Although the long-term economic impact of COVID-19 still remains uncertain, now, heading into the second part of the year Tampa Bay office CMBS that were nearly unchanged from the first quarter of 2020 are showing signs of life even though new leasing and investment closings were down, according to the second quarter 2020 Tampa Bay Office Market report by Colliers International.
Leasing and absorption highlights
The report notes that the number of lease transactions during the second quarter was down approximately 40% from this time period last year, with approximately 160 transactions being completed as compared to 272 in the second quarter of 2019. Renewals and shorter-term leases were the primary drivers during the quarter.
Net absorption was nearly flat for the quarter and vacancy throughout the market increased to 11.0% from 10.9% last quarter, with direct vacant space falling to 9.5% from 9.6%. But, publicly marketed sublet space increased to 1.5% from 1.4%.
The report predicts that going forward, vacancy is expected to trend higher, with sublease space driving most of the increase as a result of COVID-19 impact-related work-from-home strategies.
Construction and lease rates highlights
In May, a 150,000-square-foot office building in the Northwest Tampa market was the only building completed during the second quarter. It was occupied by WellCare.
The second quarter focused heavily on COVID-19 related landlord and tenant rent deferrals and concessions. "At the end of the second quarter, the average asking lease rate throughout the market averaged $27.80 per square foot throughout the market with sought-after spaces asking over $40.00 per square foot in the Tampa central business district (CBD)," the report reads. "The average Class A asking lease rate has increased substantially over the past two years in the Tampa CBD, climbing nearly $10.00 per square foot during this period."
Investments and Sales highlights
The report also noted that investment activity declined from Q1 to Q2 due to COVID-19. During the second quarter of 2020, only 12 buildings over 10,000 square feet traded hands and total sales volume was just over $28 million. The largest sale during the second quarter was a 64,000-square foot Disney Resort Center building located at 14014 E. Fieldside Place in East Tampa that sold for $16 million at a $250-per-square-foot price point and 7.08 cap rate.
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