Market Dislocation Finally Hit Tampa Bay in the Fourth Quarter

Tampa Bay is not immune from the pandemic, according to a new report from Savills. The Florida market has actually performed well through the pandemic, but at the end of the year, the office market started to see some softening.

The report shows a decline in office leasing activity, down to .7 million square feet at the end of the fourth quarter compared to 1.2 million square feet at the end of 2019. As expected, this led to a rise in the vacancy rate, which grew to 17.8%, up from 15.4% in the fourth quarter, and a rise in the available inventory, which grew to 52 million square feet, up only nominally from the 51.1 million square feet available at the end of 2019. Rental rates also fell in response to the slowed leasing velocity, down to $26.41 per square foot from $26.46 at the end of the prior year.

Quarterly decreases were even more dramatic than annual losses. Office leasing was down 33% quarter-over-quarter. There were only a handful of notable leases to close in the last three months of the year, including Heritage Insurance, which announced a major regional relocation from Clearwater to Tampa with an 86,687-square-foot lease at 1401 N Westshore Boulevard in Westshore, and TriNet Group, which renewed its existing 75,205-square-foot lease at 9000 Town Center Parkway in the Lakewood Ranch area of Manatee County. Although this was a lease renewal, seven of 10 office lease transactions in the fourth quarter were relocations or new office leases.

Quarterly rental rates also declined significantly. Class-A asking rents fell 6% for the quarter to 37.25 per square foot to $35.20 per square foot. By comparison, Westshore class-A rates fell less significantly from $35.44 per square foot to $35.23 per square foot.

This year, an additional 1 million square feet in office space will deliver into the market, instilling a sense of cautious optimism among industry leaders and experts. Companies are leaving more populated markets to the north in favor of areas like Tampa, and that could spell good long-terms news for the market. In addition, Tampa’s housing market is expected to boom in 2021, which could also help to fuel office leasing.

There has already been some movement in the right direction. Bridge Investment Group subsidiary Bridge Office Fund Manager acquired Tampa Commons for $57 million in November. The acquisition of the 13-story, 253,922 square-foot office building marked Bridge’s return to the metro Tampa Bay office market.