A bright economic forecast follows projected employment growth in the Tampa, Florida, area. The MSA is expected to gain 30,000 jobs this year, an increase of 2.4 percent. By 2006, the area’s job growth is expected to measure a 9.6 percent increase over 2003. These new jobs will help fill office vacancy, currently at 20 percent, including sublease space; and they will improve the industrial market, which is currently experiencing a direct vacancy rate of less than 8 percent. The increase in jobs will also help to fill local apartment communities and per-unit sales prices will continue to increase. Retailers are also taking note of the projected growth; they have more than 20 million square feet of retail developments on the drawing boards.

Office

Crescent Resources is nearing completion on the sole multi-tenant office project under construction in Tampa. Corporate Center Three at International Plaza, containing 287,000 square feet, will be ready for occupancy this summer. This building currently has 55 percent of its space committed.

Most office projects on the drawing board are planned for the Westshore and Interstate 75 corridor submarkets; however, no start-ups are expected in 2004 without significant pre-leasing.

2003 started with a spike in vacancy due primarily to the closing of the 820,000-square-foot WorldCom/Intermedia campus as a result of bankruptcy proceedings. Tampa’s overall vacancy rate, including sublease space, remained stabilized at slightly more than 20 percent over the course of the year.

Demand for office space was down in 2003 and many lease transactions involved relocation or consolidation of existing tenants in the market. One significant new deal was signed at a former PricewaterhouseCoopers training facility in the Westshore submarket. International Academy of Design & Technology consolidated its local operations and leased the entire 130,000-square-foot building. Net absorption will gradually improve during 2004 as business hirings gain momentum.

Over the past 3 years, the overall average asking rental rate for Tampa office space has fluctuated in a narrow band around $19 per square foot. Rates will bounce back as increased demand reduces the space options for tenants. Rates in the Westshore business district will rebound first, probably in the latter half of 2004.

The Tampa area is well positioned for a resurgence of real estate activity in 2004 and beyond. Economy.com projects employment growth for the Tampa metro area from 2004 through 2006 to be 9.6 percent. This ranks the Tampa area as the 10th fastest growing market in the nation. Job growth, especially in business services, will positively impact Tampa’s office activity in 2004.

— Randy Smith, director of research, Advantis/GVA

Industrial

Speculative development in 2003 was limited to smaller projects, generally rear-load flex buildings, which were adaptable for office use and higher parking densities. Trammell Crow Company, EastGroup Properties and First Industrial Realty Trust each dipped their toes back into the market with new spec deliveries during the year.

In December, Trammell Crow Company broke ground on a unique inter-modal industrial development, which offers wharf and rail access at the Port of Tampa. The first phase of the Port Ybor project will feature a 282,000-square-foot cross-dock facility to be completed in August.

New construction start-ups are scheduled for this year, primarily on the east side. Duke Realty Corporation is building its eighth building at Fairfield Distribution Center. Construction began in January with completion of the 94,000-square-foot rear-load structure slated for July. Also on the east side, EastGroup Properties is scheduled to begin Palm River South in March. This will feature twin 80,000-square-foot rear-load distribution buildings with 150-foot depth. Target completion date for the first building is this August.

Vacancies in Tampa’s industrial market started rising in 2001, but peaked by mid-year 2003 with a direct vacancy level of 9.1 percent. The second half of 2003 finished strong, dropping the direct vacancy rate to 7.8 percent by the end of the year.

Industrial demand got off to a slow start in 2003, but finished with a strong surge in the second half of the year with 773,000 square feet in positive net absorption. The Eastside submarket captured a majority of the larger deals, typically in the 40,000- to 50,000-square-foot range, and accounted for about 85 percent of the total net absorption for the year.

The overall average asking rental rate for industrial space in Tampa remained relatively stable throughout the year. For flex space, which represents less than 20 percent of total vacancy, the average rental rate showed a significant gain for the year. It rose 8 percent over the past 12 months, to close the year at $7.77 per square foot. The average for distribution space, which makes up the bulk of the market, ended essentially unchanged from the start of the year, at $4.22 per square foot.

The outlook is positive for the industrial sector. According to a new report prepared for the National Association of Wholesale-Distributors titled “NAW Economic Forecast 2004,” Florida will be among the leading states in the nation for employment growth among wholesale distributors; the report forecasts 3.5 percent growth in hiring.

