Northeast Tallahassee is a hot market for office development right now, according to Francis Rentz, director of Advantis Real Estate Services Co. "This market has had significant residential growth over the last 20 years, and office development has followed it," says Rentz. "This area will continue to have strong demand, but it is also nearing build-out, and there is not a lot of land available for additional office development."

One significant development in this submarket is CenterPoint, a mixed-use office and retail development that has recently sold out. CenterPoint totals approximately 150,000 square feet and has been built in 10,000- to 25,000-square-foot buildings over the past 18 months. Other significant developments include speculative office space being built by Summit East, a new mixed-use developer. They have one 40,000-square-foot building completed and occupied by Mainline Information Systems, and another 54,000 square feet of speculative office space under construction.

St. Joe Commercial, a division of the St. Joe Co., is currently in the permitting stage for a new 100,000-square-foot suburban office building. The company is starting the first building in the Arvida master-planned community at Southwood, and plans to continue development as their existing inventory gets leased. St. Joe plans to build up to 693,000 square feet in Phase I of the Development of Regional Impact.

"The Southwood and Summit East developments have the land and the horizontal improvements in place so they can quickly respond to build-to-suit requirements," says Rentz. Summit East, located on the east side of town at the US 90 East/Interstate 10 exit, can be developed with up to 750,000 square feet. The St. Joe Co.'s Southwood business park is located in the southeast quadrant and is less than four miles from the central business district.

Significant leases in the market include 20,000 square feet in the CenterPoint Development by Learnsomething.com. Rental rates for Class A space range from $22 per square foot to $26 per square foot in the CBD and $18 to $22 in the suburbs. The trend in Tallahassee office development is to construct buildings between 5,000 and 30,000 square feet for between one and four tenants, according to Rentz.

The market's largest tenant, the State of Florida, is absorbing the majority of Tallahassee's office space. As the state capital, it is the headquarters for most state agencies that occupy State of Florida-owned space as well as lease space from private sector office buildings. Additionally, state professional associations lease and own a significant amount of office space. Law firms and lobbyists occupy a large portion of the space in the CBD as well, so that they can be in close proximity to the State Capitol Building.

The State Government Suburban Office Park at Southwood now has over 1 million square feet completed. The State recently completed four buildings totaling 380,000 square feet for the State Department of Health. According to Rentz, this office park was started in 1992 and has significantly affected the entire Tallahassee office market, particularly the southeast market.

"Currently the Tallahassee office market is experiencing the highest vacancy rates in quite some time," Rentz says. Several factors have contributed to this increase in vacancy, he adds. "With the State of Florida's recent completion of 380,000 square feet of office space at their suburban office park at Southwood, coupled with the fact that the Florida Department of Labor has been dissolved by the State Legislature, the vacancy rate for private sector space has risen from 5 percent to 9.9 percent in the last 12 months."

The Koger Center, which consists of just under 1 million total square feet and housed the headquarters for the Department of Labor, has seen its occupancy rate go from 100 percent to 85 percent. Additionally, Governor Jeb Bush started cutting the state work force to reach his targeted overall reduction of 25 percent. "This recent trend in vacancy has primarily affected B and C buildings. The newer class A space still seems to be doing quite well. If a tenant is willing to accept lesser quality space, there are some bargains in the marketplace," says Rentz.

Francis Rentz is director of Advantis Real Estate Services Company.


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