In 2020, the market was projected to remain consistent however, the pandemic struck mid-first quarter and by the end of the second quarter, new leasing demand dropped approx. 50% from the first quarter.
The supply of sublease space is down from 2019 due to large companies securing what was on the market and sublease terms expiring before a subtenant being identified.
The bulk of new construction was located in Hillsborough County, with approx. 1.4 million square feet and approx. 895,000 square feet in the Central Business District.
Here is a recent article we wrote about how the corona virus could change the future of office space. There has been an increase in retail vacancy due to the restrictions especially for small business owners of restaurants and bars. The warehouse sector has experienced explosive growth with increased demand of service type businesses. Reference our 2nd Quarter 2020 market report here for comparison.
Important Highlights:
- Unemployment rate in Tampa Bay decreased to 5.9% in September 2020, compared to the end of 2nd Quarter 2020, which was approx. 9.0%
- Tampa Bay’s jobs were impacted with nonagricultural employment decreasing by approx. 4.3%. Job growth based on year-over-year, was experienced in Construction with 1,400 jobs and Wholesale Trade sector with 500 jobs
- Class A vacancy increased to approx. 13.8% by the end of 3rd quarter and Class B vacancy to over approx. 14.9%
Let’s Talk Rent Numbers
| Submarket | Overall Average Asking Rent All Classes | Overall Asking Rent Class A |
| Westshore | $33.45/sq. ft. | $37.27/sq. ft. |
| Downtown Tampa | $35.80/sq. ft. | $38.30/sq. ft. |
| Northwest Tampa | $24.08/sq. ft. | $26.49/sq. ft. |
| South Tampa | $28.06/sq. ft. | N/A |
| I-75 Corridor | $23.67/sq. ft. | $25.93/sq. ft. |
| Downtown St. Petersburg | $30.07/sq. ft. | $31.49/sq. ft. |
Construction Highlights:
Despite recent events, the Water Street and Midtown projects remain underway and are slated to be complete in the coming quarters. Water Street will add over 384,000 square feet of office space and Midtown will add over 150,000 square feet to Downtown.
2020 3rd Quarter Forecast:
- Companies may provide more flexible options for employees with hybrid of work from home and the office scenarios
- New office build out may be modified to reflect social distance measures
- Companies with leases ending may adjust their office layout to deliver an environment that might minimize the use of common areas and more individual offices
- The on-going changes of Covid will continue to dictate the long-term impacts on the office sector as the year continues and the upcoming election
What does this mean for Tenants?
- Take time gage your team’s perspective and concerns of Covid scenarios such as creating a hybrid of working from home and shifts coming into the office may be a solution. Evaluate, if Covid impacts are long term, how does that impact the company culture?
- More likely to receive rent concessions for signing a 5 year + lease term
- Class A Landlords are maintaining their asking face rates but willing to make deals more favorable with free rent and Tenant Improvement allowance
What does this mean for Landlords?
- Potential for downward pressure on rents Tenants may be willing to pay
- Providing more flexibility in lease term and concessions to accomplish deals
- Ensure Tenant’s have strong financials with low debt to income ratios when signing new leases
- Landlords are going to have to manage expectations for the next 5 years and adjust for the future