SOUTHEAST SNAPSHOT, MARCH 2010

Tampa Office Market

The Tampa Bay office market, like many others, has been highly criticized during the recent economic downward spiral, but there are many factors that have been overlooked. If you are a landlord reading this article, the trends of the market are not in your favor, but if you’re smart, they could be. Leasing transactions are up dramatically from the beginning of the year, but creative landlords are winning and retaining tenants.

The number of new leases signed in the second half of 2009 was double that of the previous 6 months. The main reasons were lower rents and more incentives, coaxing tenants to take advantage of opportunities that may not have been available when they signed their previous lease. The average office effective rental rate in the Tampa Bay area is down close to 7.5 percent from the end of 2008, while asking rental rates have only dropped 4 percent during the same time period. This validates that landlords are more willing to give lease incentives than lower rates. Office vacancy rates are flirting with 20 percent across the board. With negative absorption for the seventh consecutive quarter, these numbers are likely to get worse before they get better.

As stated above, the amount of space vacated in the fourth quarter of 2009 exceeded the amount of space leased, however, not by as much as it did in the previous three quarters. These numbers do not indicate a recovery, per say, but it could mean that the worst is behind us. 

A trend towards positive absorption will continue if development remains slow, at least for now. There were only four office projects completed in the latter part of 2009, and all four projects where located in different submarkets of Tampa Bay. This may be a sign that no one particular area can handle too much new product at this time. Office development in 2009, in general, fell almost 20 percent from 2008 numbers.

All of this is great news for tenants.  Hire a commercial broker to give you a snapshot of your submarket or even your building. Your current landlord could be offering lease incentives to new tenants and might be willing to alter your lease terms to accommodate you staying. If your loyalty is not appreciated, a move in this market may be well worth the hassle. 

Landlords, know what competitive space is offering new tenants — if you don’t, one of those new tenants may be one of your old ones. Do not let space sit vacant because you think its worth more than it really is. Make concessions; keep the space occupied, as the property fills up you can afford to be a little more stubborn. If at all possible retain your current tenants; they are your least expensive option, so do your best to help them stay.

This market downturn shall pass; population, although at a slower pace, continues to rise in Florida making a recovery likely to occur sooner than in most states. With population growth, comes a rise in local GDP, which leads to more jobs and more demand for office space. The current trend for landlords should be survival, make the concessions now and reap the benefits later. For tenants, think twice before simply renewing a lease. An experienced commercial broker can prove their worth in this market, simply by making sure you are aware of your options.

This is not the time to be bashful. Be proactive. As a landlord, stabilize your tenant roster, and as a tenant, lock in your occupancy costs.

— Kenny Anderson is a managing partner with the Tampa office of Sperry Van Ness | Commercial Property and Investment Group.

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