Third Quarter 2017 / Office Market Report Tampa Bay Market Facts Strong Economic Fundamentals and Investor Confidence Continue to Propel Tampa's Office Market.1 MSF Total office inventory in the Tampa Bay office market 530,963 SF Direct net absorption for YTD-2017 11.03% Overall Vacancy $27.02 PSF Average rental rate for class A space in Tampa Bay on a fullservice gross basis Economic Drivers Fueled by strong employment and population growth, Tampa Bay continues to enjoy solid economic momentum. The unemployment rate has steadily declined, dropping 80 bps over the rate recorded in August 2016 to a current 4.0%, and the strong pace of job growth continues with over 55,000 new jobs added in the trailing 12-month period. Healthy leasing activity is occurring, the population base is expected to grow by almost 300,000 (or 2.0%) by 2022, and the housing market continues to outperform. Major corporations also continue to reaffirm their confidence in Tampa, which was recently demonstrated by major announcements of planned corporate expansions by both AAA and USAA. Office Market Snapshot At the end of the third quarter, office fundamentals remained solid with an impressive 228 bps decline in the direct vacancy rate over the trailing 12 months to a current 11.03%, healthy net absorption for the year-to-date of 530,963 sf, and a notable uptick in the asking rental rates of $1.49 per sf since the third quarter of 2016 to a current $22.89 per sf on a full-service gross basis. Nearly every submarket has recorded positive net absorption so far in 2017 with the exception of North Pinellas and Downtown St Petersburg, the latter of which was largely due to a significant block of space landing on the market following the disposition of the former Priatek Plaza during the second quarter. In the North Pinellas submarket, the majority of the recent negative absorption took place in a single building in downtown Clearwater. The majority of the market's positive absorption recorded so far this year has been located in the Gateway, Bayside and Westshore submarkets, although the I- Corridor, Downtown Tampa and Northwest submarkets have also been solid performers. Several key leases were signed during the second quarter, the most notable of which
Tampa Bay Office Market Report Third Quarter 2017 The recent sale of Fifth Third Center is affirmation of continued investor appetite within the urban core. In fact, investment interest has been so vigorous in Downtown Tampa that virtually every class A tower has traded hands over the last five years. Average Asking Rent Rate ($/SF/FS) $23.40 $23.30 $23.20 $23.10 $23.00 $22.90 $22.80 $22.70 $22. $22.50 $22.40 $22.73 $22.80 $23.01 $23.28 $22.89 1Q16 2Q16 3Q16 4Q16 3Q-2017 Direct Vacancy Rate 18.0% 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% 16.2% 16.3% 14.9% 13.1% 11.0% 2013 2014 2015 2016 3Q-2017 Net Absorption (SF) 1,800,000 1,0,000 1,400,000 1,200,000 1,000,000 800,000 0,000 400,000 200,000 0 115,649 1,5,864 1,623,083 837,685 530,963 2013 2014 2015 2016 3Q-2017 Direct Net Absorption were Envision Healthcare's lease of 93,069 sf at Bay Vista Pavilion in the Bayside submarket and three large renewals in excess of 50,000 sf in the Gateway, I- Corridor and Northwest submarkets. Of the top nine direct and sublease deals signed, it is noteworthy that seven of them were in Downtown Tampa or Westshore. The Resurgence of Downtown Tampa Continues Strategic Property Partners, the development company behind the massive $3 billion