Tampa Q1 Office Market Review

Market leaders in the Tampa Bay area are summarizing the current commercial real estate picture in nearly all the same way this quarter. Comments include: “People are taking a cautious wait-and-see attitude”; “Business as usual—just a little bit harder”; and “Decisions are taking longer but eventually they do happen.” Colliers Arnold management further states that as job and population growth changes in the Tampa Bay area, the office and industrial markets will mirror those trends. Throughout it all, successful firms will be working harder and smarter for their clients. Local broker experience has shown that many of the building owners who are getting recent lease deals done are those who are giving more concessions. These include increased tenant improvement (T.I.) dollars, decreased annual escalation rates and some free rent. Brokers report tenants with more choices now are actually “shopping” the T.I. and concession deals in the market before making decisions.

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.