Highwoods Bay Center has some perceived competition in Tampa's densely occupied Westshore submarket, which has roughly 12 million sf of inventory and midyear vacancy around 10%, based on local brokerage estimates. Several new office projects are under way in the area, adding at least 500,000 sf in the coming year.

As such, Woodward says Highwoods is prudent about proceeding with a companion building, which already has local site plan approval. It's a matter of determining whether preleasing activity is sufficient to warrant starting construction, along with guessing whether office demand will be better by the time the second building opens.

"We're carefully monitoring those other projects and the market conditions," Woodward says. "We've got some reasonably good interest and good prospects for Highwoods Bay Center II."

Woodward notes that Highwoods aims to keep pace with asking rents for new office space in Westshore, currently above $30 per sf and the most expensive in the Tampa Bay market. Westshore's overall office rents average $24.45 per sf through the second quarter, with class A rent declining a full percentage point to $28.47 per sf, according to Karen Temmen, research director with Clearwater-based Colliers Arnold.

Highwoods is the largest office landlord in the Tampa Bay market, totaling 2.8 million sf with 95% occupancy throughout its local portfolio, Woodward says. He adds that the REIT hasn't had any significant losses related to the fallout of Florida's housing market, particularly with financial services tenants.

"Our portfolio is pretty solid," he says. "We are watching all of our tenants and industries that have had pressure."

In a related note, Robert W. Baird & Co. has initiated coverage of Highwoods with a neutral/average risk rating and $36 target price. The Milwaukee, WI-based brokerage states that Highwoods "has done a great job in their well-defined strategic plan to reposition the portfolio, strengthen its balance sheet and improve operating efficiency."