Direct vacancy is 14.2%, down from 15% in the same period last year. Rents are moving upward with the average asking rate at $18.56 per sf, about 3% higher than mid-year 2004. The Pinellas office market has had two consecutive quarters of net absorption. St. Petersburg, Clearwater, Pinellas Park, Palm Harbor, Dunedin and Largo house the majority of class A office properties, many of them facing the Gulf of Mexico.

"The performance of class A properties is leading the market and a good indicator of improving condition in Pinellas," says Randy Smith, director of research at Advantis. "Tighter space conditions for premium space are nudging the rental rates higher." Net absorption for the first half totaled 223,704 sf compared to a negative 158,990 sf in first half 2004.

Smith says Pinellas is "undergoing a real estate transformation as redevelopment is changing the landscape, mostly to accommodate the boom in residential demand and the resurgence of the tourist trade." He says "from the beaches of Clearwater to the Downtown district of St. Petersburg, high-rise residential condos, luxury-accommodation hotels and upscale mixed-use projects are sprouting up everywhere in various stage of development."

New office construction, however, pales when compared to other redevelopments, Smith notes. Still, he says "some of the older and functionally challenge office buildings are being redeveloped for more high-end uses."

One example is the 15-story Clearwater Center office building in Downtown Clearwater. The 155,000-sf, 50%-occupied structure was purchased last year by private investors for $5.7 million or a below-replacement cost of $36.77 per sf. The new owners plan a $35-million redevelopment of the property that would include 71 residential condominium homes and an additional 44,300 sf of office and retail space.