(Carl Cronan is editor of Real Estate Florida.)
TAMPA, FL-Now that all of Florida's major office markets are in double-digit vacancy and face the prospect of shrinking rental rates, renewals of existing leases are as important as ever. They mean even more for landlords who are trying to sustain property values in a tough investment sales market.
"Renewals are integral to building stability, especially in down markets," Vince La Mariana, senior director with GVA Advantis in Tampa, tells GlobeSt.com. "Maintaining an existing tenant base is critical at times like this."
Recently La Mariana had a rare opportunity to not only help a tenant renew its lease but expand another 35% at a time when most firms are contracting their office requirements. Willis of Tennessee, an insurance brokerage subsidiary of London-based Willis Group Holdings Ltd., added 7,100 square feet to its existing 19,728-square-foot space at Bayport Plaza, an 11-story waterfront building in the Westshore submarket near Tampa International Airport.
Terms of the larger lease were not disclosed, though La Mariana says Willis' new rate is in line with Westshore's current average asking rents of $29 per square foot--the highest in the Tampa Bay market. He adds that the expansion did require a smaller tenant on the same floor to relocate within the building.
Bayport Plaza, which opened in 1984 next to the Grand Hyatt Tampa Bay hotel, is owned by Hartford, CT-based UBS Realty Investors and is currently 91% leased, according to La Mariana. Willis has been a tenant at the 265,000-square-foot building for more than five years, he says.
Other significant lease renewals statewide are helping to keep landmark office buildings in good standing. In Orlando, for example, Harland Financial Services, a software supplier, renewed its 80,000-square-foot lease at 605 Crescent Executive Court. Cushman & Wakefield of Florida values the 10-year deal at $18 million.
In some cases, renewals have buoyed pending sales of office properties. Law firm Shook Hardy & Bacon signed on 71,000 square feet for 15 years at the 34-story Miami Center tower Downtown, months ahead of the building's $260-million sale to Sumitomo Corp. of America. The new $60-million lease, starting in January, replaced one that was to expire in late 2011.
Eric Siegrist, vice president of leasing with Crescent Real Estate Equities, the building's previous owner, says uncertainty over Shook Hardy's renewal would have affected the building's value. "You're mitigating future risk by locking in a deal early," he tells Daily Business Review, an Incisive Media publication. "Ideally, you'd want to wait closer to the expiration. When you renew early, you don't know whether it was a good deal."
Building values in South Florida and other major office markets are declining more than the 20% national average recorded over the past year by Reis Inc. Brokers point out that current tenants in good financial standing have more power in renewal negotiations now, though owners would rather offer concessions rather than cheaper rates as a way to hold the line on asking rents.
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