(Carl Cronan is editor of RealEstateFlorida.)

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TAMPA, FL-The local vacancy rate for office space appears to beholding steady at 15.1% midway through this year, though availableinventory has grown by at least 800,000 sf over the past 12 months,according to the latest market review by GVA Advantis. Job losses,particularly in the financial services sector, are bringing abouttepid demand.

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"Despite some erosion of Tampa's office fundamentals in thefirst half of 2008, the market seems to be transitioning into amore stabilized mode, which will limit sharp swings in the future,"Randy Smith, local research director for GVA Advantis, stated inthe report. He added that most local market players have come togrips with the reversal of fortune in office demand, which was on afavorable track until the latter half of last year.

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Asking rents for class A office space in Tampa averaged $24.50per sf at the end of the second quarter, up 1.5% over the year butwell off the pace of yearly gains measuring 10.1% in 2006 and 5.5%in 2007, Smith's statistics show. He observes that midyear marketrents adjusted downward for the first time in both class A and Bproperties.

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Slightly over a million sf of office projects are currentlyunder construction in Tampa, mainly in the Westshore submarket andInterstate 75 corridor on the city's east side, Smith says.Two-thirds of this speculative space is scheduled to open by theend of this year, likely causing a modest rise in vacancy, hesays.

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Leasing activity is strong in some segments of Tampa's officemarket, with Corinthian Colleges signing a ten-year deal for nearly115,000 sf at NetPark near I-75 in the second quarter, Smithreports. However, he observes that most local landlords areconcentrating on renewing existing tenants to maintain occupancyand cash flow.

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More than 4.5 million sf of new office is on the drawing boardlocally, according to an estimate by CB Richard Ellis, though manybrokers aren't convinced that all those plans will come to pass.For example, Philadelphia-based Rubenstein Partners has postponedan ambitious 580,000-sf waterfront office project in Westshore,called West View Corporate Center, because of the economic slowdownand faltering demand for new space.

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Westshore, the city's largest office submarket with a currentinventory of 11 million sf, also maintains the lowest local vacancyrate at just above 10% through the second quarter, according toboth GVA Advantis and CBRE estimates. Landlords are attempting tohold the line on asking rents at just above $25 per sf, with classA space commanding nearly $30 per sf, though Smith notes thatsublease space in Westshore has increased by 53% through the firsthalf of this year.

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Downtown Tampa's office market, with 6.5 million sf ofinventory, seems to be holding its own even with tenant activitycooling, Smith says, adding that "a healthy tenant base has limitedthe CBD's exposure to excessive sublease space." Vacancy measured17.9% at midyear, 16.1% for class A, with asking rents for class Aspace actually rising a couple of dollars over the past year to anaverage of $23.55 per sf, he says.

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Investment activity in Tampa's office sector has slowed downsignificantly, with only $73.7 million in sales posted through thefirst half of 2008, less than a quarter of the $316.8 millionposted through the first six months of 2007, Smith says. The onlynotable transaction during the second quarter was Orlando-basedEola Capital's acquisition of the Buschwood III building innorthwest Tampa for $19.3 million, or $112 per sf.

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However, Smith notes that transactions could pick up in thecurrent quarter, with USAA Real Estate having sold two Westshorebuildings in July for $47.3 million. Four significant buildings inWestshore and one office tower in Downtown Tampa are now in variousstages of the marketing and sale process, he says.

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