The unemployment rate for the Tampa MSA increased during the second quarter, just as it increased for the state and for the US overall. The Tampa MSA rate was 5.6% for May 2008. This compares to the year-ago unemployment rate of 3.7% for May 2007. All rates reported here are non-seasonally adjusted. The Florida State rate was 5.3% for May 2008, which compares to 3.5% for May 2007. The US unemployment rate was 5.2% for May 2008, which compares to 4.3% for May 2007. The detailed employment snapshot for the Tampa MSA shows a loss of 20,300 jobs from May 2007 to May 2008.
At the beginning of the quarter, Colliers International reported a national vacancy rate of 12.8%; up just slightly from the 12.5% for the prior quarter. This national rate compares to the current Tampa Bay overall vacancy rate of 12.2%. Nationwide demand was down dramatically with negative absorption being recorded for the first time since 2003. Despite the "pullback" in demand, lease rates nationwide managed a slight increase. The current average nationwide class A suburban rate is $28.80 per sf. This compares to the Tampa Bay "bargain" average direct rate of $24.52 for class A overall, and $24.74 per sf for class A suburban only space.
One benefit to the slower leasing market is the increased choices that prospective tenants now have if they're looking for large blocks of contiguous space. At mid-quarter Q2, there were a total of 78 spaces available in existing buildings that were 20,000+ sf contiguous in size. Even if a tenant needs 50,000+ contiguous sf, the choices are plentiful, with 22 spaces available throughout the area. The remainder of 2008 could possibly have more positive indicators in the office leasing market as those affected by the housing and credit industries have vacated the market. Those remaining may benefit from the softened market on renewals, new leases and expansions.
The Tampa Bay office market had an overall vacancy rate of 12.2% for Q2 2008. The rate rose just slightly from 11.8% for Q1 2008. Vacancy has gone up progressively each quarter from the 10.0% rate one year ago. The sublease vacancy rate for the second quarter 2008 was 1.3%, compared to 1.4% for Q1 2008. Absorption for the second quarter totaled negative 265,842 sf. Nine known large tenant move outs are responsible for 303,508 sf of this vacant space.
Four new buildings were completed in the second quarter, which totaled 107,656 sf. At the time of completion 64% had been leased or sold. The largest was the 39,566-sf West Liner building, which is part of the Signature Place mixed use project in the St. Petersburg CBD submarket. Seventy-five percent of these office and retail condominiums were sold before the building was complete. Price paid per sf ranged from $276 to $325. The 36-story Signature Place residential tower and the East Liner building are both still under construction.
Nineteen buildings are under construction in the Tampa Bay area which total 1.5 million sf. The Westshore submarket has 722,000 sf of this construction, and the I-75 corridor submarket has 759,376 sf. The three largest under construction buildings are: Met West Building One, which is 250,000 sf at 4130 W Boy Scout Blvd.; Corporate Center Four, which is 247,000 sf at 4301 W Boy Scout Blvd.; and Intellicenter Tampa Building One at 200,000 sf at 12651 Telecom Dr.
Overall direct asking lease rates for the second quarter were $21.37 per sf. This represented a decrease from $21.53 in Q1. Lease rates had been growing steadily for nine consecutive quarters since the last slight rate decrease at the end of 2005. Class A asking direct lease rates decreased only slightly—from $24.57 in Q1 to $24.52 in Q2.
The views expressed here are those of the author and not of GlobeSt.com.
Karen Temmen is a research director with Colliers Arnold Commercial Real Estate Services in Clearwater, FL. She can be reached at [email protected].
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