"Concessions, consisting of free rent, reduced rent or extra tenant improvements continue to drive the market," says Colliers Arnold analyst Jeremy Kral. The Tampa Bay market has positive office space absorption of 64,870 sf year-to-date.
While rents have dropped, "the Tampa Bay office market still remains a bargain compared to the national average for class A office space," Kral maintains. He cites the national average as $32.40 per sf for Downtown space versus $20 per sf in the metro region. National suburban space stands at an average $23.30 per sf. Tampa Bay's suburban rents have increased slightly to an average $19.11 per sf.
"Tampa Bay appears headed toward a market stabilization," the analyst predicts. That situation will continue so long as new product doesn't surface during the office market's recovery.
"There is virtually no new construction, as rental rates remain too low and available spaces too numerous to support new office development," Kral says. Third-quarter vacancies overall are 14.24%, of which 1.29% is sublet space. The third-quarter performance is also an improvement from first-quarter vacancies of 14.85% and second-quarter vacancies of 14.88%. The area has a total 8.8 million sf of vacant office space.
By submarkets, the 7.5-million-sf Tampa CBD is at the 14.74% vacancy mark with 58,897 sf absorbed in the third quarter. Class A rents average $19.75 per sf; class B, $16.92 per sf.
The largest submarket, the 12-million-sf Westshore area, has a vacancy level of 13.7%. Absorption was 167,876 sf at class A rents of $21.76 per sf and class B, $17.61 per sf.
The Clearwater CBD remains "very healthy throughout the economic downturn," the Colliers Arnold analyst says. The existing vacancy level is 10.09%. "Vacancy rates have not gone above 11.6% in the last four years," Kral notes. Absorption was 3,407 sf in the third quarter. Class A average rents stand at $16.78 per sf; class B, $13.66 per sf.
In neighboring St. Petersburg, the vacancy rate is at 8.16% with absorption of 24,717 sf. Class A rents are $18.24 per sf; class B, 15.72 per sf.
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