CHANGE OF COURSE
Developers are turning their attention to other types of
commercial properties as the condo market cools off
major prelease commitment, I think it’s going to be difficult.”
Abberger, whose prior urban successes include the Tampa
Marriott Waterside hotel and Port Ybor industrial park, boldly
predicts Prime Meridian Center will also bring tenants back to
the city’s urban core after years of defections to newer office
structures and business parks in surrounding submarkets.
With the Tampa CBD office vacancy tracking as high as 17%,
based on various estimates, the timing for a new class A building
might not look so promising right now. Yet Abberger maintains
the perspective that the office market should be in recovery mode
by the time Prime Meridian Center opens, and believes the current residential-driven downturn will be just a memory by 2010.
“In good times and bad, Tampa outperforms the rest of the
state and the majority of the country,” he says, adding that things
aren’t anywhere near as drastic as the post-Resolution Trust
Corp. era of the early 1990s, for which he notes the local recovery period took about two years.
ST. PETE ADDITION BUMPS VACANCY
Tampa isn’t alone in its office vacancy struggle, however. Downtown St. Petersburg, which added a single-user office structure
two years ago to accommodate Progress Energy Florida’s new
headquarters, has seen office vacancy ratchet up to around 12%.
The 16-story building was the first major office addition since
Bank of America Tower, the city’s largest, opened in 1990.
The greatest addition of space to the St. Pete CBD is the
135,000-sf 100 Bay Central building that once served as the nerve
center for the company formerly known as Florida Power and
hadn’t been accessible to the public until last fall. More new
space will become available when the 35-story Signature Place
condo tower, which replaced an old federal building, opens with
40,000 sf of office condos this spring.
With the Bay area’s overall office vacancy approaching 14% in
late 2007, local brokers and researchers express concern over
shadow space being reintroduced to the market, either in the
form of sublease availability or empty space for which previous
tenants still pay rent. Most of the new vacancy is attributed to
weakness in the housing market causing a domino effect on related businesses such as mortgage lenders and title companies,
some of which occupied premium office space.
The bright side to the vacancy is that those spaces present an
alternative to record-high office rents, which in some desirable
submarkets are trending at least $5 ahead of the Bay area’s $21-
per sf average. Class A rents in Tampa’s massive Westshore district are approaching nearly $30 per sf, with asking prices for
newer buildings topping that.
“These can be cost-effective opportunities if the space fits the
user’s needs,” says Randy Smith, research director for GVA Advantis in Tampa and a veteran observer of local commercial real
estate trends. He estimates at least 500,000 sf of sublease or
shadow space returned to the market in 2007.
The new asking-rent threshold in Westshore, which has more
than 11 million sf of office inventory in mostly class A buildings,
is sparking a new round of planned projects, including a three-building, 580,000-sf waterfront redevelopment by Philadelphia-based Rubenstein Partners LP.