redevelopment that will transform the Channelside area, recently unveiled plans for a 500-room hotel that will help anchor the area to be known as 'Water Street Tampa'. The flag for the new hotel has not yet been announced but the project is expected to break ground in 2018 at 10 Water Street and the hotel should open in 2020. Once completed, Water Street Tampa will be a walkable mixed-use district between the Channel district waterfront and the central business district that will include 3,500 multiresidential units, a new building for University of South Florida's Morsani College of Medicine (which is now under construction), 2.4 million sf of office space, and 1 million sf of retail, restaurants and entertainment. Higher-end collaborative workspace is also coming to Downtown Tampa at SunTrust Financial Center. Industrious, a company which describes itself as luxury co-working space and capitalizes on a growing national trend among entrepreneurs and small businesses, has leased,702 sf in the building with plans to open during the fourth quarter. A prominent downtown tower traded hands at the close of the third quarter when Farley White Interests, LLC acquired Fifth Third Center on Kennedy Blvd from Bridge Investment Group. The price of the transaction for the 281,187-sf, -story tower has not yet been disclosed, but the sale is affirmation of continued investor appetite within the urban core. In fact, investment interest has been so vigorous in Downtown Tampa that virtually every class A tower has traded hands over the last five years. USAA Expanding its Brandon Campus - Up to 1,000 New Jobs Expected by 20 USAA, a financial services giant, announced plans in August to expand its local footprint in Crosstown Center in the I- submarket with the planned construction of a new 240,000-sf office building. The new building will allow for up to 1,000 additional employees, which would bring the company's total local employment to over 4,500, and is slated for completion in 20. USAA also has a 500,000 sf center in Commerce Park, which opened in 93. Looking Ahead Demand side fundamentals marketwide are strong and solid net absorption of office space within Tampa's central business district is expected, however a lack of large blocks of quality class A space persists. Coupled with the continued scarcity of parking downtown, this may present a very real, albeit shortterm challenge for landlords in attracting larger employers. Heading into the final quarter of 2017, Avison Young expects leasing activity to remain solid, particularly in the Westshore area, that rental rates will continue to strengthen, and that investment sales interest will remain strong as investors scour for opportunities. On the investment side, high competition and low cap rates within primary markets are driving investors to secondary markets like Tampa, which offers a better relative value vs. price. Providing there are no significant economic shocks caused by policy reforms out of Washington, D.C., Tampa's office market should remain well positioned and in growth mode moving toward the year's end.
