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Second Quarter 2024 Tampa Bay Office Market Report and Forecast

2nd Quarter Tampa Bay Highlights:

Office Market:

  • Westshore and Downtown Tampa asking rents are +/- $6.75 PSF above the average of the surrounding areas, proving the demand for these particular submarkets for their location, amenities and quality buildings.
  • Vacancy rate in Tampa CBD is 15.5% and Westshore in 14% is substantially lower than the major metropolitan cities around the country including New York and Chicago.
  • Companies are continuing to come back to the office more on a regular basis as flexible work schedules continue to be tested. Mondays and Friday seem to be the day remote is most commonly occurring.

Let’s Talk Rent Numbers:

Submarket Overall Ave.  Asking Rent-All Classes Overall Ave. Asking Rent Class A
Westshore $32.50 Sq. Ft. $40.10 Sq. Ft.
Downtown Tampa $41.50 Sq. Ft. $43.36 Sq. Ft.
Northwest Tampa $24.50 Sq. Ft. $26.59 Sq. Ft.
South Tampa $25.25 Sq. Ft. $30.54 Sq. Ft.
I-75 Corridor $25.75 Sq. Ft. $28.57 Sq. Ft.
Downtown St. Petersburg $32.25 Sq. Ft. $37.52 Sq. Ft.

New Development 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 planned to have over 140,00 square feet of retail and 500,000 square feet of office space is 50% preleased before ground breaking. Grow Financial and Masonite, are the two current anchor Tenants in preleasing.
  • Midtown East: Second phase of Midtown with 177,000 Square Feet of mixed use space is under construction with expected completed in 2024.

2024 3rd Quarter Forecast:

  • More sublease space with longer, 3+ year remaining lease terms will come to the market while Tenants are restructuring their office needs and might have taken on more space during an expansion in a building they no longer need.
  • Asking face rates will remain of the same and decrease slightly in the Westshore, Central Business Districts

What Does This Mean for Tenants?

Advantages:

  • Landlords are more willing to give Tenant concessions of free rent and Tenant Improvement allowance. Depending on the Landlord, some are more flexible than others on the asking face rate, depending on the deal terms.
  • Leveraging sublease space can be a great solution for some Tenants who are targeting shorter lease terms and/or often lower rates. Increase in subleases with longer lease terms remaining 3+ years, can still provide a good solution with Improvements already completed in the Suite, lower asking rent or free rent.

Challenges:

  • Asking rates increased in first quarter and have maintain steady in the second quarter. Not as many tenants have vacated their spaces when their lease expires, although asking rental rates have gone up over the last five years.
  • Although many employees have returned to the office, identifying the right balance of in office and working remotely is a normal conversation for deciphering what best for the company culture. Important to note, each company is different and not one solution is best. Reimaging the purpose of your office space and what role do you want it to play within the company is a great start for this conversation.
  • If a Tenant has a Base Year prior 2022, they are experiencing significant pass thrus from Landlords due to surge in Real Estate Taxes and Property Insurance.

What Does This Mean for Landlords?

Opportunities:

  • Class A and amenity-focused buildings in areas like Westshore, South Tampa and the Central Business Districts are performing better due to the focus on the office experience by Tenants. Tenants are adjusting their office footprint, tend to prefer amenity focused buildings where common areas like conferencing centers and be utilized for meetings vs leasing larger space.
  • Having spec suites ready for Tenant’s to lease a turn key office, positions Landlord to provide an immediate solution for Tenants who have quick deadlines to relocate their office vs the continued delay in permitting process and unexpected cost of Tenant Improvements.

Considerations:

  • Maintain asking face rates or be willing to adjust face rates depending on the feedback from Tenants.
  • Providing 3 year lease options for as-is Suites can be solution for smaller Tenants under 2,500 RSF, who are unsure about future growth.
  • Consider adding Tenant amenities such as conferencing center to a building for Tenants is a great competitive advantage. Based on the research, employees are coming into the office for team, department and company-wide meetings.
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How Office Space Can be Used to Hire and Retain Employees

Tenant lounge and shared areas started trending in Tampa around 2017. In commercial real estate we say, “if you build, they will come.” Landlords who wanted to fill and maintain buildings started using this to leverage office buildings to be used as a competitive advantage to gain and retain Tenants. When Covid first hit, these building amenities were shut down for a period of time and thankfully up and running again.

