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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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1st Quarter 2021 Office Market Indicators and Report

Important Highlights:

Tampa Bay:

  • Unemployment rate in Tampa Bay decreased to 4.2% in February 2021, compared to the end of 4th Quarter 2020, which was approx. 5.9%. Non-agricultural employment sector decreased and Financial Activities, Professional & Business Services and Construction were amongst the top sectors which gained jobs.
  • “The annual Cost of Living Index reported the Tampa metro area as one of the most affordable metros in the US. With a cost of living lower than the national average, Tampa Bay remains to be an attractive place for new residents and companies looking to relocate.”
  • Zillow listed Tampa amongst five markets it expects to be the hottest in 2021.
  • Class A vacancy increased to approx. 14% by the end of 1st quarter and Class B vacancy fell to 15%.

Office Market:

  • New lease demand was up by approx. 120% in Hillsborough and Pinellas County.
  • 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). 

Let’s Talk Rent Numbers:

Submarket Overall Average Asking Rent All Classes Overall Asking Rent Class A
Westshore $33.24/sq. ft.  $37.12/sq. ft.
Downtown Tampa $36.33/sq. ft. $37.95/sq. ft.
Northwest Tampa $24.20/sq. ft. $26.90/sq. ft.
South Tampa $27.64/sq. ft. N/A
I-75 Corridor $25.08/sq. ft. $27.14/sq. ft.
Downtown St. Petersburg $31.11/sq. ft. $27.06/sq. ft.

Construction Highlights:

  • New construction Landlord’s adjusted asking rents which impacted the direct asking rents across the Tampa Bay 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 2nd Quarter Forecast:

  • Total vacancy is expected to rise as current construction projects are slated to deliver in either Q2 or Q3 of this year
  • Continued relocation and expansion of companies into Tampa Bay do to our more cost-effective real estate options, Florida’s favorable regulations for business and as always, the great weather .
  • Continued increase in sublease space, especially larger block 20,000 RSF and up hitting the market as the work from home trend continues and companies evaluate their office space footprint.
  • < 5,000 RSF subleases will be subleased by companies who want to leverage the market and thus will move quicker than larger spaces.
  • Companies will be rolling out transition plans back into the office fulltime or a flex schedule. Privately held companies may transition faster than publicly traded due to the amount of decision makers involved and size of the company.

What does this mean for Tenants?

  • Evaluate your current office space floor plan and if employees wish to work remotely or in the office with what’s best for the company. Potentially moving to a flex schedule of part-time working from home and in the office can provide an alternative solution to maintain office culture while maintaining the benefits of working from home.
  • If minimizing your 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 evaluating relocating your office, take advantage of the short term and lower monthly rent of sublease office space on the market

What does this mean for Landlords?

  • Adjusting asking rents to stay competitive in the market
  • Consider 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
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3 Office Space Design Strategies To Minimize The Potential Spread of Covid

Being mindful of long term implications of Covid, the impact on your employees and office space, is a key to consider when evaluating your office space layout. 

Here are three design and layout strategies which could minimize the influx of large groups of people congregating in common areas or for employees feeling uneasy to return to work.

1) Individual Offices for Employees

The past few years an open office layout was trending for companies to create collaborative workspace areas. Going back to having employees with their own individual offices will limit exposure and minimize the amount of air being shared amongst other employees. With a surplus of subleases 

2) Tenants Have Their Own Bathrooms and Kitchen

Having a space that provides the Tenants with their own kitchen in a Full Service building is something you typically see across Tampa Bay in Westshore, Downtown Tampa and Downtown St Petersburg. Larger Tenants, when negotiating their build out in a Full Service building could have a restroom added to their build out. Negotiating any real estate transaction boils down to the economics of the deal. 

Ensuring your own restrooms is usually common for single story or single Tenant buildings. If having your own restroom is important, this will restrict what buildings you will be evaluating when touring. Considering a sublease space might be a viable option for your company! 

3) Tenant has their own entrance into the building

Similar with sharing bathrooms in a Full Service building, sharing common area entrance, lobby and even Tenant lounges or conference centers is an amenity in Full Service buildings Landlords have added. To minimize the influx of people in these areas at the same time or multiple people using the same area at different times, leasing a building where each Tenant has their own entrance will minimize any shared space.  Having your own entrance into a building is achieved by leasing a single Tenant building, meaning, you are the only Tenant leasing in the building or a building which has walk-up entrances with no common area lobby is shared. 

No one has all the answers, however; the health and safety of employees should be a top priority.  By taking the necessary precautions it will satisfy the employees and avoid adding to the surplus of sublease space. Give our team at Office Space Brokers a call 813-289-3700, for a consultation to strategize your company’s office space steps.

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4th Quarter 2020 Office Market Indicators and Report

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:

Submarket Overall Average Asking Rent All Classes Overall Asking Rent Class A
Westshore $33.51/sq. ft. $37.06/sq. ft.
Downtown Tampa $35.84/sq. ft. $38.33/sq. ft.
Northwest Tampa $23.83/sq. ft. $26.31/sq. ft.
South Tampa $27.03/sq. ft. $30.25/sq. ft.
I-75 Corridor $24.39/sq. ft. $26.39/sq. ft.
Downtown St. Petersburg $30.26/sq. ft. $31.78/sq. ft.

 

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.

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
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3rd Quarter 2020 Office Market Indicators and Report

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