Office Leasing Lackluster

Office leasing dropped off across the Tampa Bay region in the second quarter of 1998. Only two counties showed an improvement over an unusually strong first quarter. However, total regional net absorption of 485,800 sf, while down 26 percent from the first quarter, was enough to send the region's annual absorption over two million sf for the first time in six years.

Annual Office Absorption

Pinellas was way in front of the other counties with net second quarter absorption of 351,000 sf, which pushed annual absorption up 40 percent to 1.12 million sf. The vacancy rate dropped to 8.1 percent. Class A space dropped a point to 7.2 percent vacant, while class B & C space dropped to 8.7 percent. The Pinellas Gateway was again the region's star. Completion of a 250,000 sf building at Danka Center sent absorption soaring. While the building was originally marketed as multi-tenant, Danka Industries will now expand into the entire building. Gateway's annual absorption jumped 70 percent to 674,360 sf, while vacancy dipped to 7 percent. Construction began on the Tides of Feather Sound, a 158,000 sf class A building due for completion in March.

The small South Pinellas sub-market had an unusually strong quarter with net absorption of 50,615 sf. This market is currently 5 percent vacant with its largest contiguous space available at 5,350 sf.

For the rest of Pinellas County it was a lackluster quarter. North Pinellas saw just 21,515 sf of net leasing, while Downtown St. Petersburg netted just 10,080 sf. Across the bay, Hillsborough County saw net occupancy losses in five of its six sub-markets. Westshore pulled the county's net quarterly absorption to the plus side. The county's vacancy rate slipped slightly to 8.8 percent, while annual absorption dropped to 726,275 sf. Countywide, class A space is 6.6 percent vacant while class B & C space is 11 percent vacant.

Multi-Tenant Office Market

Westshore netted 105,740 sf in quarterly absorption. The second Pan Am Circle building was sold for single user occupancy after being vacant for several years. The vacancy rate dropped to 7.9 percent. Class A space is a tight 5.6 percent vacant with only six buildings having contiguous space of 10,000 sf or more. In the other five Hillsborough sub-markets, move-outs topped move-ins by 37,790 sf. The Northwest sub-market suffered the biggest loss at 20,050 sf. The new 25,000 sf building at Gulf South Center was completed during the quarter, but the development saw a net loss, as leases to state agencies are not being renewed.

Sarasota County had 26,650 sf in quarterly absorption. Vacancy was essentially unchanged at 7.3 percent. Construction was completed during the quarter on a 30,000 sf building at Cattle Ridge Business Park in suburban Sarasota and on an 11,500 sf building at Lakeview Office Park in the Venice Market. Both buildings are fully leased. Two more buildings are under construction at Cattle Ridge, with 50 percent of the space pre-leased. Construction also started on the 45,000 sf Merrill Lynch Building at Venetia Bay; 48 percent of the building will go to the signature tenant.

Only 13,990 sf was absorbed at eleven buildings in Manatee County, dropping the vacancy rate to 14.2 percent. Polk County netted 21,520 sf in quarterly absorption, after a first quarter net occupancy loss. Polk continues with the region's highest vacancy rate at 16.5 percent.

Activity was reported at only three buildings in Pasco County, which netted 4,700 sf in quarterly absorption. The vacancy rate dropped to 9.8 percent.

Office buildings fully leased for two or more quarters do not appear in the survey charts. All office buildings continue to be updated in the database each quarter. For more complete information on the survey call the Maddux Report research department at 727/321-3225.