Tampa Bay Office Market Report Third Quarter 2017 Tampa Bay MSA Class A 22,081,620 1,744,734 104,579 $27.02.10% 7.90% 0.47% 8.37% 148,800 73, Class B,067,449 2,794,887 182,769 $20.32 85.34% 14.66% 0.96% 15.62% 0 457,383 Total,149,069 4,539,621 287,348 $22.89 88.97% 11.03% 0.70% 11.73% 148,800 530,963 I- Corridor Class A 2,749,490 253,849 3,774 $24.90 90.77% 9.23% 0.14% 9.37% 0 (13,023) Class B 4,017,708 7,209 71,4 $.89 82.10% 17.90% 1.78%.68% 0 65,140 Total 6,767,8 973,058,188 $21.20 85.62% 14.38% 1.11% 15.49% 0 52,117 Northwest Tampa Class A 1,170,380 28,6 0 $24.93 97.59% 2.% 0.00% 2.% 148,800 16,109 Class B 2,635,1 321,822 31,688 $.56 87.79% 12.21% 1.20% 13.42% 0 38,336 Total 3,805,499 350,018 31,688 $.99 90.80% 9.20% 0.83% 10.03% 148,800 54,445 South Tampa Class A 48,050 0 0 $0.00 100.00% 0.00% 0.00% 0.00% 0 1,168 Class B 279,023 20,533 0 $22.20.64% 7.36% 0.00% 7.36% 0 6,566 Total 327,073 20,533 0 $22.20 93.72% 6.28% 0.00% 6.28% 0 7,734 Tampa CBD Class A 5,306,173 543,221 28,283 $28.44 89.76% 10.24% 0.53% 10.77% 0 33,779 Class B 936,746 174,095 17,296 $21.30 81.% 18.59% 1.85% 20.43% 0 18,490 Total 6,242,9 717,316 45,579 $26.71 88.51% 11.49% 0.73% 12.22% 0 52,269 Westshore Class A 7,524,312 467,497 63,069 $30.24 93.79% 6.21% 0.84% 7.05% 0 55,501 Class B 4,933,527 489,238 51,737 $24.36 90.08% 9.% 1.05% 10.97% 0 103,121 Total 12,457,839 956,735 114,806 $27.23.32% 7.68% 0.% 8.% 0 158,622 PINELLAS COUNTY Bayside Class A 1,024,1 104,7 0 $22.07 89.77% 10.23% 0.00% 10.23% 0 32,189 Class B 1,136,424 266,358 0 $.39 76.56% 23.44% 0.00% 23.44% 0 123,651 Total 2,1,835 371,133 0 $20.15 82.82% 17.18% 0.00% 17.18% 0 155,840 Gateway Class A 1,716,331 18,024 0 $22.11 98.95% 1.05% 0.00% 1.05% 0 99,695 Class B 1,845,644 315,217 10,484 $.13 82.% 17.08% 0.57% 17.65% 0 73,301 Total 3,561,9 333,2 10,484 $.30 90.64% 9.36% 0.29% 9.65% 0 172,996 Mid Pinellas Class A 94,470 3,500 0 $20.00 96.30% 3.70% 0.00% 3.70% 0 11,095 Class B 895,904 181,237 0 $17.42 79.77% 20.23% 0.00% 20.23% 0 (7,906) Total 990,374 184,737 0 $17.47 81.35% 18.65% 0.00% 18.65% 0 3,189 North Pinellas Class A 970,0 6,2 0 $20.25 79.77% 20.23% 0.00% 20.23% 0 (74,323) Class B 1,013,0 140,954 0 $18.70 86.10% 13.90% 0.00% 13.90% 0 8,174 Total 1,983,995 337,214 0 $. 83.00% 17.00% 0.00% 17.00% 0 (66,149) South Pinellas Class A 0 0 0 $0.00 0.00% 0.00% 0.00% 0.00% 0 0 Class B 700,852 128,128 150 $18.29 81.72% 18.28% 0.02% 18.30% 0 14,896 Total 700,852 128,128 150 $18.29 81.72% 18.28% 0.02% 18.30% 0 14,896 St Petersburg CBD Class A 1,477,8 129,2 9,453 $29.21 91.24% 8.76% 0.64% 9.40% 0 (88,610) Class B 672,582 38,096 0 $20.23 94.34% 5.66% 0.00% 5.66% 0 13,614 Total 2,150,510 167,508 9,453 $27.17.21% 7.79% 0.44% 8.23% 0 (74,996) CBD Class Breakdown Total RSF Direct Vacant SF Sublet Vacant SF Asking Rate % Occupied % Vacant % Sublet Vacancy % Total Vacancy Under Construction Net Absorption Class A 6,784,101 672,633 37,736 $28.59 90.09% 9.91% 0.56% 10.47% 0 (54,831) Class B 1,9,328 212,1 17,296 $21.11 86.81% 13.% 1.07% 14.26% 0 32,104 Total 8,393,429 884,824 55,032 $26.79 89.46% 10.54% 0.66% 11.20% 0 (22,727) Non-CBD / Suburban Class Breakdown Total RSF Direct Vacant SF Sublet Vacant SF Asking Rate % Occupied % Vacant % Sublet Vacancy % Total Vacancy Under Construction Net Absorption Class A 15,297,5 1,072,101 66,843 $26.04.99% 7.01% 0.44% 7.45% 148,800 128,1 Class B 17,458,121 2,582,696 165,473 $20.25 85.21% 14.79% 0.95% 15.74% 0 425,279 Total 32,5,640 3,654,797 232,316 $21.95 88.84% 11.16% 0.71% 11.87% 148,800 553,690 Reporting Methodology: This report includes all class 'A' and 'B' office buildings and parks 20,000 SF and greater in the Tampa Bay MSA that are not owner occupied, office medical, or government owned. All rents are reported on a full-service gross basis. The information in this report has been collected by the Avison Young research team via sources that are deemed reliable but is not guaranteed.
