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Third Quarter 2024 Tampa Bay Office Market Report and Forecast

3rd Quarter Tampa Bay Highlights:

Tampa Bay:

  • Although Tampa Bay’s unemployment rate increased to 3.4% in Q3, it still falls below the national rate of 4.1%
  • Inflation Rate is up is 3.1% as of Sep. 2024 and up 1.2% in past 12 months via the US Bureau Labor Statistics
  • A low cost of living and a strong job market helped to secure the 4th place ranking on the Wall Street Journal’s hottest job markets in the U.S. Another important aspect of Tampa Bay’s incredible economy that has led to new business relocation is the agreeable tax environment. 

Office Market:

  • Tampa Bay’s overall asking rates continued to increase with rising over 5%. Class A office space in Westshore and Downtown Tampa had the most significant upturn to +/- $41.00 PSF in Westshore and +/-$43.50 PSF in Downtown Tampa.
  • Vacancy rate in Downtown Tampa was +/- 13% and +/-19% in Westshore Business District. Vacancy rate in the Northwest and I-75 corridor in Tampa are significantly higher between +/-29% – +/-31%. Downtown St Petersburg was +/-9% with higher vacancy rates in Greater Pinellas County ranging from +/-13%-38%.

Let’s Talk Rent Numbers:

Submarket Overall Average Asking Rent-All Classes Overall Asking Rent Class A
Westshore $35.00 Sq. Ft.  $41.00 Sq. Ft. 
Downtown Tampa $42.09 Sq. Ft.  $43.50 Sq. Ft. 
Northwest Tampa $28.34 Sq. Ft.  $31.11 Sq. Ft. 
South Tampa $30.00 Sq. Ft.  N/A
I-75 Corridor $26.20 Sq. Ft.  $26.67 Sq. Ft. 
Downtown St. Petersburg $35.90 Sq. Ft.  $37.16 Sq. Ft. 

Building Highlights: 

  • Tampa International Airport: With Phase 1 of the renovations complete, Tampa International Airport sets its sights on Phase 2 of the expansion plan, which features a new pedestrian bridge, curbside express lanes and more.
  • Historic Gas Plant District: Construction on the largest development project in Tampa Bay history is slated to begin in early 2025. The phase one vertical development is promised to bring new housing, office space, meeting space and more to benefit all.

2024 3rd Quarter Forecast:

    • Labor Market: The influx of new jobs from Fortune 500 company relocation to the Tampa Bay area are a huge benefit to the economy.
    • Job Creation: Nonfarm employment grew by 25,900 jobs, or 1.7%, over the past year.
    • Supply: This marks the steepest quarterly improvement of vacancy rates since Q4 2017 and puts Tampa Bay in a great spot to continue to see the vacancy rates decrease into Q4.
    • Demand: This brought the year-to-date (YTD) total to 2.0 msf, a 14.1% decline compared to the same period in 2023. Thanks to influential accounting firms of PricewaterhouseCoopers and Clifton Larson Allen renewing their leases, the future looks promising.
    • Economic Indicators: The Tampa Bay MSA’s unemployment rate is likely to remain at 3.4%, which is significantly lower than the national rate of 4.1%. Employment is anticipated to continue growing in the region.

What does this mean for Tenants?

Advantages:

  • Companies who desire to be in auburn areas outside of the Downtown Core in Tampa and St. Petersburg and Westshore Business District, may have more negotiating leverage on rental rate and lease concessions due to the higher vacancy rates in buildings. 

Challenges:

  • Class A may continue to trend higher with limited new construction forecasted in the future and current trend of companies focusing on location of their office and surrounding amenities. 
  • There is over 300,000 RSF is for sublease in Westshore, giving Tenants who are in the market for sublease space the ability to shop around for the deal with the most favorable terms.

Considerations:

  • Allotting plenty of lead time before a lease ends is vital when evaluating Westshore and Downtown Core for a relocation or expansion. Vacancy rates are low and which creates competition for desirable available space.  
  • Tenants 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. 

What does this mean for Landlords?

Opportunities:

  • Landlords with buildings located in Downtown 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:

  • 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. 
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3rd Quarter 2023 Tampa Bay Office Market Report and Q4 Forecast

Important Highlights:

Tampa Bay:

Office Market:

  • Majority of activity and demand has been focused on Westshore and Central Business District (CBD) vs the suburbs which is consistent with the flight to quality trend by Tenants.
  • Class A buildings made up of over 60% plus of leasing activity in Q3 over the suburban areas.
  • Asking rents in Class A Buildings have increased by +/-6%
  • Direct asking rents are up 1% and Class A and B building in the Westshore and CBD areas for the third quarter in a row.
  • Vacancy rate in Tampa CBD is 13% and Westshore in 18%.

