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Will The Office Market Experience a Surplus of Sublease Space?

While many office space locations remain nearly vacant to prevent the spread of the coronavirus, one question remains certain: “Will the Office Market Experience a Surplus of Sublease Space?” The short answer…it’s too early to tell. However, events such as the election, a second potential lockdown in Tampa Bay and 4th quarter happenings will play a vital role in the response.


2020 Presidential Election:
Historically, new administration brings new policies which impact the business sector. With the 2020 Presidential election now behind us, we play the waiting game. A new administration, new policies will be rolled out in the beginning of 2021, this could impact major decision makers as they decide what is next for their company for 2021 and the future.


A Second Lock Down:
Another hot topic that has been on everyone’s minds: “Will there be another lock down?” Since Europe has recently entered into their second lock down and now we are seeing states like California, Illinois and New York transition back into a severe lock down, is this on the horizon for Florida? Whether Florida experiences a second lock down or not, companies whose Corporate Headquarters in Illinois, New York and California, are announcing maintaining a work from home policy through 2021 or later. What does this mean for Landlord’s in Tampa Bay? The same companies who have additional offices in markets like Tampa or St Petersburg are maintaining their work from home policies across their entire company for consistent company culture, even though Tampa, has different Covid restrictions and regulations.


4th Quarter Happenings:
As we quickly approach the end of 2020 and the fourth quarter is in full swing, we are going to start seeing companies begin to strategize their future plans for office space. Typical commercial office space lease in Tampa Bay have running a minimum of 5 years. Many companies have been forced to allow their employees to work from home and satisfy the rent on their lease. However, as companies near the end of their lease some will begin to test the market by reducing the size of their office space or even taking the huge leap to go completely remote.


With so much change and uncertainty over the past year it’s hard for many to tell what 2021 could bring. Having a Tenant Representative on your side will provide an advantage only an expert with their ear to the ground on a daily basis can deliver insight and market specialization. Give our team at Office Space Brokers a call 813-289-3700, for a consultation to strategize your company’s office space steps.

Chelsea Drinkard No Comments

How COVID-19 Has Changed Office Space Design

As we quickly near the end of the month of September, I think we can all agree that COVID-19 is still relevant. While a great deal of people continue to work from home, many have returned to the office. So, many have asked how the Corona Virus has changed the future of office space? Office space as we once knew it has changed and continues to change as new information about the virus evolves. Three particular things come to mind when you think about how COVID-19 has changed the design and layouts of offices: touch-less technology, open-space office concepts and flex schedules.

Touch-Less Technology

Pre-COVID many companies had already began implementing touch-less forms of technology such as automatic doors or automatic sinks, soap and paper towel dispensers (in restrooms/break rooms). However, as offices began to reopen after quarantine, companies understood that they would need to invest touch-less technology to ensure the safety of their employees. Some companies have even gone the extra mile and invested in ultra-violet lights, which can kill both virus and bacteria. These can be used to both disinfect workspace surfaces and limit human contact by monitoring how many people are in the workplace.

Open-Space Office Concepts

The trend of open space office layouts may be a thing of the past. For years, many companies found ways to get creative and fully utilize the space they had by introducing an open-space office concept. Rather than having a bunch of small offices or cubicles, long tables were introduced to create a cohesive work environment and bring employees together. Due to social distancing rules, companies may need to say good bye to the open concept plans. Many people are going to be looking for that extra space before even thinking about going back to work. Employees are going to look for the separate offices or cubicles to ensure their own safety. Cushman & Wakefield are testing a new concept called the “Six Feet Office,” which will display visual foot traffic routing in the office to keep people six feet apart. The wheels are definitely turning; however, companies are going to need to get creative!

Flex Schedules

Another way companies have strategized getting employees back into the office safely is through flex work schedules. Companies are breaking teams up into smaller groups and staggering them throughout the week. By implementing flex schedules and prioritizing whom needs to be in the office more, companies are able to start getting employees back in the building in a safe way.

No one has all the answers, however; the health and safety of employees should be a top priority.  Give our team at Office Space Brokers a call 813-289-3700, for a consultation to strategize your company’s office space steps.

Chelsea Drinkard No Comments

2nd Quarter 2020 Office Market Indicators and Report

2019 was a strong year and as we headed into 2020, the market was projected to be steadfast. The pandemic struck mid-first quarter. In second quarter, we came out on the other side of a full quarter in the mist of the pandemic. The market did experience an impact with new leasing demand dropping approx. 50% from the first quarter.

Sublease supply is still down from 2019 due to large companies securing the supply and sublease terms expiring.

New construction has been hyper focused 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 decreased of service type businesses. Reference our Quarter 4 2019 market report here for comparison.

Important Highlights:

  • Unemployment rate in Tampa Bay increased to to 13.1%, compared to end of Quarter 2019 was approx. 2.7%
  • Tampa Bay’s jobs were impacted with nonagricultural employment decreasing by approx. 7.4%. Job growth based on year-over-year, was experienced in Construction with 300 jobs and Government sector with 100 jobs
  • Class A vacancy increased to approx. 12% by the end of 2nd quarter and Class B vacancy to over approx. 15%.

 

Let’s Talk Rent Numbers

Submarket Overall Average Asking Rent All Classes Overall Asking Rent Class A
Westshore $33.85/sq. ft. $38.00/sq. ft.
Downtown Tampa $34.62/sq. ft. $36.39/sq. ft.
Northwest Tampa $22.00/sq. ft. $24.40/sq. ft.
South Tampa $29.60/sq. ft. N/A
i-75 Corridor $22.53/sq. ft. $25.78/sq. ft.
Southwest $19.75/sq. ft. $24.00/sq. ft.
Downtown St. Petersburg $28.20/sq. ft. $31.00/sq. ft.

