Downtown Tampa and Westshore often teeter totter back and forth of for the top spot of highest rent in all submarkets with approx. 10% separating from the next submarket in the lineup.

Below is the average asking rent for Class A Full Service office space:

• Westshore: $34.00/sq. ft.
• Downtown Tampa: $32.50/sq. ft.
• Northwest Tampa: $24.20/sq. ft.
• Downtown St. Petersburg: $30.25/sq. ft.

As the year drew to an end, it should be noted that Class A space led the market with over 100,000 sq. ft. absorbed. Office space in the suburban market held the greatest ranking with almost 2.0 of the 2.4 million sq. ft. available leased. These statistics help us to see how the leasing aspect of the Tampa Bay market was robust and points to a healthy 2019 rate of leasing activity as well.

Forecast:

The market is estimated to continue the rent growth in the 2019 and starting 2020 level out and potentially increase as more available space comes is delivered to the market.

What does this mean for Tenants?

• The market should continue to absorb positively in this next quarter.
• With vacancies decreasing while the Tenant demand remains steady, Landlords have the upper hand to increase rents as we move into 2019.
• Now is the time to have a Tenant Broker advocating on your behalf.The market is dynamic, availability of space is quickly shifting and having a Broker who has their finger on the market pulse and long standing relationships with Brokers will get you the best terms as possible.

1) Procrastinating Before Acting

Leverage time to work for you, not against you. Don’t give up your rights for negotiating. Allow plenty of time to work things out before your lease date is up. A good rule to remember – the amount of time you need is correlated to your size of office space. If you occupy less than 2,500 rentable square feet, four months before your lease ends is an ideal time frame. Allowing enough time prior to deciding to renew your lease or relocate gives you time to assess the market and spend time negotiating deal points that are most important to the success of your business.

Our team recently worked with a Tenant who had leased over 3,500 rentable square feet of office space. They started their search during November with a deadline to move by the beginning of tax season, however, their progress was slowed down due to the holiday season and busy contractors. In the end, the Tenant did not move into their space until the middle of tax season. Being aware of your busy season and holidays are important to remember when planning your office space search.

2) Failing to Assess the Market

Keep in mind that it is easier and less expensive for a Landlord to keep a current Tenant rather then going through the timely process of marketing the space, identifying a Tenant and negotiating a lease. This works in your favor and helps to give you the upper hand as the Tenant. However, if the Landlord knows you are entertaining other options in the market, he is likely to be more aggressive in the renewal proposal.

Assessing the current market is key to ensuring you the best deal available. Competing Landlords in the area could deliver the floor plan you need but in a more efficient space, decreasing your office size and potentially your rent. It’s important to know your options before you decide which route – to renew or to move – is the best fit for your company.

3) Accepting Your Renewal As Is

The Broker representing the Landlord has a fiduciary relationship representing the best interest of the Landlord. Keep in the mind, however, that the renewal will favor the Landlord and his cash flow, not yours.

For example, you have been leasing your office space for five years and while the floor plan still works well for your team, you would like the carpet cleaned, interior repainted or a reserved parking space. Each of these items can be presented and negotiated as part of the renewal. Office Space Brokers recently worked with a law firm who loved their office and location but there were inefficiencies in the floor plan and the break room desperately needed cleaned. The Landlord knew our team was reviewing competing nearby offices and this motivated him to do what he could to keep the Tenant, giving the law firm a wonderful negotiation on their five-year renewal. Don’t make the mistake of quickly signing your lease renewal to get it off your to do list before contacting a professional like Office Space Brokers to help negotiate the terms to your favor.

Pros:

1. Shorter Term

Landlords have tightened the reins on the length of lease term in the Tampa office market. Especially in Downtown Tampa or Westshore, landlords require a five-year and or even seven-year lease term, depending the Tenant Improvements in the space. A five- to seven-year lease is not always ideal for a growing business when future growth is not predictable.

A Sublease can be a great option since lease terms are shorter. I subleased a 2,111 RSF office in Westshore earlier this year which had two years left on the term, however, I then worked with another Tenant to Sublease their 2,820 SF space which had four years left on the term. The bottom line – every Sublease is different.

2. Below Market Rate

This is usually one of the main reasons a business is looking to Sublease space – the below market rate. Sublease opportunities can occur for reasons such as a business downsizing, new office space is ready before lease term is up or outgrowing office space. The Master Tenant is usually feeling the difficulty of the situation and is willing to deeply discount the rent they are paying in order to get out of the lease quickly. For example, a Subtenant can pay rent equivalent to a Class B building while occupying and enjoying Class A building amenities.

3. Relaxed Financial Restraints

This is extremely important for a startup business. If you are looking for office space in Tampa, Westshore or Downtown Tampa, you are most likely working with an institutional Landlord who has heavy financial requirements with newer businesses. Landlords often require a personal guarantee, and additional security deposit for a startup. The Master Tenant is usually more flexible since they have less invested in the real estate and will offer more flexibility for a credit-worthy Tenant. In this situation, the Master Tenant usually has to receive approval from the Landlord of the potential Subtenant.

Cons:

1. Inefficient Floor Plans

When Subleasing, what you see is what you get. Unlike leasing directly with a Landlord who, depending on the lease term, can offer improvements of adding/removing walls, carpet, paint, etc., a Sublease is typically as-is. There might be an option to sign a direct lease with the Landlord beginning when your lease with the Master Tenant ends and maybe provide the Tenant an opportunity to make improvements to the space.

2. Out Of Your Hands

The Subtenant abides by the Sublease between themselves and the Master Tenant, and the original lease is held between the Master Tenant and the Landlord. During the lease term, the Master Tenant is held liable for the lease with the Landlord. Having confidence in the Master Tenant and Landlord is key. If the Master Tenant suddenly goes out of business or fails to pay the rent, the Subtenant experiences the repercussions.

3. It’s Only A Short Term Fix

A Sublease isn’t a long-term solution but a great option for a startup or growing phase for a new company. Relocating every one or two years can be expensive when factoring in all the moving costs. Once the Sublease term is over, the Subtenant is subject to market rates. If a discounted Sublease is the only way to afford the rent in a premium building, you will have no choice but to relocate. A direct deal with a Landlord can lock in your rent for the next five to seven years and avoid rolling the dice on market rates when your Sublease is up. A predetermined exit strategy is required to maximize the pros of a Sublease as your company continues to grow.