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4th Quarter 2024 Tampa Bay Office Market Report and Forecast

Economic Factors:

  • Although Tampa Bay’s unemployment rate increased to 3.8% in Q4, it still falls below the national rate of 4.0%.
  • “The area’s private sector employment increased by 17,500 jobs (+1.2 %) over the year in December 2024. In December 2024, the Tampa metro area also led the metro areas in job gains over the year in education and health services, adding 7,900 jobs; and information, adding 1,500 jobs” says the Florida Commerce.
  • Inflation Rate was up 1.6% as of Nov. 2024 in past 12 months via the US Bureau Labor Statistics. 
  • Per the Regional Competitiveness Report, “Tampa Bay is once again first in net migration and in the top five for in-migration ages 25-34 and business startup rates.”

Key Metrics in the Office Market:

  • 2024 ended with +/- 11% quarter-over-over increase in leasing activity.
  • Tampa Bay’s overall asking rates amongst all  building classes continued to increase reaching an all time high up +/- 3% Year-over-year and +/- 2.5% in Class A buildings. Class A buildings were predominantly driving the asking rate increase and quality Class B buildings experienced +/- 5% rent increase.
  • Majority of leasing activity occurred in Westshore Business District.
  • Overall vacancy ended at +/- 20% with Class A buildings at +/- 15%

Let’s Talk Rent Numbers:

Submarket Overall Average Asking Rent-All Classes Overall Asking Rent Class A
Westshore $36.00 Sq. Ft. $41.25 Sq. Ft.
Downtown Tampa $42.80 Sq. Ft. $45.00 Sq. Ft.
Northwest Tampa $28.25 Sq. Ft. $32.65 Sq. Ft.
South Tampa $37.25 Sq. Ft. N/A
I-75 Corridor $26.00 Sq. Ft. $27.20 Sq. Ft.
Downtown St. Petersburg $38.75 Sq. Ft. $39.50 Sq. Ft.

Building Highlights:

  • Midtown East: The Primary new office construction of 85,000 SF is the second phase of Midtown Tampa, mixed use project located in the heart of Tampa. 50,000 SF has already been preleased.

2025 1st Quarter Forecast:

What does this mean for Tenants?

Advantages:

  • Companies who desire to be in suburban areas such as Northwest Tampa in near Hillsborough Avenue/ Veterans Expressway and Carrollwood and I-75 Corridor,  have more negotiating leverage on rental rate and lease concessions due to the higher vacancy rates in buildings.
  • Tenants in the 10,000 + Square Foot range have a stronger position across all Submarkets when negotiating with Landlords.

Challenges:

  • Flexible work schedules with a mix of in office and work from home, continues to be a work in progress as companies evaluate what is best for their team. Every industry is different and everyone company is different.
  • Class A may continue to trend higher with limited new construction forecasted in the future and the flight to quality and work where you live trend.
  • The continued shift of focusing on strategic office location with surrounding amenities and environment that compel employees to want to come into the office can drive companies to the same Submarkets and buildings, creating vacancies in less desirable buildings and competition in others.

Considerations:

  • Allowing plenty of lead time before a lease ends is vital when evaluating Westshore and Downtown Tampa Core for a relocation or expansion.
  • If Tenants are finding themselves in place of uncertainty for their office space, Coworking solutions have become very common in Tampa Bay, providing a mix of individual offices and conference rooms to be used for monthly and quarterly meetings.
  • Companies footprints and office schedules are shifting, under 5,000 Square Feet office spaces may have more competition that pre-pandemic.
  • Tenants who are considering subleasing their space, positioning the space below market rent and (if there is a long remaining lease term) considering offering shorter lease terms for companies are looking for shorter lease terms Landlords typically do not agree to will provide an advantage among other spaces.

What does this mean for Landlords?

