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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.
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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
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2nd Quarter 2021 Office Market Indicators and Report

Important Highlights:

Tampa Bay:

  • Office vacancy rates increased in Hillsborough County and Pinellas County, both counties experienced overall growth rents of +/- 6% Year Over Year. Both Class A and Class B building’s rents grew.
  • The unemployment rate in Tampa Bay increased to 4.6% in May 2021, compared to the end of 1st Quarter 2021, which was approx. 4.2%. Non-agricultural employment sector increased and Financial Activities, Professional & Business Services, and Construction were amongst the top sectors which gained jobs.
  • Florida ranked in the number one spot for net migration for the fifth consecutive year. According to data from the U.S. Census; Florida saw the largest gain of residents between July 2019 and July 2020 with 252,717 new residents. 
  • Tampa ranked ninth in tech talent growth over a five-year span, increasing 23.5% from 2016 – 2020 in U.S. markets. Meaning Tampa acted as a job creator, supplying employment to tech workers that we’re unable to find employment in their metro of origin.

Office Market:

  • Even with a significant amount of sublease space on the market, absorption trended positive for Q2.
  • Office supply increased to historic levels due to the approximate 500,000 square feet of new construction delivered by SkyCenter One, Midtown West, and The Lofts at Midtown.

Let’s Talk Rent Numbers:

Submarket Overall Average Asking Rent-All Classes Overall Asking Rent Class A
Westshore $34.11 Sq. Ft.  $37.95 Sq. Ft.
Downtown Tampa $36.24 Sq. Ft. $37.98 Sq. Ft.
Northwest Tampa $24.02 Sq. Ft. $26.97 Sq. Ft.
South Tampa $27.48 Sq. Ft. N/A
I-75 Corridor $25.26 Sq. Ft. $28.01 Sq. Ft.
Downtown St. Petersburg $30.87 Sq. Ft. $31.73 Sq. Ft.

Construction Highlights: 

  • SkyCenter One the 497,787 s.f. The building was completed this quarter at, Midtown West and The Lofts at MidtownMidtown West
  • In Hillsborough County, there is new construction at 1001 Water Street in the 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 deliver by the end of the year. 

2021 3rd Quarter Forecast:

  • Total vacancy is expected to rise as current construction projects are slated to deliver by year’s end.
  • Tenants proceed to bring their teams back to the office as flex schedules are being tested with a hybrid of working from home and in the office. 
  • Continuing expansion and relocation by companies from out of state moving to Tampa Bay for our business-friendly environment 

What does this mean for Tenants?

  • Tampa Bay is unlike other significant markets such as New York, Los Angeles and Chicago. Although Landlords are being more flexible with the economics of leases, vacancy rates do not compare with other significant markets around the US. Landlords across the country do not have the same motivation to fill vacancies in Tampa Bay as they might be in other parts of the country.
  • Leverage market conditions by taking advantage of available sublease space which can provide more competitive rates, shorter-term and furniture 
  • Evaluate your current office space. If you realize there are inefficiencies, you and #1-sublease a portion if you there a long term remaining on the lease or #2-when your lease ends, move to a more efficient space. 

What does this mean for Landlords?

  • New lease demand grew 6.0 percent from the 1st quarter of 2021. More Tenants expanding in the market and relocating to Tampa Bay from out of state.
  • Adjusting asking rent as a competitive advantage over Landlord’s  who have to maintain their face rates
  • Consider providing more flexible lease terms and concessions, such a rent abatement to accomplish deals
  • Ensure Tenant’s have strong financials with low debt to income ratios when signing new leases
  • Start marketing available space 6 months in advance for under 5,000 SF and 9 months + for over 5,000 SF that is coming available
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Tampa Bay Submarkets

Tambay Bay Submarkets

Tampa Bay includes six counties. Below is a snapshot highlighting three, Hillsborough, Pasco and Pinellas County.  These highlighted Submarkets within the counties are a good reference point when the evaluating the area since each have their own characteristics and demographics.