The bay area's business park market couldn't sustain the momentum of first quarter as it moved through the second quarter. Quarterly absorption for the region as a whole was about half the first-quarter level. Annual absorption overall, however, slipped a relatively unremarkable 6 percent from the previous quarter.
Hillsborough County's net quarterly absorption was down 57 percent from first quarter. It is clear that the speculative space boom of the past two years has started to slow down. Through the second quarter, 59 percent of the speculative space planned or under construction in Hillsborough at the beginning of the year is now complete; 33 percent is still under construction; and just 8 percent is in the planning pipeline. Now, all the new space in the market has started to take its toll on the older locations: move-outs across the county totaled 418,200 sf.
West of I-275, second-quarter absorption was down 39 percent. Construction was completed on 120,715 sf at Thompson Center-Waters (95 percent leased) and on 70,000 sf at WestLake (available). As a result of more new space than net absorption, the vacancy rate climbed 0.8 of a percentage point. Annual absorption was up 10 percent, as this quarter's absorption was twice as high as second quarter 1999, which dropped out of the twelve-month moving rate.
East of I-275 net quarterly absorption dropped 65 percent. Move-outs totaled 368,700 sf in this sub-market. Construction was completed on 100,000 sf at Highland Oaks (available), 16,500 sf at Hobbs Road Industrial (available), 116,290 sf at Palm River North (available) and 65,200 sf at Silo Bend (28 percent leased). All this new space, combined with the move-outs, boosted the vacancy rate here to eight-tenths of a percent; annual absorption dropped 13 percent.
To the west of the bay, Pinellas County's net quarterly absorption dropped 73 percent from the first-quarter level. Move-outs totaled 106,500 sf. Construction was completed on 189,000 sf at Gateway Business Park and 40,000 sf at Interlaken Commerce. The vacancy rate climbed 1.4 points, while annual absorption dropped 26 percent. Gateway's vacancy rate moved up 1.8 points; annual absorption was down 29 percent.
Polk County bucked the trend with net quarterly absorption climbing 51 percent. Construction was completed on 31,500 sf at East Lakeland Commerce Center (available). The vacancy rate dropped a half point, while the annual rate more than doubled as this quarter's net absorption replaced a net loss in the twelve-month moving rate.
Pasco County also had a better quarter. The first quarter had seen net loss in occupancy. Construction was completed on a build-to-suit at West Pasco Industrial Park. The vacancy rate dropped 0.8 point; the annual rate climbed 55 percent. After two quarters of no reported activity, Hernando County saw the completion of 23,062 sf in build-to-suits plus 10,800 sf of speculative space. Annual absorption was up 71 percent.
Manatee County recorded its second consecutive net quarterly loss in occupancy, driving the vacancy rate up 1.5 points and the annual rate down 76 percent. Sarasota County's quarterly activity was a wash. With a very low 1.9-percent vacancy rate, the county has very limited choices in available space. Annual absorption slipped 7 percent.
Across the region, half of all speculative space in the pipeline at the beginning of the year is now complete, 32 percent remains under construction while 19 percent is still in the planning stages. A year ago 2.1 million sf of space was under construction compared to 1.2 million sf today (including speculative space and build-to-suits).
NOTE: Office buildings fully leased for two or more quarters do not appear in the survey charts. All office buildings are updated each quarter. Previous quarterly data is revised as new information is received. Survey charts may include sublease space, which is not included in analysis numbers.
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