(Carl Cronan is editor of Real EstateFlorida.)
TAMPA-Office sales activity is slowing down considerably this year, with no class A sales posted through the first five months of 2008, according to a local market researcher. A newly released report by GVA Advantis states that local investment activity has little chance of matching the $567 million in transaction volume posted in 2007.
Sales of office properties through the first quarter totaled $51.5 million and mainly involved class B or lesser-graded buildings, according to Randy Smith, research director with GVA Advantis in Tampa. The year's largest sale to this point is Flagler Development Group's acquisition of the nine-story, 171,000-sf Bridgeport Center building in the Westshore district for $29.5 million, or $173 per sf.
Boston-based TA Associates Realty bought two smaller Tampa buildings earlier this year: the 76,414-sf Reo Building in Westshore for $10.7 million, or $140 per sf, and Grand Regency Business Center near Interstate 75 for $8.5 million, or $176 per sf. Based on Smith's estimates, the average office sales price in Tampa is $167 per sf, up 16% from last year's class B price of nearly $144 per sf.
Ongoing economic turmoil is keeping many investors and lenders on the sidelines, leading to inactivity in the class A office sales market. Last year, Tampa reached an all-time-high average of $213 per sf for class A investment sales, according to Smith.
"There really isn't a lot of pressure to sell at this point, and it might have kept a few things off the market," Smith tells GlobeSt.com. However, he says he is aware of several local properties that are being offered to potential investors, possibly in off-market deals.
Tenants are also being hesitant to scout the office market for new space because of continued economic uncertainty and higher unemployment. Smith says unoccupied space, including subleases, pushed the city's overall vacancy to 15.3% through the first quarter.
Yet even as demand for office space weakened, overall rental rate growth continued to move forward, he says. The average asking rate for Tampa rose at least 4% over the year, to $22.61 per sf, with Westshore class A continuing to lead the charge at just under $30 per sf, GVA Advantis figures show.
Smith predicts that the weakened economy's lagging effects on commercial real estate will likely dampen activity for most of this year. However, he says certain sectors such as medical businesses and educational institutions will continue to need local office space.
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