Let’s Talk Rent Numbers:

Submarket Overall Average Asking Rent-All Classes Overall Asking Rent Class A
Westshore $33.50 Sq. Ft. $37.01 Sq. Ft.
Downtown Tampa $40.00 Sq. Ft. $41.80 Sq. Ft.
Northwest Tampa $26.75 Sq. Ft. $27.90 Sq. Ft.
South Tampa $34.50 Sq. Ft. N/A
I-75 Corridor $26.50 Sq. Ft. $27.50 Sq. Ft.
Downtown St. Petersburg $33.40 Sq. Ft. $36.00 Sq. Ft.

Building 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. The first phase, including 317 apartments and retail space, began construction in October and is set to open in spring 2024. A second apartment community with 370 apartments and retail will begin construction later in 2023. At full build-out, Gas Worx is planned to have nearly 5,000 residences, 140,000 square feet of retail, and 500,000 square feet of office space.
  • Ybor Harbor: Adjacent to Gas Worx, Darryl Shaw has unveiled plans for Ybor Harbor, a 33-acre mixed-use waterfront development on Ybor Channel south of Adamo Drive. The project aims to connect Ybor to the Channel District and downtown and will include up to six million square feet of residential, office, hotel, and retail space. Plans also include the development of a public area with piers, boat slips, green space, and a boardwalk lined with restaurants and shops.
  • Tampa’s Riverfront: The development boom along downtown Tampa’s riverfront continues, with projects like the 31-story luxury apartment tower Arts and Entertainment Residences and the Pendry Residences Tampa luxury riverfront hotel and condominium tower. The Tampa Convention Center is also undergoing a $38 million expansion, adding new waterfront meeting and event rooms.

2023 4th Quarter Forecast:

  • Labor Market and Economic Indicators: The tight labor market is expected to remain steady, with the unemployment rate likely to be around 3.2%, similar to the previous quarter.
  • Job Creation: Tampa Bay is anticipated to continue as a front-runner in job creation across the state, contributing to further employment growth.
  • Supply: Overall vacancy rates are projected to remain low
  • Demand: Leasing is expected to be steady into fourth quarter with majority in focused in CBD and Westshore in Class A and Trophy buildings.

What does this mean for Tenants?

Advantages:

  • Increased rent concessions from Landlords: Higher Tenant Improvement allowance towards build outs and providing free rent to decrease overall lease value.
  • Favorable Economic Indicators: The low unemployment rate and steady job growth in Tampa Bay suggest a thriving economy. For Tenants, this means a potentially larger customer base and a higher likelihood of finding qualified employees in the area.
  • Sublease Options: Sublease options can provide favorable for Tenants who prefer a shorter lease term and below market rent especially for those looking for 10,000 RSF and up.

Challenges:

  • Turn Key Options: Construction costs are still record high and the lack of turn key “Spec Spaces” Landlords have available for Tenant’s who require immediate move can require Tenant’s to lease Suites do not provide the desired layout for Tenants.
  • Lead Time: Having timelines with buffer built in will give margin for continued slow construction timelines, for architectural drawings, permit approvals and supply chain issues.

What does this mean for Landlords?

Opportunities:

  • Low Vacancy Rates For Smaller Suites: Suites under 5,000 SF and under spaces are being leased quickly.
  • Turn Key and Spec Suites: Having turn key Suites under 5,000 SF for Tenants to quickly move into will provide a competitive advantage over other vacant competing Suites for Tenants who do not have enough lead time for long construction timelines.

Considerations:

  • Tenant Selection: Ensuring that potential Tenants have a strong financial standing and align with the property’s intended use can help minimize risks associated with tenant turnover or payment issues.
  • Tenant Retention: Attracting new Tenants is essential and Landlords should also prioritize Tenant retention. Historically, it is more cost effective to maintain a Tenant then marketing, leasing and Tenant Improvement costs to acquire a new Tenant. Maintaining positive Landlord-Tenant relationships and providing excellent customer service can help ensure Tenants choose to renew their leases, reducing turnover and associated costs.
  • Building Location: If buildings are located in Suburban areas outside of CBD and Westshore will have to be more aggressive with Concessions and adjusting asking rent.