With its low occupancy costs, Tampa Bay’s 40.4-million-square-foot general purpose, multi-tenant office market has emerged over the years as a comfortable niche for back office and call center operations. With a notable portion of these tenants belonging to the financial sector, however, the market was dealt a significant setback by the recession. A definitive recovery trend, meanwhile, has been slow to materialize. Brief periods of positive net absorption have alternated with bouts of loss. Indeed, following 165,000 square feet of positive activity during the latter half of 2011, first half 2012 followed with negative 70,000 square feet. July, moreover, added 74,000 more to the loss column.
The vacancy rate, as a result, has been unable to manifest an overriding downward trend. Reis put the second quarter rate at 20.9%, up 10 basis points from the quarter before, down 20 year-over-year. July’s occupancy loss, meanwhile, drove the rate back to 21.1%. The overall recent losses aside, the firm expects demand to strengthen over the remainder of the year; much of the loss suffered to date should be redeemed by year-end. According to Jones Lang LaSalle, meanwhile, renewals with expansions accounted for 12.6% of total lease volume during the second quarter, well above the 3.3% calculated for the period 2008 through 2011 as tenant expansion, albeit slowly, returns.
Construction has slowed markedly. No competitive general purpose projects completed last year. And the 2012 completion total for that category of space will consist solely of the 88,000-square-foot DBSI Park Centre Office Building at Telecom Drive and Woodstock Road in east Tampa. One major project, meanwhile, is underway for completion in 2013. The $78 million, 250,000-square-foot MetWest Two broke ground in June 2011 at Boy Scout Boulevard and Lois Avenue in the upscale Westshore submarket. Reis expects completion next June. With respect to absorption, the new building will be a wash. According to Jones Lang LaSalle, PricewaterhouseCoopers will consolidate its Tampa Bay operations at MetWest Two in a relocation of its 30,000-square-foot practice at International Plaza and empties nearly 330,000 square feet of back office space at LakePointe One and Two at Tampa Bay Park. Second quarter 2013 occupancy is planned. Meanwhile, Trammell Crow Company is searching for an anchor tenant for its planned 400,000-square-foot SouthGate office tower intended for a site on E. Whiting Street and Florida Avenue in the downtown submarket. Preleasing at 60.0% is sought, reports Jones Lang LaSalle; delivery “between 2014 and 2015” is expected.
Positive net absorption over the remainder of the year should result in a year-end vacancy rate of 20.8%. Rent growth at about 1.0% is forecast for the year. Absorption is expected to improve markedly next year, taking the lead over same-year new supply. Vacancy should decline as rent growth strengthens.