that are move-in ready for companies with pressing deadlines continue to be in demand who do not have the time to wait for permitting and construction timelines. 

Let’s Talk Rent Numbers:

Building Highlights: 

• Mixed-use developments continue to be at the forefront of new construction.
• “Miami-based Related Group purchased 6 acres on the west bank of the Hillsborough River — what will become the Riverfront district. 
• Ybor City developer Darryl Shaw is assembling roughly 25 acres of closely watched waterfront land along the Ybor Channel.
• Strategic Property Partners, the developer of Water Street Tampa, has demolished the former Ardent Mills flour plant between the Channel district and downtown Tampa to make way for Water Street’s second phase.” Read more of the upcoming developments here. 

2023 2nd Quarter Forecast:

• To sustain teamwork, camaraderie, and creative collisions, companies may adopt flexible schedules based on personnel who operate in the same teams or departments. 
• Tampa Bay will continue to see out-of-state businesses migrate and expand to the area, and demand for under 5,000 SF office space could remain high.
• The primary concern was the blurring of boundaries between home and work. As a consequence, throughout 2022, there was a gradual rise in the number of professionals opting for a partial return to the office, which persisted consistently month after month.

What does this mean for Tenants?

• Tenants should evaluate what is the best long-term solution for their company, considering the well-being of the company and the possibility of a hybrid, remote, or in-office job. While vacancy rates in Tampa remain low, landlords may offer rent abatement and increased Tenant Improvement allowances due to high construction costs.
• Tenants who delay office space matters until the last minute will find themselves at a disadvantage, with few alternatives and minimal, if any, leverage for negotiating based on construction timelines and competing availability.

What does this mean for Landlords?

• Landlords must consider increasing Tenant Improvement allowances for construction expenses to provide basic building standards and Tenant-specific finishing to compete for the right Tenants.
• Profit margins may be impacted by inflation, but increased rents and 3-4% annual increases can aid in the impact of inflation. Providing turn-key spec office spaces that are move-in ready for companies with pressing deadlines can help capture tenants.