At the beginning of the first quarter Colliers International reported a national vacancy rate of 12.3%—up slightly from the prior quarter. National absorption for the quarter showed the smallest increase since Q2 2003. However, despite slower leasing demand, lease rates still increased nationwide. Now being debated in the Tampa Bay area is speculation if lease rates will hold and increase further since demand has slowed. The current top asking rate is $33 per sf for Corporate Center Four, which is under construction in the Westshore submarket.
The overall average direct lease rate for Q1 2008 is $21.34 per sf. All office rates quoted are shown as full service. Once again, this quarter represents an increase—although slight. The average direct lease rates for the past five quarters show this: Q4 2007: $21.27, Q3 2007: $21.27, Q2 2007: $21.22, Q1 2007: $20.56 p.s.f.
The class A average direct lease rate continues to climb in the Tampa Bay area. The five quarter review shows the following: Q1 2008: $24.31 per sf, Q4 2007: $24.03, Q3 2007: $23.99, Q2 2007: $23.81, Q1 2007: $23.24 per sf.
Total new office building completions equaled 430,582 sf for the first quarter, with 52% being pre-leased or pre-sold. Fourteen buildings totaling 1,106,612 sf are currently under construction with 31% of this space being pre-leased or pre-sold. The two largest of these buildings are both located in the Westshore submarket. Corporate Center Four is 247,000 sf and is located at 4301 W Boy Scout Blvd. The second largest is the 250,000-sf MetWest Building 1 located at 4100 W Boy Scout Blvd.
The Tampa Bay office inventory totals 76,473,612 sf and includes all office buildings (including owner occupied) which measure 10,000+ sf . The Tampa Bay area showed an overall vacancy rate of 11.7% for the first quarter 2008. This compared to 11.0% for Q4 2007. The rate climbed steadily throughout 2007, as indicated in the earlier quarters: Q3 2007: 10.5%, Q2 2007: 10.0%, Q1 2007: 9.8%. The class A Q1 vacancy rate was 12.7%. Absorption for the quarter registered -271,875 sf, and can be explained by 15 known large tenant move-outs and downsizes which total approximately 366,000 sf. The sublease vacant sf increased by approximately 330,000 to a new total of 1.1 million sf. It is the highest total since Q2 2002. The largest move-out was Home Depot, who vacated 99,000 sf at 100 Legacy Park.
Further evidence of the slow down is that fewer companies are expanding and creating additional branch locations. On a positive note, respected forecaster—Moody's economy.com—states the outlook is still bright for the Tampa Bay area where it is predicted "growth will proceed at a moderate pace throughout this year, with an acceleration expected toward the end of 2008 as the housing market bottoms out." At the same time, Tampa Bay was just ranked by KPMG as #2 in the nation for lowest overall business costs in a 27-point rating. The views expressed here are those of the author and not of Real Estate Media or its publications.
Karen Temmen is research director at Colliers Arnold in Clearwater, FL. She can be reached at [email protected].
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