Opportunities:

  • Carving up larger office Suites for < 5,000 Square Feet Tenant’s to lease, although a high initial investment, can pay off long term with diversification of leases rolling and smaller vacancies.
  • Landlords with buildings located in Downtown Tampa Core or Westshore Business District, with onsite and nearby amenities should experience the most leasing activity and ability to be more selective when evaluating Tenants.

Challenges:

  • Buildings located in suburban corridors like the Northwest and i-75 are experiencing the highest vacancy rates with companies minimizing their office footprints and focusing on prime locations.

Considerations:

  • Landlord’s in high vacancy areas, can offer additional incentives for Tenants with shorter lease terms, higher Tenant Improvement allowance and rent abatement to incentivize companies to consider a building and location they typically would not.
  • Frequency of office space use and operational layouts are being reimagined and repurposed, consider providing conference room space for Tenants who only need use of a conference room on a monthly or quarterly basis.
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Second Quarter 2024 Tampa Bay Office Market Report and Forecast

2nd Quarter Tampa Bay Highlights:

Office Market:

  • Westshore and Downtown Tampa asking rents are +/- $6.75 PSF above the average of the surrounding areas, proving the demand for these particular submarkets for their location, amenities and quality buildings.
  • Vacancy rate in Tampa CBD is 15.5% and Westshore in 14% is substantially lower than the major metropolitan cities around the country including New York and Chicago.
  • Companies are continuing to come back to the office more on a regular basis as flexible work schedules continue to be tested. Mondays and Friday seem to be the day remote is most commonly occurring.

Let’s Talk Rent Numbers:

Submarket Overall Ave.  Asking Rent-All Classes Overall Ave. Asking Rent Class A
Westshore $32.50 Sq. Ft. $40.10 Sq. Ft.
Downtown Tampa $41.50 Sq. Ft. $43.36 Sq. Ft.
Northwest Tampa $24.50 Sq. Ft. $26.59 Sq. Ft.
South Tampa $25.25 Sq. Ft. $30.54 Sq. Ft.
I-75 Corridor $25.75 Sq. Ft. $28.57 Sq. Ft.
Downtown St. Petersburg $32.25 Sq. Ft. $37.52 Sq. Ft.

New Development Highlights:

  • Gas Worx: Ybor City real estate investor Darryl Shaw’s Gas Worx is a mixed-use development remaking older industrial and vacant properties between Ybor and the Channel District into a walkable area planned to have over 140,00 square feet of retail and 500,000 square feet of office space is 50% preleased before ground breaking. Grow Financial and Masonite, are the two current anchor Tenants in preleasing.
  • Midtown East: Second phase of Midtown with 177,000 Square Feet of mixed use space is under construction with expected completed in 2024.

2024 3rd Quarter Forecast:

  • More sublease space with longer, 3+ year remaining lease terms will come to the market while Tenants are restructuring their office needs and might have taken on more space during an expansion in a building they no longer need.
  • Asking face rates will remain of the same and decrease slightly in the Westshore, Central Business Districts

What Does This Mean for Tenants?

Advantages:

  • Landlords are more willing to give Tenant concessions of free rent and Tenant Improvement allowance. Depending on the Landlord, some are more flexible than others on the asking face rate, depending on the deal terms.
  • Leveraging sublease space can be a great solution for some Tenants who are targeting shorter lease terms and/or often lower rates. Increase in subleases with longer lease terms remaining 3+ years, can still provide a good solution with Improvements already completed in the Suite, lower asking rent or free rent.

Challenges:

  • Asking rates increased in first quarter and have maintain steady in the second quarter. Not as many tenants have vacated their spaces when their lease expires, although asking rental rates have gone up over the last five years.
  • Although many employees have returned to the office, identifying the right balance of in office and working remotely is a normal conversation for deciphering what best for the company culture. Important to note, each company is different and not one solution is best. Reimaging the purpose of your office space and what role do you want it to play within the company is a great start for this conversation.
  • If a Tenant has a Base Year prior 2022, they are experiencing significant pass thrus from Landlords due to surge in Real Estate Taxes and Property Insurance.

