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3rd Quarter 2022 Market Report

Important Highlights:

Tampa Bay:

  • Hillsborough and Pinellas Counties’ unemployment rate of 2.7% is drastically lower than the nation’s rate of 3.5%. 
  • The population of the city has grown by 1.1% year-over-year.
  • Tampa has been named one of the best places in the United States to live, according to a new ranking released by the finance brand Money.

Office Market:

  • Supply: The total vacancy rate in Tampa increased to 19.4% in the third quarter of 2022 due to 1 of Hillsborough Counties largest Tenants deciding to sublease their 556,000 SF office space. The sublease vacancy increased to 4.9%, a 40% increase from the second quarter of the year and the highest since 2002. 
  • Demand: Increase in vacant space however, the demand has continued to rise with Approx. 10% up in leasing activity year-to-date. 
  • Current Tenant Trend: There is a trend of “flight to quality” with companies being attracted to Class A and trophy buildings that are highly amenitized with cafes, Tenant lounges and collaboration areas, gyms, and focus on enhanced air quality.                                                                       

Let’s Talk Rent Numbers:

Submarket Overall Average Asking Rent-All Classes Overall Asking Rent Class A
Westshore $28.84 Sq. Ft.  $36.77 Sq. Ft.
Downtown Tampa $28.00 Sq. Ft. $38.04 Sq. Ft.
Northwest Tampa $23.16 Sq. Ft. $29.21 Sq. Ft.
South Tampa $29.93 Sq. Ft. N/A
I-75 Corridor $25.82 Sq. Ft. $28.53 Sq. Ft.
Downtown St. Petersburg $27.19 Sq. Ft. $38.04 Sq. Ft.

 

 Building Highlights: 

  • The most significant recent transaction may have been the sale of the recently delivered, two-building Heights Union property to Atlanta-based Cousins Properties. The two properties that TPA Group sold, totaling 294,000 SF, sold for $144.8 million, or a cap rate of 3.2%. The buildings were 93% occupied when they were ultimately constructed in late 2020, with businesses in the life sciences sector like Pfizer and Axogen occupying over 70% of the leased space.

 

2022 4th Quarter Forecast:

  • Companies will continue bringing employees back into the office with increased frequency. Those who are maintaining a flex schedule may find it beneficial to schedule to be based on employees who work in teams or departments to maintain synergy, comradery, and creative collisions. 
  • If a company has delayed their office related to the last minute, they will find themself at a disadvantage with limited options and in a position of inferiority when negotiating 
  • Office vacancy rates will slightly uptick but Tampa Bay will continue to experience companies in the tech industry and cyber security relocate to Tampa Bay and/or require a larger office footprint

What does this mean for Tenants?

  • Decide what is best for the long-term health of your team and company. What do mentorship, professional development, and opportunities for younger employees look like if work was 100% remote? Is it a remote, in the office, or a hybrid? Testing a hybrid [mix between working from home and in the office] can be a compromise. 
  • Although Landlords are more willing to provide rent abatement and Tenant Improvement allowance, the vacancy rates are not similar to those in other big US areas, and not experiencing the same “pain”. 
  • High construction costs mean a more expensive build-out. Landlords will require longer,  7-10 + year leases to recoup those costs. 
  • Annual increases have typically been 3% on annual basis but some Landlords are beginning to increase to 4% and above.

 

What does this mean for Landlords?

  • Construction costs remain high and will have to increase Tenant Improvement allowances to deliver basic building standard finishes and significantly for upgraded finishes to win deals.
  • Having turn-key spec office suites that are ready for Tenants who have quick deadlines due to holding off their office move, will have an advantage in winning new Tenants.
  • Inflation will continue to be a factor and will impact profit margins.
Chelsea Drinkard No Comments

2nd Quarter 2022 Tampa Bay Office Market Report and 3Q Forecast

low angle photography of gray tower crane

Important Highlights:

Tampa Bay:

  • Tampa’s office vacancy rates are roughly 11.82% for all types of buildings. 
  • The unemployment rate in Tampa Bay has decreased to 2.5% in March of 2022, compared to the end of the 1st Quarter 2022 of 3.50%, Tampa Bay is below the national average of 3.50%
  • Tampa Bay is the third-fastest-growing metropolitan region in the US for entrepreneurs.

