Aside from a few build-to-suit projects and sales of recently completed or vacant buildings, currently there is not much significant development coming out of the ground in the Tampa Bay, Florida, office market.

"Thankfully, speculative office development has gone into hibernation for the time being," notes Robert Shoemaker, executive vice president of Mercantile Bank's commercial real estate group in St. Petersburg, Florida.

"Of course, this current posture is primarily a function of generally weaker economic conditions alongside a retrenchment in certain business sectors, specifically technology, which has led to higher vacancies and the weakest absorptions our market has experienced in many years," Shoemaker continues. He points out that absorption rates have dropped to negative levels in some submarkets. "This deterioration is further amplified by the abundance of sublease space in the market. Nevertheless, the Tampa Bay economy remains quite resilient and is certainly in much better shape than many of its peers around the nation. We still see plenty of opportunities on the drawing board, waiting for the right moment to launch."

In Hillsborough County, the Westshore market and surrounding neighborhoods are quite popular due to availability of vital amenities such as interstate and airport access and acceptable commute times to popular residential areas. The dining and entertainment choices in this area are an attractive draw as well.

In Pinellas County, the Gateway area continues to thrive due to a central Pinellas County location and availability of some of the last remaining land parcels large enough to host office developments of any significance. "Pinellas has earned the reputation of being built-out," says Shoemaker. "I like to think of it as under-demolished. In fact, much of its future hinges on focused redevelopment of core business areas like downtown St. Petersburg and downtown Clearwater. This process is already well underway and has gained much needed political support to foster this trend."

Fortunately, Tampa Bay is host to the continued participation of local developers as well as several new entrants to our market from outside the Tampa Bay area and the state of Florida. Some of these groups have been very active in the market previously and have returned to pursue new opportunities, which is a testament to the ever-growing attraction of the Tampa Bay area. Some of the most active players include Crescent Resources, Chesapeake Atlantic Holdings Inc. and Grady Pridgen, Inc.

The standard range for Class A rental rates in Tampa is $20 to $24 per square foot. "According to most of the real estate databases we subscribe to, vacancy rates range from 12 to 15 percent," Shoemaker says. Additional softening is expected in the near term.

"From a cautionary standpoint, all of our submarkets warrant a watchful eye," he notes. "None of them have been insulated from the economic climate recently, although some have suffered far more than others. From an opportunistic standpoint, redevelopment opportunities in downtown St. Petersburg and the Gateway area of Pinellas County are worthy of serious consideration."

Robert Shoemaker serves as executive vice president - commercial real estate group with Mercantile Bank.


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