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What Are Spec Suites?  

 


What Are Spec Suites?  

Speculative Suites is an office space designed to demonstrate to prospective renters what the office space may look like. While the finer specifics of what exactly makes a spec suite differ from each Landlord, at its most basic level, a spec suite is a place where the Landlord has invested construction expenditures ahead of time to have the room in move-in ready shape by creating an effective layout for the space, paint, and floors based on current market trends.

 

Who Are Spec Suites For:

Small to mid-sized Tenants with standard office space requirements are best served by spec suites. They’re especially appealing to Tenants who need to move in quickly, generally within three months or less since the office space is in a move-in ready condition.

 

Benefits of Spec Suites:

One of the main advantages of leasing a spec suite is that it reduces your out-of-pocket expenditures for building and finishing. Furniture and construction costs have been steadily rising, making new office development prohibitively expensive. Spec Suites are usually furnished and ready to move in, allowing Tenants to enjoy new, high-quality furnishings without having to pay for them out of pocket. 

For firms who need to be in their new office fast, Spec Suites might be a terrific solution. Depending on the extent of construction required, a new office build-out might take anywhere from 2 to 8 months to complete. The period between signing a lease and moving in can be greatly reduced with Spec Suites. Landlords create select “spec suites” to provide move-in ready options for Tenants who have a quick time frame to occupy quickly. Delayed permits have recently played a role in having quick occupancy options. Some companies are waiting to make a decision (due to uncertainty in their business) having an easy option can give Landlords a competitive advantage to win the deal.

 

Downfalls Of Spec Suites:

A downside of spec suites is the lack of control over the space’s appearance and feel. The Landlord has already chosen the spec suite’s design and finishing and typically may not invest additional money into the space unless the Tenant is willing to cover the cost of signing a longer lease.

 

 

A Tenant Representation Broker can walk you through if a spec suite is a right solution for you. Give Office Space Brokers a call at 813-289-3700.

 

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Sales Tax On Commercial Leases: June 1, 2025 Update

Often a surprise to companies who expand or relocate to Florida, Florida is the only state that charges sales tax on commercial leases. Each year this number can fluctuate based on the decisions in Tallahassee and typically is in effect first quarter of the following year. Starting June 1, 2025 to reflect the below. View the document from the Florida Department of Revenue here. View additional resource here. As you see in the below graphic, each county has their own additional taxes that are included in this number. Historically, Hillsborough County is one of the highest.

Always consult your CPA for tax advice especially for in municipalities that collect other taxes such as nuances in Oldsmar, Tarpon Springs, Wesley Chapel and Zephryhills.

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Downfalls of Subleasing Office Space

Subleasing office space can offer a more superior building at a lower monthly rent, providing the Tenant the ability to be in the building they desire without the hefty price tag, flexibility of a shorter term and even use of existing furniture. 

There are rights a Tenant, who decides to sublease their space, gives up when subleasing their space. These “rights” are usually located in the “Sublease” clause in the lease between the Landlord and Tenant. 

Two main examples of building signage and an option to renew the lease. 

  1. Right of building signage is more common for a Tenant who is leasing at least a full floor of a building. 
  2. Renewal options are more common in every lease. A renewal could say, “Tenant has a one time option to renew their lease at the current market rate.” If the Tenant decides to sublease their space, majority of the time, the option of the renewal is not passed through to the Sublease. 

What does this mean for a Subtenant?

Any terms that were agreed upon for a renewal, the Subtenant does not have a right to and is subject to whatever the current market rate and how the Landlord is marketing the building. 

There are two potential issue could arise when not having a renewal option:

  1. A Tenant in the building could have First Right of Offer to the said sublease space at the end of the term, this Tenant has first position and priority over the Subtenant, to lease the space.
  2. The current market rate could be higher than the Subtenant’s budget. If the Subtenant would like to move into a relationship as Tenant to the Landlord but cannot afford a direct deal the Subtenant will have to relocate. 

 Having a Tenant Representative can bring clarity when evaluating the best decision for your business to choose a sublease or a lease a space directly

 

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Is The Tampa Bay Office Market Overflooded with Sublease Office Space?

 

Is The Tampa Bay Office Market Overflooded with Sublease Office Space?

When we were evaluating the future of office space in 2020 there were several discussions of what the future of office space in Tampa would hold. I even wrote a blog explaining what I believed the two contributing factors would be: 2020 Presidential election and a second lockdown. 

Tampa Bay did not experience the second lockdown but we know other cities around the United States did and impacted their use of office space. 

Evaluating the national commercial real estate market is great when analyzing trends and an overall sense of where we are headed. We have to keep in mind, real estate markets are also very independent of the area: the people, culture, politics, and the diversification of companies somewhere like Tampa, can be different than Los Angeles. All the major headlines highlighting the surplus of office space on the market in New York, Los Angeles, and Chicago and most think Tampa Bay is experiencing the same trends. Has Tampa experienced an influx of sublease space on the market? Yes. Has it been to the level of other major cities? No. 

Why is Tampa not experiencing the same impact as other cities?

  1. The average size of an office space Tenant in Tampa is under 10,000 RSF in a 100,000 sf + building, the majority of buildings are diversified with a smaller Tenant mix. We are experiencing larger vacancies but the under 3,000 SF sublease vacancies are moving quickly in the market. The large sections of office space of sublease coming to the market are mostly Publicly Traded companies whose decision-makers are out of New York, Los Angeles, and Chicago deciding to maintain consistently from policies made at their HQ level to across the country. 
  2.  The average size company in Tampa has fewer people and privately-held businesses are the lifeblood of our business community. Smaller businesses typically have more flexibility in implementing new policies and procedures.
  3. Tampa is a pro-business environment. Tampa did not experience a second lockdown. I believe if we had a second lockdown there would have been a dramatic impact in our business community, just like NYC did. Tampa is benefiting from companies relocating to Tampa and the expansion of companies already located here. Sublease office space that might have been on the market is being subleased by companies moving to Tampa who want a smaller footprint as they grow and leveraging favorable terms. There are pros and cons to subleasing office space. A great pro can be more favorable terms of a below-market rent and shorter lease term but there can also be cons.
  4. The people component is the most important in terms of office space. Tampa has been known for diversity in backgrounds and melting pot natives with folks from all over the country. Culture in Tampa’s location is one factor but the culture of each company is different. The people who make up the culture in each company play a more important role.

As 2021 comes to an end and sights are set on 2022, the influx of sublease space has cooled down and folks will have at least 1-2 quarters under their belt of implementing back to work policies. Although office sublease inventory decreased in the third quarter, most U.S. markets are still dealing with record rates of sublease space. Additionally, unlike other major metro areas, there are no whispers of a second lockdown in our future. The data is showing to be optimistic for the Tampa office space market as we head into 2022. 

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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