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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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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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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
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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.