What Does This Mean for Landlords?

Opportunities:

  • Class A and amenity-focused buildings in areas like Westshore, South Tampa and the Central Business Districts are performing better due to the focus on the office experience by Tenants. Tenants are adjusting their office footprint, tend to prefer amenity focused buildings where common areas like conferencing centers and be utilized for meetings vs leasing larger space.
  • Having spec suites ready for Tenant’s to lease a turn key office, positions Landlord to provide an immediate solution for Tenants who have quick deadlines to relocate their office vs the continued delay in permitting process and unexpected cost of Tenant Improvements.

Considerations:

  • Maintain asking face rates or be willing to adjust face rates depending on the feedback from Tenants.
  • Providing 3 year lease options for as-is Suites can be solution for smaller Tenants under 2,500 RSF, who are unsure about future growth.
  • Consider adding Tenant amenities such as conferencing center to a building for Tenants is a great competitive advantage. Based on the research, employees are coming into the office for team, department and company-wide meetings.
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A Key Resource for Commercial Real Estate Buyers and Sellers

In the world of Commercial Real Estate, a Commercial Real Estate Office Broker, whose primary focus is representing office space, is a key resource for Buyers and Sellers alike. Commercial Real Estate brokers specialize in buying, selling, and leasing commercial properties, such as office buildings and industrial warehouses. Expertise and experience assist clients navigating the complex world of Commercial Real Estate,  and make informed decisions about their investments.

One of the key benefits of working with a Commercial Real Estate broker is their deep knowledge of the local market. Brokers have their finger on the pulse of the local commercial Real Estate market and can provide valuable insights into trends and opportunities. Office Brokers guide Tenants and Buyers uncover properties that meet their specific needs, budget and can provide Landlords and Sellers with accurate valuations and marketing strategies.

In a Commercial Real Estate office, Office Brokers work with clients to identify their objectives and develop strategies to achieve their goals. For Buyers, this might involve identifying properties that are likely to appreciate in value or Tenants, negotiating favorable lease terms. For Sellers, pricing the property appropriately, staging it for sale, and Landlords, developing a comprehensive marketing plan.

One of the key roles Commercial Real Estate Brokers play is that of a mediator. Commercial Real Estate transactions can be complex and often involve multiple parties, including Buyers, Sellers, lenders, and attorneys. Brokers act as a bridge between these parties, facilitating negotiations and ensuring that all parties are on the same page.

Commercial Real Estate Broker offices are not without their challenges. Managing multiple transactions simultaneously, while also staying up-to-date on changing market conditions and industry trends is a fast-paced environment that is not for the faint of heart. Brokers must also understand best practices for work environment culture, be skilled negotiators, able to navigate complex deals and resolve conflicts that may arise.

Despite these challenges, Commercial Real Estate Broker offices remain a critical resource for Tenants, Buyers, Landlords and Sellers in the Commercial Real Estate market. Whether you’re looking to buy, sell, or lease a property, working with a Commercial Real Estate Broker can provide you with the expertise and guidance you need to make informed decisions and achieve your goals.



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The basics you must know about a Triple Net Lease

Triple Net Lease, also known as NNN lease, is a commercial real estate lease in which the Tenant is responsible for paying for all or some of the property’s Operating Expenses or sometimes called, Common Area Maintenance. These expenses can include property taxes, insurance, maintenance for common areas costs. In a Triple Net lease, the Tenant not only pays rent but also assumes financial responsibility for the upkeep and maintenance of the property. This type of lease is common in commercial real estate, particularly in retail and warehouse spaces and less likely to come across in office space. 

Benefits of Triple Net Leases For Landlords

Landlords can easily project their income stream, as the Tenant is responsible for the expenses associated with the property. There can be years when Real Estate Taxes and Insurance increase, those increased amounts can be passed directly to the Tenants.  Landlords can use this predictable income stream to secure financing for additional real estate investments or to reinvest in the property itself. Tenants being responsible for maintaining the property, Landlords can minimize their involvement in the day-to-day management of the property.