Office Market:

  • Office vacancy rates in Tampa are approx.11.82% between all office building class types and Class A buildings 2.15%
  • Tampa’s overall rent has increased by 5.00% this year to 37.8% compared to 2021 which was 32.8%
  • Tampas business-friendly environment, companies from out of state will continue to develop and migrate to Tampa Bay

Let’s Talk Rent Numbers:

Submarket Overall Average Asking Rent-All Classes Overall Asking Rent Class A
Westshore $27.70 Sq. Ft.  $37.01Sq. Ft.
Downtown Tampa $19.05 Sq. Ft. $35.57 Sq. Ft.
Northwest Tampa $21.62 Sq. Ft. $26.24 Sq. Ft.
South Tampa $28.89 Sq. Ft. N/A
I-75 Corridor $24.31 Sq. Ft. $27.70Sq. Ft.
Downtown St. Petersburg $24.98 Sq. Ft. $35.95 Sq. Ft.

Construction Highlights: 

  • Construction costs continue to rise due to inflation. 
  • Tenants should be prepared to sign a longer lease 7+ years to absorb construction costs and pay out of pocket. 

2022 3rd Quarter Forecast:

  • With new buildings likely to be finished by the end of the year, total vacancy is predicted to rise as more available space enters the market. 
  • Flex schedules, which combine working from home and in the office, will continue to be tested. When faced with such short constraints, companies that have postponed their relocation and growth choices may find themselves with fewer options and less leverage when bargaining. 
  • Our business-friendly environment, companies from out of state will continue to develop and migrate to Tampa Bay

 

What does this mean for Tenants?

  • Despite landlords being more lenient with lease economics, vacancy rates are not comparable to other significant markets in the United States. Landlords in Tampa Bay are not as driven to fill vacancies as they are in other parts of the country. 
  • Take advantage of market conditions. 
  • Take a look at your existing working situation. Is your staff content with their jobs?

 

What does this mean for Landlords?

  • Changing the asking rent to obtain a competitive advantage over landlords who are obligated to maintain their face rents 
  • More flexible lease periods and concessions, such as a rent decrease, should be made available. 
  • Start advertising open space six months ahead of time.
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1st Quarter 2022 Tampa Bay Office Market Report and Q2 Forecast

gray building

Important Highlights:

Tampa Bay:

  • Office vacancy rates in Tampa are around 13.4% for all over class buildings 
  • The unemployment rate in Tampa Bay has decreased to 3.50% in January 2022, compared to the end of the 4th Quarter 2021, which was approx. 4.8%. Compared to the national average which is 3.6%
  • Tampa Bay is third in the nation among the fastest-growing metropolitan areas for entrepreneurs

Office Market:

  • As everyone is still recovering from the pandemic, more companies are continuing to make decisions of going back to office full time, testing flex working schedules and making their office space decisions of relocating, expanding or consolidating their office if their lease is ending in 2022.
  • Despite the fact that there was a substantial amount of sublease space on the market, absorption in Q4 2021  was positive, this was mostly due to the smaller block sublease space being leased by Tenants with short lead times and/or new companies moving into the Tampa market.
  • The most significant activity was for office spaces Downtown Tampa and secondly in Westshore for 1,000 SF-5,000 SF spaces. Companies have delayed their decisions with relocating their offices as they continue to maneuver the changing of their office environment, leaving short time frames before leases end. Landlords who have move-in ready spaces experienced a competitive advantage to capture Tenants who had quick timelines for identifying a new office before their current lease ends.

