Tampa's Surging Downtown Drives Office Market

"An unprecedented level of residential construction is planned for Downtown Tampa over the next three years to contribute to the health, stability and vibrancy of the Downtown community," according to researchers at Trammell Crow Co. "With the goal of creating a 24-hour city, there are approximately 25 residential projects that are proposed or under construction, which will deliver over 5,000 units by late 2007."

The new residential product, in turn, will generate new office development, the firms project. "Expanding office-using firms added more than 12,000 workers to payrolls last year, producing net absorption of 690,000 sf," notes Steven M. Ekovich, first vice president and regional manager of the local office for Marcus & Millichap Real Estate Investment Brokerage Co.

"Owners should be able to reclaim some pricing power in the near term with effective rents forecast to rise as leasing activity improves during the year and concessions wane," he adds.

The local office of Advantis Real Estate Services Co./GVA puts the net absorption, year-to-date at 1.16 million sf. In the near future, a new name will be added to the corporate logos posted on the city's Downtown skyline, says Advantis research director Randall W. Smith. "Trump Tower Tampa, a 52-story residential condominium tower with unit prices ranging from $700,000 to over $6 million, has been announced for a prime waterfront site along the Hillsborough River," Smith says. New York real estate mogul Donald Trump and a local developer are partnering in the $220-million project, as GlobeSt.com previously reported.

In Pinellas County, just east of Tampa in Hillsborough County, Smith notes office leasing activity was "off about 10% from the previous year." He says "corporate downsizings and consolidations contributed to weaker conditions."

Still, he finds the relocation and expansion of several national firms to Pinellas County an encouraging sign of future office growth. The firms include Certegy, Verizon, Valpak, Medical Technology Systems, Mercury Insurance and Bright House Networks.

Kelly Offutt, a senior analyst in the local office of CB Richard Ellis Inc., points out large law firms and companies in the financial services and consulting industries "continue to have a strong presence in the office market."

She adds, "Throughout 2005, it is expected that more mid-sized and smaller tenants, such as engineering and technology firms, will be seeking expansion opportunities throughout the Tampa Bay" area.

Colliers Arnold finds office construction in the overall Tampa Bay area is primarily build-to-suit, non-speculative buildings. Of the 738,000 sf currently under construction, only 276,800 sf is speculative space. Colliers Arnold puts the vacancy at 15.9%, down from 16.7% a year ago.