(Carl Cronan is editor of Real EstateFlorida.)
TAMPA-Average asking rents in the Tampa-St. Petersburg office market reached an all-time high in the first quarter, according to a research report by CB Richard Ellis. The report also notes that there is nearly one million sf of vacant sublease space in the office market surrounding Tampa Bay.
The current trend of negative absorption and corporate downsizing, which contributed to an overall vacancy rate of 14.7% through the first three months of 2008, is expected to continue, at least over the short term. Economic uncertainty is causing some tenants to put expansion or relocation plans on hold, CBRE reports.
"Many businesses are thinking long and hard before they make commitments related to their real estate requirements," says Michael Hoffman, first vice president with CBRE in Tampa. He notes that residential real estate's troubles are becoming more visible on the commercial side, caused by factors such as renewed financial market uncertainty and increasingly tightened credit.
Office vacancy in the Tampa Bay market grew at least a percentage point from the end of 2007 and three points from last year's first quarter, CBRE figures show. Southeast Tampa has taken the worst hit, at 31.7% vacancy, largely due to the closing of a 100,000-sf Home Depot call center in January.Tampa's Westshore office submarket continued to show strength during the last quarter, finishing with roughly 10% vacancy, while Downtown Tampa vacancy reached nearly 15% and Pinellas County stood at 17%.
Despite rising vacancy rates and negative absorption of 173,600 sf for the quarter, asking office rents continued climbing steadily to $21.55 per sf in the first quarter, with class A rents reaching $24.17, according to CBRE. Westshore continued to command the highest class A office rent around Tampa Bay at $29.19 per sf, though that price is down slightly from the end of 2007.
Area experts believe strong class A rents are continuing to prop up overall asking prices for local office space, though those numbers may not swell much more given increasing competition among landlords and concessions offered to prospective tenants. "At this point, I think we're going to see some flattening of rents through the rest of the year," says Randy Smith, research director for GVA Advantis in Tampa.
Despite reaching a new high mark last quarter, Tampa's asking rents appear in the midrange among Florida's major office markets. Through the first quarter, rents are more expensive in Miami at $30.88 per sf and Orlando at $22.24 per sf, yet cheaper in Fort Lauderdale at $18.43 per sf and Jacksonville at $18.19 per sf, according to CBRE research.
Investment activity in the Tampa Bay market remained strong during the first quarter, particularly among less-than-trophy office assets, CBRE stated. The largest local sale this year is the 171,000-sf Bridgeport Center building in Tampa, which AEW Capital Partners sold to Flagler Development Co. for $29.5 million, or $172 per sf.
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