 

Let’s Talk Rent Numbers:

Submarket Overall Average Asking Rent-All Classes Overall Asking Rent Class A
Westshore $34.15 Sq. Ft.  $37.99 Sq. Ft.
Downtown Tampa $36.31 Sq. Ft. $37.98 Sq. Ft.
Northwest Tampa $24.12 Sq. Ft. $26.96 Sq. Ft.
South Tampa $27.48 Sq. Ft. N/A
I-75 Corridor $25.26 Sq. Ft. $28.06 Sq. Ft.
Downtown St. Petersburg $30.89 Sq. Ft. $31.76 Sq. Ft.

 

Construction Highlights: 

  • In Hillsborough County, there is new construction at 1001 Water Street in the Central Business District (CBD), Midtown Two in Westshore, and an office building in the University of South Florida Research Park in the Northwest submarket.  These are expected to be delivered by the end of the year. About 900,000 SF of new construction coming to the market by 2022.

2022 2nd Quarter Forecast:

  • As new construction underway is projected to be completed by the end of the year, total vacancy is expected to climb with the increase of available space coming to market. 
  • Flex schedules will continue to be experimented with a combination of working from home and in the office. Companies who have delayed their relocation and expansion decisions, may experience limited available options and lose leverage when negotiating when facing such short timeframes. 
  • Companies from out of state will continue to expand and relocate to Tampa Bay because of our business-friendly atmosphere and Tampa Bay was voted the number one sports city in 2021. Click here to read more about why so many businesses are moving to Tampa.

    What does this mean for Tenants?

  • Vacancy rates do not comparable to other key markets in the US, despite Landlords being more liberal with lease economics. Landlords in Tampa Bay are not motivated in the same way that they are in other parts of the country to replace vacancies. 
  • Tenants can leverage market circumstances to their advantage.
  • companies need to examine their current work environment and engage in employee feedback. Feedback will bring clarity to their developing office space culture and the role it plays in the overall health of their company. 

 

What does this mean for Landlords?

  • Demand for new leases increased by 8.0 percent in the first quarter of 2022. More out-of-state tenants are still expanding in the market and migrating to Tampa Bay. 
  • Adjusting the asking rent to gain a competitive edge against Landlords who must keep their face prices.
  • Provide more flexible lease terms and discounts, such as a rent reduction. 
  • Start promoting available space 6 months in advance.
Chelsea Drinkard No Comments

4th Quarter 2021 Tampa Bay Office Market Report and 2022 Forecast

Important Highlights:

Tampa Bay:

  • Office space leasing has been increasing rapidly close to what it was pre-pandemic 
  • The unemployment rate in Tampa Bay decreased to 4.9 % in December of 2021 and is expected to decrease even more in 2022
  • Average direct asking rentals are up .5 percent from last quarter, soon to be back at pre-pandemic rates
  • Rent is up 28% in the Tampa Bay Area 

Let’s Talk Rent Numbers:

Submarket Overall Average Asking Rent-All Classes Overall Asking Rent Class A
Westshore $33.43 Sq. Ft.  $28.04 Sq. Ft. 
Downtown Tampa $40.56 Sq. Ft.  $47.89 Sq. Ft. 
Northwest Tampa $24.01 Sq. Ft.  $28.92 Sq. Ft. 
South Tampa $23.33 Sq. Ft.  N/A
I-75 Corridor $ 24.88 Sq. Ft.  $28.23 Sq. Ft. 
Downtown St. Petersburg $31.45 Sq. Ft.  $32.77 Sq. Ft. 

2022 1st Quarter Forecast: 

  • Confidence in the Tampa Bay market is high, going into the last quarter of 2022 amid sustained new-to-market tenancy.
  • Tenants will proceed to bring their teams back to the office more so in 2022
  • By 2022 remaining new construction space with many buildings is expected to be over 60% leased. 

What does this mean for Tenants?

  •  Managing market expectations in key areas where office vacancies are higher than in Tampa Bay. Due to lower vacancy rates than key markets such as New York and Los Angeles, landlords in Tampa Bay are not as driven to replace vacancies as they are in other areas of the country.
  • Use available sublease space to take advantage of the market conditions we do have, which can give more reasonable rates, shorter terms, and any available furnishings.