— Randy Smith, director of research, Advantis/GVA

Retail

Florida has always had huge growth from in-migration following periods of national crises, severe winters and economic downturns such as the events that were ushered in with the tech bust in mid- to late-1999. As residents move north and south of the city of Tampa, retailers are not far behind. Most of the proposed retail development in Tampa is to take place in high residential growth areas, with southeastern Pasco County, New Tampa and north/northeast Hillsborough County leading the way. These areas exploded in the mid-1990s with single-family and multifamily residential but had few retail options. Now retailers are scrambling to serve; qualified developers have more than 2 million square feet of retail space on the drawing boards with plans to be significantly engaged in predevelopment activity this year.

Oakley Plaza at the intersection of SR 54 and I-75 will be the largest undertaking. Echo Development will build a planned 1 million-square-foot regional center, which should open fall 2006. Just a few minutes’ drive from Oakley Plaza, The Goodman Company will develop the new 400,000-square-foot Wiregrass Ranch Power Center. Wiregrass Ranch is also breaking ground on a 14,000-unit subdivision. The Wesley Chapel/New Tampa neighborhood has a Wal-Mart Supercenter and SuperTarget, but Wal-Mart continues to grow, adding another Supercenter near the busy intersection of SR 54 and Bruce B. Downs Boulevard on Porter’s Wiregrass Ranch. Wal-Mart is planning a Sam’s Club less than 4 miles away, at the intersection of the new SR 56 and SR 581. Jacobs also has plans to build a 1.2 million-square-foot conventional enclosed mall at the intersection of SR 54 and SR 56.

Another area of substantial residential growth is south Hillsborough County where young couples have created demand for housing. Retailers want to be there to take advantage of the new demand for goods and services. Morin Development and The Sembler Company plan a major power center at the intersection of I-75 and Big Bend Road. At Big Bend and U.S. 301, RMC Property Group is developing a center for The Home Depot and Publix. Kash n’ Karry also plans a new store on the southeast corner of the project.

In the Tampa Bay area, the story continues to be urban infill, with such developments as Clearwater Mall, the Morin redevelopment of the Jim Walter building at I-75 and Dale Mabry, and the explosive growth of north/ northeast Tampa-southeast Pasco.

— Jeremy Kral, director of market analytics & GIS, Colliers Arnold

Multifamily

With projections for strong employment growth and reduced construction, Tampa’s multifamily market is poised for solid growth. The Tampa MSA is set to record 2.4 percent employment growth in 2004, a gain of 30,000 jobs, following a 1.5 percent payroll expansion in 2003. Half of the new positions will be in the professional and business services sector, which will fuel demand for apartments as the market for first-time homeowners begins to lose steam.

Investors have taken notice, pushing up the median price per unit among Tampa multifamily investment sales from $46,000 in 2002 to $48,000 in 2003. Sales activity has been stronger in Hillsborough County than Pinellas County with the former accounting for 60 percent of the metro area’s sales. A limited availability of land helped the South Pinellas submarket post a median price gain of 6.6 percent in 2003, to $52,500 per unit. Hillsborough County’s median price per unit rose from $37,500 in 2002 to $44,000 in 2003. Areas closer to employment centers, such as the Tampa CBD and Westshore, will record price gains over the next 2 years as employment grows.

Apartment operators can expect vacancy to rise to 8.4 percent in 2004, just 10 basis points above the 2003 level of 8.3 percent. Vacancy climbed from 8.6 percent in 2002 to 9.6 percent in the first quarter of 2003 but retreated rapidly later in the year as employment escalated. Asking rents are expected to continue climbing in 2004, from $722 per month to $731 per month, an increase of 1.2 percent. Effective rents were flat in 2003, at $660 per month, but are expected to rise this year.

Construction declined in 2003, and 2004 will see only 3,500 new apartment units. Heavy construction in the large North Hillsborough submarket, however, resulted in a 5 percent increase in local inventory and a jump in vacancy of 240 basis points. Selected properties may be affected by new deliveries, presenting opportunities for acquisition and repositioning.

— Steven Ekovich, first vice president and regional manager, Marcus & Millichap’s Central Florida offices

©2004 France Publications, Inc. Duplication or reproduction of this article not permitted without authorization from France Publications, Inc. For information on reprints of this article contact Barbara Sherer at (630) 554-6054.