The Tampa Bay economy grew over the past year adding 22,140 jobs resulting in an annual growth rate of 2.0%.  Most of the job growth was in the financial activities sector and the professional and business services sector.  As of June 2019, the unemployment rate in Tampa Bay fell over the last twelve months to 3.0%.

Office Market Overview – Hillsborough County

Overall rents (including all classes and direct and sublet space) increased in the last twelve months by 6.9% to $27.15 a foot.  Class A rents closed out the second quarter up 4.1% to $31.15 a foot which is the first time overall Class A rents averaged over $30.00 a foot in Tampa/Hillsborough County history.  Class A rents in Downtown Tampa and in Westshore increased over the last twelve months by 8.7% to $32.27 a foot in Downtown Tampa and by 11.3% to 35.59 a foot in Westshore.  This is the second quarter in a row in which Class A asking rents in Westshore reached historic highs.  The overall vacancy rate for office space in Hillsborough County was increased to 12.8% in the second quarter. This was due in large part to Laser Spine Institute vacating 176,000 feet in Westshore.  Downtown Tampa had the lowest overall vacancy rate at 9.1% with Class A space at a record low of 6.2%.

At the close of the second quarter Tampa/Hillsborough County had approximately 1.4 million square feet under construction.  This is the most office space under construction since 2008.

Significant projects include:

  • Heights Union – 300,000 feet of office space under construction in two 150,000 square foot office buildings together with a mixed-use development.  Axogen has pre- leased 75,000 feet and WeWork has pre-leased 50,000 feet.
  • Water Street – 1001 Water Street is a 380,000 square foot office tower located in Strategic Property Partner’s Water Street, a multi-billion dollar mixed use project being developed by Jeff Vinik and Bill Gates.  1001 Water Street is the second office building under construction in the project which includes the 180,000 foot office tower under construction in Sparkman Wharf.
  • Met West Three – 250,000 square feet of office space under construction and pre-leased entirely by PwC.
  • MidTown One – Phase I is to be completed before the 2021 Super Bowl and includes retail, a hotel, multi-family, apartments, parking garages, and a 140,000-foot speculative office tower.  Significant tenants will include Whole Foods and WeWork.

Office Market Overview – Pinellas County

Overall rents increased by 5.2% in the last 12 months to $23.11.  Class A assets saw a 6.1% increase to $26.04.  Class A rates in downtown St. Petersburg increased 7.0% to $30.84.  The Gateway submarket had the highest rent increase in the County for both overall rates and Class A rates with overall rates increasing 12.2% to $23.38 and Class A rates up 13.5% to $26.59.

The overall vacancy rate for office space fell to 10.3% which is the lowest vacancy level in over 20 years.  With very limited new construction in the pipeline and historically low vacancy, rents will continue to increase in the near future in Pinellas County.  While rents have increased, they are still below what they would need to be to encourage developers to begin new projects given ever higher construction pricing.

However, the development scene in Pinellas County could change dramatically in the next several years.  Mayor Rick Kriseman recently announced that redevelopment of the 86- acre Tropicana Field site will begin moving forward with or without the Rays.  Redevelopment of this site would be a game-changer for St Petersburg which has struggled to attract large corporate users due to a lack of large blocks of office space.