Market Overview T AM P A BA Y
OFFICE
|
FIRST QUARTER
|
2010
www.colliersarnold.com
COLLIERS ARNOLD
|
TAMPA BAY
Insights on the Market OFFICE
|
FIRST QUARTER
|
2010
Activity Continues As Landlords Get Creative The Tampa Bay office market continued to face challenges in the first quarter of 2010, mainly due to unemployment and high vacancy levels. Despite these factors, deals continue to occur mainly between existing tenants and landlords that have begun imposing a “blend and extend” approach. Landlords who are unwilling to renegotiate are seeing their tenants out shopping for more favorable options. Tenants with strong financial strength are being offered concessions including one free month for every year of the lease term. Many landlords are willing to provide these concessions to gain occupancy and secure cash flow. It is a tenant’s market and many are benefiting from the current market conditions.
MARKET INDICATORS TAMPA BAY INVENTORY 80,946,589 Sq. Ft. Q1 OVERALL VACANCY 16.3% DIRECT VACANCY 15.6% ABSORPTION (233,863) s.f. CONSTRUCTION 0 s.f. NEW SUPPLY 14,080 s.f.
Q2*
OVERALL DIRECT AVG ASKING RATE $20.19
CLASS A DIRECT AVG ASKING RATE $23.63
*Projected, relative to prior period Note: Directional arrows compare current quarter to previous quarter historically adjusted figures. All data in this report includes buildings 10,000 square feet and greater.
CRE Investor confidence up as cap rates stabilize. According to the latest Korpacz Real Estate Investor Survey, investor confidence has improved with regard to the current and likely future performance of the economy, commercial real estate, and the financial markets. However, many still believe that an increasing number of forced sales will occur in the upcoming years due to landlords receiving insufficient cash flows and tighter refinancing requirements. Depending on the outcome, more opportunities will present themselves for astute investors holding out for distressed assets. Unemployment problematic, certain sectors continue to grow. The Tampa Bay area unemployment level now stands at 12.7 percent, and continues to be the primary cause of the negative absorption and high vacancy. Although stabilization in the unemployment rate has begun to occur both locally and nationally, substantial employment growth will be needed for the market to begin to expand. While several sectors continue to eliminate jobs, healthcare, legal, and government related users stand out as being the most active in today’s office marketplace. Vacancy Up, Rents Continue to Decline. The Tampa Bay Office Market is currently experiencing a 16.3 percent vacancy rate, up from 16.0 percent in the previous quarter. Full service asking lease rates have fallen slightly from the previous quarter to $23.63 per square foot. Subleased space is contributing significantly to the decline in rates by adding inventory to a market where high vacancy levels already exist. Inventories of office space will remain high for the foreseeable future, and will result in lease rates continuing a downward trend well into 2011.
TAMPA BAY OFFICE SERVICE GROUP
www.colliersarnold.com
Jim Allen jallen@colliersarnold.com
David Box, MCR dbox@colliersarnold.com
Claire Calzon ccalzon@colliersarnold.com
Mary Clare Codd, SIOR mcodd@colliersarnold.com
Alan Feldshue afeldshue@colliersarnold.com
John Gerlach, CCIM jgerlach@colliersarnold.com
Melanie Jackson mjackson@colliersarnold.com
Christopher Leonard, CCIM cleonard@colliersarnold.com
James Parker, CCIM jparker@colliersarnold.com
Josh Pardue jpardue@colliersarnold.com
Camille Renshaw, CCIM crenshaw@colliersarnold.com
James Stuckey, MCR jstuckey@colliersarnold.com
Jeff Tolrud, CCIM jtolrud@colliersarnold.com
James Ullrich, CPA jullrich@colliersarnold.com
Carol Warren, CCIM cwarren@colliersarnold.com
Kimberly Lamb, CPM klamb@colliersarnold.com
COLLIERS ARNOLD | 1
2010
|
FIRST QUARTER REPORT
|
OFFICE
|
TAMPA BAY RENTAL RATES BY BUILDING CLASS
OVERALL OFFICE MARKET STATISTICS
O v e ra ll A v g. Le a s e R a t e C la s s A A v g. Le a s e R a te
400
18%
300
16%
200
14.3%
12%
16.0%
15.5%
14.9%
16.3%
100 0
10%
(100)
8%
(200)
6%
(300)
4%
(400)
2%
(500)
$30.00
