Important Highlights:

• Unemployment rate in Tampa Bay decreased to 5.9% in November 2020, compared to the end of 2nd Quarter 2020, which was approx. 9.0%. Non-agricultural employment sector decreased and manufacturing and wholesale were amongst the top sectors which gained jobs.
• New leases were down by approx. 50% in Hillsborough and Pinellas County for 2020 compared to 2019.
• Office supply increased due to large sublease blocks on the market and over 570,000 square feet of new construction deliveries by Heights Union West (Tampa Heights), Sparkman Wharf (Channelside) and Renaissance Center VII (Northwest Tampa).
• Tampa-St. Petersburg-Clearwater combined statistical area fourth in the U.S. in terms of the biggest net inflow of new residents. Tampa Bay gained about 47,000 people last year
• Class A vacancy increased to approx. 14.2% by the end of 4th quarter and Class B vacancy to over approx. 15.9%.

Let’s Talk Rent Numbers:

Construction Highlights:

• New construction Landlord’s adjusted asking rents which impacted the direct asking rents across the Tampa Bay Market. 
• Record high since 2008 of new construction delivered to the market.
• SkyCenter One, 270,000 square feet of new office space building under construction at the Tampa International Airport, 384,000 square feet Water Street project in Downtown Tampa and the 384,000 square feet Midtown project, just North of the Westshore submarket, continue to announce national Tenants and are slated to be completed by end of 2021. 

2021 1st Quarter Forecast:

• Continued increase in sublease space hitting the market as the work from home trend continues and companies evaluate their office space footprint
• Redevelopment of shared Tenant “Touchless entry, access, and reservation systems could take off, with personal devices replacing building IDs, security cards and elevator access systems, as well as traditional ways of reserving conference and amenity space.”
• Zillow listed Tampa among the five markets it expects to be the hottest in 2021 which is an indicator of companies relocating or expanding into Tampa. 
• Transition of flexible schedules mixed with working from home and in the office, hot desks can be a solution versus dedicated offices or workstations. Hot desk, a shared workstation or office with other employees who are in the office on different days of the work, allows for a smaller office footprint.
  • Here is a recent article we wrote about how to corona virus could change the future of office space.

What does this mean for Tenants?

•  If a Tenant determines minimizing their office footprint is the right decision there are two solutions: sublease the entire or a portion of their suite. Both scenarios will minimize the monthly financial burden 
• If a Tenant is willing and able to sign a 5+ year lease, they are in a position of strength with increased probability to receive rent concessions
• Evaluate whether moving into a sublease versus a direct lease with a Landlord is the right solution to take advantage of discounted rental rates and favorable terms of subleases (lower rent, shorter term, furniture etc.)

What does this mean for Landlords?

• Adjusting asking rents to stay competitive in the market
• Determine solutions for long term implications of Covid with repurposing empty space in multi-Tenant buildings and update air quality and filtration systems
• 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

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

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