As a result, the office market is becoming a landlord's market with a shrinking pool of available space and higher than ever asking rates. There has been 1.5 million sf of total absorption since the beginning of the year, with 944,237 sf of the space absorbed in the third quarter, according to a Colliers Arnold Q3 report.
At the beginning of the quarter, Tampa experienced a 9.7% vacancy rate, the lowest rate in the past 24 quarters. At 6.1%, the Tampa Bay class A suburban vacancy rate is the third lowest in the nation, according to the Colliers report.
It appears that the good times will continue. According to a Marcus & Millichap Q3 report, vacancy is projected to fall 100 basis points over the course of 2006 to 10.8% by the end of the year. This compares with a 460 basis point vacancy improvement over last year. Asking rents will continue to grow and are expected to gain 4.9% to $19.70 per sf by year's end, while effective rents are forecast to climb 6% to $16.98 per sf.
"Investors are confident in the prospects of Tampa office properties and are driving transaction velocity and prices to new heights," the report states. "Dollar volume has gained more than 50% over the previous year and continues to show signs of strength. Strong demand for office space is expected to continue this year, as cap rates remain near the national average and office properties attract investors looking to enter the market."
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