Companies that are facing hiring challenges and desire to bring their folks back to the office are looking for ways to stand out amongst their competitors and create an environment their team wants to experience. Gone are the days of giving lunch on Fridays and maybe a ping-pong table will cut it for “workplace culture”. Maintaining a holistic community focus is an imperative factor to accomplish both goals.

 

Where is the office building located?

The first factor in a holistic community is where the office building is located. When selecting sites ask yourself the following:

  • “Is my team already driving here?” I.e., is a grocery store nearby, popular gyms, and other stores? When companies are requiring their employees to come to the office, being located where employees plan on running errands is convenient for cities like Tampa where most folks are individually commuting.

 

  • “Is the building easy to access?” i.e., is located on major highways like i-275, Veterans Expressway, and i-4. Folks have been used to not commuting to work and being able to minimize the commute time is a lifestyle preference.

 

  • “Does my team feel safe and comfortable in the surrounding environment?” We all know when the time changes in Tampa and the sun is setting at 5:30 pm, there still can folks working past 5:00 pm whom you want to ensure are comfortable walking to their car if they are in the office later.

 

Does the inside and outside of the building support a healthy and happy lifestyle?

Tenants want to look for buildings with amenities like an onsite gym, workout classes, and outside community spaces. Tampa Bay is surrounded by water, we have outside-friendly weather the majority of the year and have the best sunsets in the entire country. Looking for buildings that incorporate an outdoor design and other wellness-oriented amenities into projects creates a flexible feel for employees to recharge and alternative workspaces to boost focus and productivity. Some great examples to look for is wifi outside, walking path, and even yoga classes offered before work or during the lunch hour.

In a day and age where finding and maintaining the right people is tough, having a holistic approach with your office space will give companies the edge needed to win the right people who align with their company.

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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

How Could the Corona Virus Change the Future of Office Space?

Short answer, it’s too early to tell the impact the Corona Virus will have on office space market in Tampa Bay. However, there are a couple of factors based on the shift we have seen with the Corona Virus that could impact office layout, cleanliness and the space requirements. Reviewing the top three factors which were impacted from the Corona Virus were air quality, limiting the touching of common surfaces and shared common areas. Below I have addressed the three different areas and how each could be impacted.

Cleanliness and Air Quality.

Good air quality has already been correlated with productive work environments and minimizes the number of sick days. Air quality improves the over all sense of well-being, focus and productivity. Buildings who have high standards for air quality and circulation will be favored over others. If a technology is created to minimize this impact of virus spread, this could also be a consideration when companies are reviewing which office buildings can provide the safest environment.

Landlords could increase cleaning standards by their janitorial companies in common areas such as fitness centers, bathrooms and elevators. The recent addition of Tenant lounges in office buildings with shared kitchens, meeting spaces and activities will have be evaluated with new cleanliness standards or reconfigured. Tenants who hire their own janitorial services, might have to comply per their lease, cleaning standards within their office suites.

Office Layout.

We have seen the trend of more open work environment shift over the years, some with smaller work areas and bringing people closer together. For example, think of two long tables with employees on each side, creating a community work area that several companies have adopted. Work stations moved into shorter “walls” to create a collaborative and open environment.

The immediate use of small and large conference rooms could be avoided. The changes of the 6 feet in between individuals which has been mandated could translate into the layout and space needed to fit the same 20 people may increase thus, requiring more space allotted per person. Individual offices could return as a solution or larger work stations with taller walls and dividers could make an appearance. Click here to read the average work stations and office sizes and what is your company’s ideal size.

Working From Home.

I have heard some say companies transitioning to working from home could reach a point where production is consistent and the habit of working from home has created a new culture which the staff prefers. I do not believe this 100% work transition will occur, it depends on the industry, company and the culture of the company.

I believe the 100% transition to remote work may be less common, a hybrid of minimizing the number of people in the office and frequency may be more common. The opposite could also be true, realizing the need for in person communication and collaboration is required for productivity.

 

Making  the protection of health and safety of employees a top priority, will reduce risk and position companies to be a top employer of choice in a competitive environment. 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.