Tampa Bay Office Market Report Third Quarter 2017 Demand side fundamentals marketwide are strong and solid net absorption of office space within Tampa's central business district is expected, however a lack of large blocks of quality class A space persists. Leading Indicators (Y-O-Y 3Q-2016 to 3Q-2017) Vacancy Rate 11.73% Net Absorption 530,963 SF Average Asking Rate (FS) $22.89 Under Construction 148,800 SF Total Employment 1.46 MM Significant Third Quarter 2017 Lease Transactions - Sorted by SF Tenant Property Type SF Submarket Bankers Insurance Roosevelt III Building Renewal 109,649 Gateway Envision Healthcare Bay Vista Pavilion New 93,069 Bayside StreetLinks Netpark Tampa Bay Renewal 77,050 I- Corridor WellCare Tampa Int'l Business Center F Renewal 59,7 Northwest Tampa HDR, Inc. One Urban Centre New 29,970 Westshore Bristol Myers Squibb* President's Plaza II New 29,030 Westshore Greenway Health MetWest One Sublease 26,587 Westshore Greenway Health One MetroCenter Sublease 23,432 Westshore Microsoft Corp Highwoods Bay Center I Renewal 22,233 Westshore Industrious SunTrust Financial Centre New 20,026 Tampa CBD Wellcare Tampa Int'l Business Center E Expansion 22,000 Northwest Tampa Visit Tampa Bay SunTrust Financial Centre New 15,973 Tampa CBD Harrison-Davis, Inc. Meridian Three New 12,7 Westshore * Avison Young handled this transaction Significant Third Quarter 2017 Sales Transactions - Sorted by Sale Price Property SF Sale Price Price/SF Cap Rate Buyer Submarket Centrepointe* 161,900 $35,700,000 $221 6.50% Florida Department of Transportation Westshore 8800 Hidden River Pky 135,000 $20,200,000 $150 8.00% Farley White Management Company I- Corridor 550 N Reo St 76,397 $9,000,000 $118 8.50% Wisco LLC Westshore 220 E Madison St 97,744 $4,0,000 $47 NA Omar Garcia Tampa CBD Sabal Business Center 4 49,368 $2,0,000 $56 NA Xenia Management I- Corridor * Avison Young was involved in this transaction 2017 Avison Young - Florida, LLC. All rights reserved. E. & O.E.: The information contained herein was obtained from sources which we deem reliable and, while thought to be correct, is not guaranteed by Avison Young.
Tampa Bay Office Submarkets Ho l i d ay Ta r p o n Springs MID PINELLAS PASCO COUNTY PINELLAS COUNTY BAYSIDE Ch eva l Keys to n e 597 2 Lu t z SOUTH PINELLAS Ci t ru s Pa rk 2 We s tc h a s e BUS Ca r ro l l wo o d U n i ve r s i t y USF 597 Dunedin Oldsmar 1 Tow n ' N ' Co u nt r y S a fe t y H a rb o r Ta m p a Int l Airport Cl e a r wate r 699 Belleair 611 Belleair 686 Indian Rocks 688 Indian Sh o re s R e d i n g to n Sh o re s L a rg o 688 Fe at h e r Sound 296 B a rd m o o r 694 Seminole B ay 699 Pi n e s M a d e i ra R e d i n g to n 2 0 Downtown Tampa BUS Th o n o to s a s s a 4 4 574 S e ff n e r Mango 574 D ove r P l a nt Ci t y 301 Port of Tampa B ra n d o n 618 Va l r i co Pa l m R i ve r Cl a i r M e l 39 Pro g re s s Vi l l a g e Pi n e l l a s Pa rk 582 Te m p l e Te r ra ce Ta m p a Channelside 2 582A 583 E a s t O r i e nt Pa rk S t Pe te - C l e a r wate r Int l Airport Eg y p t - Le to 39 581 Magdalene 589 POLK COUNTY No r t h d a l e East DOWNTOWN ST PETE Cr ys t a l Springs Odessa 611 Pa l m H a rb o r GATEWAY Tr i n i t y L akeland NORTH PINELLAS Ze p hy rh i l l s We s l ey Ch a p e l Land O' s Bloomingdale R i ve r v i ew Macdill AFB Fi s h H aw k G i b s o nto n Le a l m a n 2 3 S a i nt Pe te r s b u rg Ap o l l o 1 Tre a s u re Is l a n d South Pa s a d e n a Gulfport Ruskin 682 St. Pe te Ti e r ra Ve rd e HILLSBOROUGH SUBMARKETS 301 NW TAMPA Balm S u n Ci t y Ce nte r I- CORRIDOR Wi m a u m a 674 POLK COUNTY PINELLAS SUBMARKETS Third Quarter 2017 WESTSHORE DOWNTOWN TAMPA SOUTH TAMPA 2 MANATEE COUNTY Contact Information Ken Lane Tampa, FL 337 813.444.0623 ken.lane@ Clay Witherspoon Tampa, FL 337 813.444.0626 clay.witherspoon@ Tim Callahan Tampa, FL 337 813.280.8372 tim.callahan@ Lisa McNatt Director of Research 135 W Central Blvd, Suite 700 Orlando, FL 32801 813.444.06 lisa.mcnatt@ 2017 Avison Young - Florida, LLC. All rights reserved. E. & O.E.: The information contained herein was obtained from sources which we deem reliable and, while thought to be correct, is not guaranteed by Avison Young.