Tampa Bay Economy.
According to the Bureau of Labor Statistics, the Tampa Bay region had an unemployment rate of 6.8% in August 2020, up from 3.3% in August 2019. The national rate was 8.4% in August 2020, so Tampa Bay appears to be fairing better than the US economy as a whole. Nonagricultural employment in Tampa Bay was 1.3 million, down 59,000 jobs or 4.3% from a year ago. The only two employment sectors that gained jobs year over year were construction up 1.7% and Government up 2%. Not surprisingly, Leisure and Hospitality had the greatest job losses in the last 12 months with 34,400 jobs lost resulting in a 21% decline.
Office Market Supply.
Overall office vacancy (includes Class A, B and C) increased 2.1% from Q3 2019 and ended the quarter at 13.8%. The increase was due primarily to an increase in sublease space and new construction deliveries. Office space which is available for sublease increased throughout Tampa Bay to 1,500,000 square feet. Almost 700,000 feet has been placed on the market since the pandemic began in March. Of that 1,500,000 feet, approximately 850,000 is currently vacant. Delivery of Sparkman Wharf and Heights Union (West) added 355,000 square feet of new space. Approximately 57% of that new space has been pre-leased but move ins have been delayed.
Office Market Demand.
The total amount of office space leased in Tampa Bay through Q3 2020 was 1.8 million compared to approximately 1,982,000 through Q3 2019. Of the 1.8 million leased to date in 2020 only about 18% was leased in the third quarter. If leasing continues to be lackluster in the fourth quarter, we could be looking at a double-digit decline from 2019.
Pricing.
Rents for Class A, B, and C combined increased 1.4% from Q3 2019 averaging $26.89 per square foot full service. Rents for Class A averaged $30.27 a foot. Class A assets in the downtown Tampa submarket increased 13.4% to $37.15 a square foot. Until recently, Tampa Bay had not seen significant office construction since the early 1980s. The relative scarcity of space seems to be holding face rates at pre-pandemic levels.
Outlook.
Between Midtown Tampa, Water Street Tampa, and the Heights, just over 1,000.000 feet of new office space will become available in the first half of 2021. Seven hundred fifty thousand feet of that new space has yet to be pre-leased. That square footage combined with the 1,500,00 available for sublease is bound to increase vacancy and put downward pressure on rents. So far advertised rates have not fallen but landlords are offering more in the way of concessions such as free rent.
At Mobiliti CRE we focus 100% on representing tenants with office relocations, expansions, contractions, and subleases throughout Tampa Bay and the entire West Coast of Florida. We also assist businesses that are looking to purchase office, medical office, industrial, and retail space. Reach out to us for assistance with all of your commercial real estate needs at (813)-300-2227 or email us at pam@mobiliticre.com