Disadvantages of Triple Net Leases For Landlords

If the Tenant fails to pay for expenses such as property taxes or insurance, the Landlord may have to cover those costs, leading to financial losses. Furthermore, if the Tenant is responsible for maintenance, the Landlord may not be aware of issues that arise, leading to potential property damage that could reduce the property’s value.

Benefits of Triple Net Leases For Tenants

Triple Net leases can provide more control over the property and potentially lower costs since they are responsible for maintenance and repairs by choosing which vendors to use or update themselves. Additionally, since Tenants have more control over the property’s upkeep, they can customize the space to fit their specific needs. This can be particularly advantageous for businesses with unique requirements, such as medical offices or laboratories.

Disadvantages of Triple Net Leases For Tenants

Tenants should also be aware of the potential downsides of Triple Net leases. If the property requires significant maintenance or repairs, the Tenant may be responsible for substantial expenses. Property Taxes and Insurance can fluctuate and subsequently may face higher costs if Property values or Insurance rates increase.

Triple Net leases can benefit Landlords and Tenants. Landlords can secure a stable income stream and minimize their involvement in property management, while Tenants can have more control over the property and potentially lower costs. It is essential for both parties to understand the potential downsides of triple net leases, such as financial risks and increased expenses. As with any real estate transaction, it is crucial to carefully review and negotiate the lease terms to ensure a mutually beneficial arrangement.

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Florida Top Population Growth

 

Census: Florida defies decline in population growth; nation becomes more diverse

The Sunshine State took the top place for the first time since 1957 in terms of the nation’s highest population growth, according to estimates issued last week by the U.S. Census Bureau Florida saw the country’s most substantial growth. Its expansion revitalizes the economy and makes Florida more appealing and competitive worldwide. The third-largest state in the US had a population growth of 1.9% between July 2021 and July 2022, adding more than 400,000 people to the state’s 22.2 million total, according to Ian Hodgson of the Tampa Bay Times. According to these experts, most people moving last year were older U.S. residents nearing retirement age. 

Remote working increased during the Pandemic in 2020, creating an influx of individuals relocating to Florida to take advantage of the flexibility. We have seen the younger generation moving to Florida in recent years selling their homes in more expensive areas like New York and California. This younger generation is purchasing cheaper properties in Florida. “Cheaper” is no longer what it once was due to the competition for scarce homes brought on by out-of-state money. Comparing prices in the states where transplants are leaving (California and New York), Florida’s record-high numbers are appealing unless you are an existing Florida resident. 

Throughout 2022, South Florida had a decrease in the number of vacant commercial properties, while vacancy rates rose in cities like New York, there were 57,488 New Yorkers who relocated to Florida. It is nothing new, as New Yorkers have been moving to Florida forever. In fact, New Yorkers want to take advantage of cheap taxes, pleasant weather, and a supportive business climate. 

There are two top factors luring people in higher income brackets to Florida. The absence of personal income tax, one of the few states in the US that exempts its citizens from paying state income tax. The overall state tax burden in Florida will be far lower than the majority of states, even with paying sales and property taxes. Secondly,  lifestyle reasons with weather, sandy beaches, amusement parks and outdoor activities. Income for remote workers in these higher income brackets, can go a longer way in the State and enhance their lifestyle as a whole.

Despite the many reasons people are moving to Florida, there are also challenges associated with population growth. As more people move to the state, there is increased demand for housing, transportation, and public services. This can lead to issues such as overcrowding, traffic congestion, and strains on infrastructure.

Overall, Florida’s population growth is a complex issue with both positive and negative impacts. While it has brought new economic opportunities and lifestyle benefits, it has also created challenges related to infrastructure, the environment, and the quality of life for residents. As the state continues to grow, it will be important to carefully manage these issues to ensure that Florida remains a desirable and sustainable place to live for generations to come.