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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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Will The Office Market Experience a Surplus of Sublease Space?

While many office space locations remain nearly vacant to prevent the spread of the coronavirus, one question remains certain: “Will the Office Market Experience a Surplus of Sublease Space?” The short answer…it’s too early to tell. However, events such as the election, a second potential lockdown in Tampa Bay and 4th quarter happenings will play a vital role in the response.


2020 Presidential Election:
Historically, new administration brings new policies which impact the business sector. With the 2020 Presidential election now behind us, we play the waiting game. A new administration, new policies will be rolled out in the beginning of 2021, this could impact major decision makers as they decide what is next for their company for 2021 and the future.


A Second Lock Down:
Another hot topic that has been on everyone’s minds: “Will there be another lock down?” Since Europe has recently entered into their second lock down and now we are seeing states like California, Illinois and New York transition back into a severe lock down, is this on the horizon for Florida? Whether Florida experiences a second lock down or not, companies whose Corporate Headquarters in Illinois, New York and California, are announcing maintaining a work from home policy through 2021 or later. What does this mean for Landlord’s in Tampa Bay? The same companies who have additional offices in markets like Tampa or St Petersburg are maintaining their work from home policies across their entire company for consistent company culture, even though Tampa, has different Covid restrictions and regulations.


4th Quarter Happenings:
As we quickly approach the end of 2020 and the fourth quarter is in full swing, we are going to start seeing companies begin to strategize their future plans for office space. Typical commercial office space lease in Tampa Bay have running a minimum of 5 years. Many companies have been forced to allow their employees to work from home and satisfy the rent on their lease. However, as companies near the end of their lease some will begin to test the market by reducing the size of their office space or even taking the huge leap to go completely remote.


With so much change and uncertainty over the past year it’s hard for many to tell what 2021 could bring. Having a Tenant Representative on your side will provide an advantage only an expert with their ear to the ground on a daily basis can deliver insight and market specialization. Give our team at Office Space Brokers a call 813-289-3700, for a consultation to strategize your company’s office space steps.

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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.

Chelsea Drinkard No Comments

2nd Quarter 2020 Office Market Indicators and Report

2019 was a strong year and as we headed into 2020, the market was projected to be steadfast. The pandemic struck mid-first quarter. In second quarter, we came out on the other side of a full quarter in the mist of the pandemic. The market did experience an impact with new leasing demand dropping approx. 50% from the first quarter.

Sublease supply is still down from 2019 due to large companies securing the supply and sublease terms expiring.

New construction has been hyper focused 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 decreased of service type businesses. Reference our Quarter 4 2019 market report here for comparison.

Important Highlights:

  • Unemployment rate in Tampa Bay increased to to 13.1%, compared to end of Quarter 2019 was approx. 2.7%
  • Tampa Bay’s jobs were impacted with nonagricultural employment decreasing by approx. 7.4%. Job growth based on year-over-year, was experienced in Construction with 300 jobs and Government sector with 100 jobs
  • Class A vacancy increased to approx. 12% by the end of 2nd quarter and Class B vacancy to over approx. 15%.

 

Let’s Talk Rent Numbers

Submarket Overall Average Asking Rent All Classes Overall Asking Rent Class A
Westshore $33.85/sq. ft. $38.00/sq. ft.
Downtown Tampa $34.62/sq. ft. $36.39/sq. ft.
Northwest Tampa $22.00/sq. ft. $24.40/sq. ft.
South Tampa $29.60/sq. ft. N/A
i-75 Corridor $22.53/sq. ft. $25.78/sq. ft.
Southwest $19.75/sq. ft. $24.00/sq. ft.
Downtown St. Petersburg $28.20/sq. ft. $31.00/sq. ft.

Construction Highlights:

Despite recent events, Heights Union and SkyCentre One are both projects underway in Downtown Tampa projected for 2020 occupancy and approx. 60% preleased. Midtown has new leases signed by national retailers. Sparkmarn Wharf is renovating the office portion creating 200,000 sf of office space and recently landed Industrious, coworking office space as a Tenant.

2020 3rd Quarter Forecast:

  • Companies may provide more flexible options for employees with hybrid of work from home and the office scenarios.
  • Build outs that were in process to be adjusted to more social distance measures
  • Companies with leasing up for renewal may shift their office footprint to provide an environment where employees feel comfortable and safe in the office
  • The fluidity of Covid will continue to determine the long-term impacts on the office sector as the year continues and the upcoming election

What does this mean for Tenants?

  • Potential opportunity when signing new leases for rental concession such as shorter lease terms, free rent abatement and Tenant Improvement allowance
  • Evaluate if Covid has and will make a lasting impact on your business with work flow layout in the office and number of people who are in the office on a regular basis. Thinking your office footprint may need to adjust in size? Use our calculator here to determine your ideal office space size
  • If you lease renewal is coming up in the next 24 months and unsure about your business’ office space needs? Read this article for 3 keys when determining your next steps. 
  • Now is the time to have a Tenant Representative Broker advocating on your behalf. Having an advisor on your side who has their finger on the market pulse and long-standing relationships with Landlord Agents will deliver the best terms possible.

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