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Across the region a growing refrain is heard: “Many of our smaller tenants are losing their businesses,” says Nelson Guyardo with Austin Companies. Yet there is some optimism, too, as agents are seeing other companies looking for office space. It’s a tenants’ market, though, so prospects are taking their time. “It’s a very quiet time,” says Russ Sampson of Colliers Arnold.
The region’s three largest office markets – Hillsborough, Pinellas
and Sarasota – saw move-outs top move-ins during the second
quarter. As a result, activity the past 12 months dropped to the lowest
level ever recorded by MADDUX BUSINESS REPORT – 118,825 SF.
This is reflective of the 27,000 jobs lost regionwide from first
quarter 2007 to first quarter 2008,
according to a Tampa Bay Partnership
report. (To see a comparable loss, you
have to go back to the late ‘80s-early ‘90s.)
A substantial portion of this quarter’s multi-tenant office losses
is the result of leases expiring on already vacant space. (We report
vacancies only upon lease expiration.) Over the next 12 months,
590,000 sf of occupied space is coming available regionwide and is
being marketed now. An additional 550,000 sf is available for sublease.
Moreover, 1.8-million sf is under construction, opening this
year and next. All this is on top of the 9.6l-million sf that is vacant.
Here’s the upshot: 30 years. That’s how long is would take to fill
the space if activity stays on pace, based on the average supply of
office space over five reporting periods, July 2007 through now.
That supply ranged as low as 18 years (last October) to 80 years
this period (based on vacancies of 9.61-million sf and the 12-month
volume of 118,825 sf). The market shifted sharply when it went from
a two-year supply in July 2006 to 33 years in July 2007.
Pinellas, the second-largest market, is the serious drag with a net
loss of 366,000 sf the past 12 months. It has endured losses in four
of the last five quarters, posting its worst annualized volumes last
quarter and this.
Hillsborough, the largest office market, has a current supply that
would take 27 years to fill up, based on vacancies of 4.57-million sf
and the current 12-month volume of 168,460 sf. Sarasota, the third
largest market, presently has a 14-year supply. Manatee, Pasco and
Polk counties each has a supply of about five years.
In Hillsborough, asking rents have softened at several locations.
Free rent is being offered as well in some offices. Westshore specifically
saw its biggest quarterly loss with four buildings reporting
move-outs totaling 20,000 sf or more. Activity elsewhere was flat.
Most of Sarasota’s losses this quarter occurred downtown, which
now has lost 21,000 sf over the past year. Manatee was hit with a
35,260 sf loss this quarter, its largest in more than two decades.
Pasco bucked the trend this quarter and reported its highest level
of activity in five years. But what is unclear is how much of this space
went to investors who may be competing with more traditional landlords
to rent out their space.
In Polk, much of the current activity is in the east, along US 27 from
Haines City to Lake Wales. There, two medical buildings are being
built and three developments totaling 108,000 sf are planned.
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