What does this mean for Landlords?

  • To acquire a competitive advantage against Landlords who retain their face rates, evaluate concessions for tenants by changing asking rents and increasing Tenant Improvement Allowances. 
  • Make lease terms more flexible. 
  • Expect a surge of new products to hit the market. Tenants from other states are growing or migrating to Tampa. 
  • Start marketing available space 6 with a longer lead time for office space that will become available in the near future.
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3rd Quarter 2021 Office Market Indicators and Report

Important Highlights:

Tampa Bay:

  • Within the last 5 quarters, office space leasing has been increasing rapidly.
  • Tampa Bay Wave ranked #1 in Florida for the organization with the greatest number of startups receiving investments!
  • The unemployment rate in Tampa Bay increased to 5.0% in October 2021, compared to the end of 2nd Quarter 2021, which was approx. 4.6%. 
  • Average direct asking rentals are down 2.5 percent year over year, owing mostly to re-pricing in certain availabilities that have been on the market for more than a year. In contrast, several Class A buildings in Westshore raised their asking prices to $42.00 per square foot, bringing them closer to pre-pandemic values.
  • For the sixth year in a row, Florida has been rated first in net migration. According to the United States Census Bureau, Florida gained the most inhabitants between July 2019 and July 2020, with 252,717 additional residents.

Office Market:

  • Office vacancy rates increased in Hillsborough County and Pinellas County to around 12% but have remained fairly constant. 
  • Both Class A and Class B building’s rents grew more than 2%, placing Tampa in the top 15 markets in the US with average office rentals of more than $25 per square foot. 
  • Absorption trended negative for the quarter and remains negative year-to-date, but several submarkets recorded positive quarterly absorption.
  • Westshore submarket which leads in year-to-date absorption with over 140,000 s.f. Nearly all the quarter’s negative absorption took place in the Northwest Tampa submarket.

 

Let’s Talk Rent Numbers:

Submarket Overall Average Asking Rent-All Classes Overall Asking Rent Class A
Westshore $34.42 Sq. Ft.  $38.57 Sq. Ft. 
Downtown Tampa $41.26 Sq. Ft.  $45.48 Sq. Ft. 
Northwest Tampa $24.96 Sq. Ft.  $27.11 Sq. Ft. 
South Tampa $24.16 Sq. Ft.  N/A
I-75 Corridor $ 25.19 Sq. Ft.  $28.23nSq. Ft. 
Downtown St. Petersburg $30.55 Sq. Ft.  $30.88 Sq. Ft. 

Construction Highlights: 

  • The 380,000 s.f. was completed this quarter at 1001 Water Street in Tampa. Additionally, 500,000 s.f. was delivered earlier this year at SkyCenter One, Midtown West, and The Lofts at Midtown, all in the Westshore submarket.

2021 4th Quarter Forecast:

  • Confidence in the Tampa Bay market is high, going into the last quarter of 2021 and into 2022 amid sustained new-to-market tenancy.
  • Total vacancy is expected to remain the same through the rest of 2021
  • Tenants will slowly proceed to bring their teams back to the office 
  • By mid-2022 remaining new construction space with many buildings is expected to be over 50% leased.

What does this mean for Tenants?

  •  Managing market expectations of primary markets that are experiencing higher office vacancies than Tampa Bay. Landlords in Tampa Bay are not motivated in the same way that they are in other parts of the country to replace vacancies due to the lower vacancy rates than primary markets such as New York and Los Angeles. 
  • Take advantage of market circumstances we do have by making use of available sublease space, which can offer more reasonable rates, shorter terms, and any available furniture.

What does this mean for Landlords?

  • Evaluate concessions for Tenants by adjusting asking rents, higher Tenant Improvement allowances to gain a competitive edge over Landlords who maintain their face prices
  • Provide more flexible lease terms 
  • Expect an increase of new to market Tenants are expanding or relocating to Tampa from other states
  • Start marketing available space 6 with a longer advanced lead time for office space that is coming available