Construction Highlights:

Despite recent events, Heights Union and SkyCentre One are both projects underway in Downtown Tampa projected for 2020 occupancy and approx. 60% preleased. Midtown has new leases signed by national retailers. Sparkmarn Wharf is renovating the office portion creating 200,000 sf of office space and recently landed Industrious, coworking office space as a Tenant.

2020 3rd Quarter Forecast:

  • Companies may provide more flexible options for employees with hybrid of work from home and the office scenarios.
  • Build outs that were in process to be adjusted to more social distance measures
  • Companies with leasing up for renewal may shift their office footprint to provide an environment where employees feel comfortable and safe in the office
  • The fluidity of Covid will continue to determine the long-term impacts on the office sector as the year continues and the upcoming election

What does this mean for Tenants?

  • Potential opportunity when signing new leases for rental concession such as shorter lease terms, free rent abatement and Tenant Improvement allowance
  • Evaluate if Covid has and will make a lasting impact on your business with work flow layout in the office and number of people who are in the office on a regular basis. Thinking your office footprint may need to adjust in size? Use our calculator here to determine your ideal office space size
  • If you lease renewal is coming up in the next 24 months and unsure about your business’ office space needs? Read this article for 3 keys when determining your next steps. 
  • Now is the time to have a Tenant Representative Broker advocating on your behalf. Having an advisor on your side who has their finger on the market pulse and long-standing relationships with Landlord Agents will deliver the best terms possible.

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
Chelsea Drinkard No Comments

What Are My Options to Eliminate My Office Space Rent?

The market has plummeted and now your business is taking a hit. Furthermore, you are not able to go into your office because it is not considered “essential” or out of the risk of your employees’ health and safety.

Every lease is written differently but there could be a few clauses that may be arguable in your favor. We are not attorneys and can’t provide legal counsel, however, we have identified and selected attorneys who are experts in Force Majeure and Impossibility Clause. Below are 3 action steps you can take to minimize any financial overhead you have with your Landlord.

PPP Loan.
The PPP Loan can be used towards office space rent, utilities and interest on a mortgage. If you have not already and missed the first round of funding, take advantage of the second round. You will want to apply directly through your bank. It is recommended you apply through your existing bank.

Make an Appeal to Landlord.
Ask your Landlord if you can forgo rent for the next ninety days. Not all Landlords would be accepting to this but it does not hurt to ask. A way this could be presented is the next ninety days is waved and then owed in addition to your next rent payment. For example, rent for May, June and July could be waved and on August 1st rent May-August will be due. Another scenario, you could tack it on to the end of the lease or spread the rent over the next several months. There are several ways this could be accomplished depending on the Landlord’s appetite and the Tenant’s ability to pay.

Review Your Lease.
As we stated in the beginning, every lease is different. Dig up your lease and you will want to review for two clauses, Force Majeure and Impossibility clause. Both of these clauses could provide means to bring to your Landlord but that would be for a Real Estate Attorney to advise. Force Majeure is defined as “unforeseeable circumstances that prevent someone from fulfilling a contract”. Impossibility is defined as “is an excuse for the nonperformance of duties under a contract, based on a change in circumstances (or the discovery of preexisting circumstances), the nonoccurence of which was an underlying assumption of the contract, that makes performance of the contract literally impossible.”

Additionally, the State of Florida is a very Tenant friendly state in regards to laws between Landlords and Tenants compared to other states. Having a Tenant Representative provides a competitive advantage to understand the pulse of the market and insider only, knowledge. Give our team at Office Space Brokers a call 813-289-3700 or email at cd@officespacebrokers.com to evaluate your company’s office space solution and walk you through this process to minimize your financial risk while you business is at a standstill.

Chelsea Drinkard No Comments

My Office Space Lease Is Coming Up and The Economy Just Plummeted

Is your lease coming up in the next 6-9 months? If so, your decision to renew or relocate will have a few additional factors to consider when making the decision.

It is typical for a lease renewal deadline to be given in writing to a Landlord at least 6 months prior to the lease ending. You might find yourself in this situation, your lease is up in the next 6 months and not sure if you plan on relocating or renewing?

Check your lease for a Renewal Deadline.

We wrote a blog giving you a map, to avoid hidden traps when renewing your office space lease. Use a fine-tooth comb to check when your notice, if you chose to renew your lease, is due to the Landlord. Double check there is no requirement to notify the Landlord you will not be renewing. If you need more time, go ahead and ask the Landlord for an extension on the notice to provide to the Landlord whether you wish to renew. Office Space Brokers clients, we give clients a thirty-six, twenty-four, twelve and six month reminders to assist in this planning process.

Make a Scenario A and Scenario B plan.

Create two scenarios for your office space requirements. Scenario A is best case scenario for your business and Scenario B is worst case on how you foresee your office space needs will be impacted. Office Space Brokers provides a free resource on our website where you can calculate your office space requirements based on your ideal layout. Click here to access the calculator. 

Create Your Budget.

What is your Scenario A and Scenario B office budget? If your budget drastically decreases but the office space size requirements stays the same, considering a different submarket or changing the class of building you lease, can provide the opportunity to meet your budget. When you change from a Class A building to a Class B building that is something that could change the type of lease structure. Click here to read more about the three most common lease structures.

Commercial Real Estate typically responds to market shifts and not necessary and economic leader. As I am writing this article, it is too early to see the lasting impact except for the noticed impact in the small retail and restaurant businesses.

Having a Tenant Representative on your side will give you the pulse of the market and insight only having your ear to the ground on a daily basis can provide. Give our team at Office Space Brokers a call 813-289-3700 or cd@officespacebrokers.com to evaluate your company’s office space solution.