Tampa Bay Economy.
According to the Bureau of Labor Statistics, the Tampa Bay region had an unemployment rate of 5.7% in November 2020, up from 2.7% in November 2019. The national rate was 6.7% in November 2020, so Tampa Bay appears to once again be fairing slightly better than the US economy as a whole. Nonagricultural employment in Tampa Bay was 1.35 million, down 56,400 jobs or 4.0% from a year ago. The only three employment sectors that gained jobs year-over-year were Manufacturing, Wholesale Trade and Other Services which collectively added 2,600 new jobs in 2020. Not surprisingly, Leisure and Hospitality had the greatest job losses in 2020 with 27,500 jobs gone seconded by Business and Professional Services which lost 9,000 jobs in 2020.
Office Market Supply.
Overall office vacancy (includes Class A, B and C) increased 3.6% from Q4 2019 and ended the quarter at 14.5%. The increase was due primarily to an increase in sublease space and new construction deliveries. Office space available for sublease increased throughout Tampa Bay to 971,958 square feet. Over 565,000 feet of new office space was delivered in 2020 of which 40% is available for lease. Approximately 1 million additional square feet is scheduled to deliver in 2021 with minimal pre-leasing.
Office Market Demand.
Net absorption, which is the total new square footage leased minus the total square footage of tenants that no longer occupy their suites was negative 579,132 in 2020. This represents a 59% reduction in leasing activity in Tampa Bay compared to 2019. Class A office properties had the most leasing activity as tenants took advantage of leasing concessions to move to higher quality properties.
Pricing.
Average direct asking rents were down 4.3% year-over-year. This is due primarily to reductions in rent on newly constructed properties and properties under construction. 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. All of this new space combined with a record amount of sublease space is putting downward pressure on direct asking rents. Rates at 1001 Water Street have fallen approximately $10 per square foot to between $47 and $49 a foot including parking. So far overall average asking rates on existing properties have not fallen but landlords are offering more in the way of concessions such as free rent.
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. A large portion of that new space has yet to be pre-leased. That square footage combined with the 971,958 available for sublease is bound to increase vacancy and put downward pressure on rents. So far advertised rates (other than newly constructed and under construction) 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
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