Tenants, Investors Discover St. Petersburg

"Competition for office tenants between cities in the Tampa Bay area is fierce and the City of St. Petersburg is vying for the winning edge," says Steven M. Ekovich, Marcus & Millichap's Florida regional manager. "St. Petersburg is successfully luring office employers to the area with attractive amenities."

Among the city's benefits are waterfront property, sports activities, Downtown living space and a pedestrian-friendly environment. "Many businesses have been further enticed by asking rents that are 13% less than in Tampa," Ekovich notes. "As a result, St. Petersburg boasts vacancy rates 50% lower than Tampa or Clearwater."

Investors are "most interested in properties near the amenity-rich BayWalk area and the Gateway region, which is home to more than 30,000 workers and includes companies such as Raymond James and the Home Shopping Network," the broker says. Ekovich adds, "We expect increased upward pressure on sales prices in St. Petersburg as investors continue to target the area."

Kim Kaiser, research director in the Tampa office of Colliers Arnold, says that "unlike some of the other submarkets in the Tampa Bay area, St. Pete's CBD has not suffered from overbuilding during the '90s." Although new office construction has been almost invisible, she expects that scene to change soon as North Carolina-based Progress Energy considers developing a 200,000-sf office-retail mixed use venture Downtown.

With overall vacancy rates less than 10% and sublease space dropping below 2%, "the time seems ripe for new class A office product," Kaiser says. "As single-tenant, owner-occupiers gobble up smaller Downtown offices and similar space outside St. Pete's CBD, tenants are heading back to Downtown."

She adds, "With overall rental rates about 80 cents below Tampa Bay's average and class A rents nearly a dollar shy of the Bay area average, this [St. Petersburg] CBD remains a tremendous value."

The live-work-play national downtown concept is also catching on in St. Petersburg, the researcher finds. "While the buzz of late is for mixed-use development and properties, St. Pete's CBD is becoming the epitome of a successfully redeveloped downtown, filled with white collar residents wanting to live where they work," Kaiser says.

"Tenants signing long-term leases in Downtown St. Petersburg now will likely experience the submarket's lowest rates, as rents will likely continue to creep up during the next few quarters," she adds.