Tampa Office Market May Bottom Out

TAMPA, FL-The Tampa Bay office market may be beginning to turn a corner, with the amount of negative absorption in the first quarter of 2010 significantly smaller than in the 1Q09, according to brokers at Grubb & Ellis and CB Richard Ellis. Plus, activity in the market is up from late 2009, they report.

“In 2009, people were uncertain about the economy,” but now company executives are interested in making decisions about renting space, says Paula Buffa, senior vice president, Grubb & Ellis Commercial Florida at the Tampa office. Buffa and colleagues Jim Moler, senior vice president, and associate Maria Camarinos Hall, of the new “office agency team,” at Grubb and Ellis in Tampa, recently added the Turtle Creek property, a 120,000-square-foot First Industrial Realty Trust office/flex project in Clearwater, to their portfolio of properties for which they are in charge of leasing.

At the end of first quarter 2010, there was negative absorption of 200,000 square feet of office space in the Tampa/St. Petersburg market, reports Buffa. “We will continue to have negative absorption for the rest of the year, but significantly less than in 2009, which ended with 1.2 million square feet of negative absorption,” she says. In contrast, if the market activity continues the way it has been in first quarter 2010, there will only be 800,000 square feet of absorption 2010. “The negative absorption in first quarter 2010 was about half the amount in first quarter of 2009, when there was a little over 400,000 square feet of negative absorption in the area, says Buffa.

“Inquiry activity is up, both e-mail and voice mail from brokers and tenants alike, says Anne-Marie Ayers, first vice president at CB Richard Ellis in Tampa. Recently a 50,000-square-foot lease was signed in Tampa’s central business district by a financial-services related company, she says. “It was the largest lease to be signed in the area in the last four quarters.”

“The third and fourth quarters of 2009 were very quiet,” says Ayers, and the office vacancy rate for the first quarter in the Tampa market was 19.2%, says Ayers, “But starting in February, the number of companies looking for space to lease is up, so we are hoping in the second quarter we will reap the rewards.”

Among the companies looking for space, says Buffa, are medical-related firms, including those developing medical-related software programs; educational companies, such as universities renting space off campus, as well as for-profit schools, insurance agencies and the federal government. The Department of Defense and the GSA (General Services Administration) are looking at leasing space, says Buffa.

“There is nothing under construction, which helps (existing properties),” says Ayers. “We think that we’ve hit the bottom and this particular market tends to bounce on the bottom for a couple of quarters, before we see upward spikes,” she says.

The average asking lease rate in the Tampa area is $21.03 for all classes of space and in all submarkets, says Ayers. “This is a drop of maybe 3% to 4% in asking rental rates since first quarter 2008,” she says, adding that she doesn’t think rates will continue to decline.