$25.00 Asking Rates
20%
14% Vacancy
Net Absorption Class A Vacancy
Square Feet (In Thousands)
Completions Overall Vacancy
$20.00
$15.00
$10.00
$5.00
(600)
0% Q1 '09
Q2 '09
Q3 '09
Q4 '09
$0.00
Q1 '10
Q1 '09
Q3 '09
Q4 '09
Q1 '10
NATIONAL GDP
FLORIDA CONSUMER CONFIDENCE INDEX Co nsumer Co nfidence Index
Q2 '09
Natio nal GDP
Benchmark Level
8.0
110
5.4
5.6
Consumer Confidence Index
6.0
100 Percent Change
90 80 70
72
71
69
65
72
71
72
67
74 69
73
70
69
3.2
3.0
4.0
2.1
1.4 2.0
3.6 1.5
1.2
0.1
2.2 (0.7)
0.0
(0.7)
(2.0)
(2.7)
(4.0)
60
(5.4)
(6.0) (6.4) (8.0)
50
Q1
Mar. Apr. May. Jun. July. Aug. Sept. Oct. Nov. Dec. Jan. Feb. Mar. 2009
Q2
Q3
2006
2010
Q4
Q1
Q2
Q3
Q4
Q1
Q2
2007
Q3
Q4
2008
Q1
Q2
Q3
Q4
2009
Quarter & Year
Month and Year Source: Bureau of Economic and Business Research
Source: Bureau of Economic Analysis – U.S. Department of Commerce
UNEMPLOYMENT SNAPSHOT Unemployment Rate Florida
Tampa M SA
USA
12 10 8 6 4 2
Source: Florida Research and Economic Database
2 | COLLIERS ARNOLD
Mar-10
Sep-09
Mar-09
Sep-08
Mar-08
Sep-07
Mar-07
Sep-06
Mar-06
Sep-05
0 Mar-05
Unemployment Rate (%)
14
The unemployment rate for the Tampa Bay MSA was 12.7% for March 2010, which represents a 0.5% decrease from the previous month. This compares to the published rate of 10.1% for March 2009. The State of Florida rate was 12.0% for March 2010 which compares to 9.5% for March 2009. Both the local and state rates are higher than the national rate which now stands at 10.2%. The national rate in March 2009 was 9.0%. The detailed snapshot for the Tampa Bay area shows a net gain of 13,856 jobs from February 2010 to March 2010. All reported rates are seasonally adjusted.
TAMPA BAY
|
OFFICE
|
FIRST QUARTER REPORT
|
2010
SUBMARKET TRENDS
WESTSHORE
25%
60
0 15%
(20) (40)
10%
(60) (80)
5%
(100) 0%
200 100
15% 0 10% (100) 5%
(120)
(200)
0% Q1 '09 Q2 '09 Q3 '09 Q4 '09 Q1 '10
GATEWAY
I-75 CORRIDOR
Net Absorption
Overall Vacancy
25%
Completions
Net Absorption
25%
40
Completions
Net Absorption
Overall Vacancy
60
25%
40 20%
20 0
15%
(20) (40)
10%
(60) (80)
5%
(100)
(300)
Q1 '09 Q2 '09 Q3 '09 Q4 '09 Q1 '10
Completions
Overall Vacancy
300
20%
Vacancy
20
Net Absorption
25%
Square Feet (In Thousands)
40 20%
Vacancy
Completions
Overall Vacancy
Vacancy
Net Absorption
Square Feet (In Thousands)
Completions
ST. PETERSBURG CBD
0%
Square Feet (In Thousands)
TAMPA CBD
(120) Q1 '09 Q2 '09 Q3 '09 Q4 '09 Q1 '10
NORTH PINELLAS Overall Vacancy
Completions
200
Net Absorption
25%
Overall Vacancy
120
(40)
10%
(60) 5% (80) 0%
(100) Q1 '09 Q2 '09 Q3 '09 Q4 '09 Q1 '10
15% 50 10% 0 5%
(50)
60 40
15%
20 0
10%
(20) (40)
5%
(60) (80)
0%
(100) Q1 '09 Q2 '09 Q3 '09 Q4 '09 Q1 '10
0%
Square Feet (In Thousands)
(20)
80
20%
Vacancy
15%
100
Square Feet (In Thousands)
Vacancy
0
150
20%
Vacancy
20%
Square Feet (In Thousands)
100 20
(100) Q1 '09 Q2 '09 Q3 '09 Q4 '09 Q1 '10
SUBMARKET OVERVIEW Vacancy rates saw a decline in three of the six submarkets during the first quarter of 2010. The North Pinellas submarket experienced the most improved conditions, where vacancies decreased to 15.7 percent from 17.5 percent in the previous quarter. This was due to 96,218 square feet of positive net absorption. A building was delivered in the Tampa Bay Market during the first quarter totaling 14,080 square feet. The building is located in the Tampa CBD submarket at 600 E. Madison Ave. ESJ Capital Partners purchased University Park, a 99,234 square foot class B complex for $12 million or $120.07 per square foot. The complex houses primarily health care-related
companies in three separate buildings. The seller, Arthur Hill & Co. paid $10.6 million for the complex in 2005 showing a 12% increase in value. BB&T Bank signed a 51,310 square foot lease within the Park Tower building located in the Tampa Central Business District. Genzyme leased 36,080 square feet of space in Tampa Oaks II near I-75 & Fletcher Ave in the I-75 Corridor. Rasmussen, Inc executed a new lease for 29,428 square feet in Highland Oaks at 4042 Park Oaks Blvd while Anchor Glass and Marsh Inc. renewed their leases of 19,972 and 21,694 square feet respectively.
COLLIERS ARNOLD | 3
2010
|
FIRST QUARTER REPORT
|
OFFICE
|
TAMPA BAY
TAMPA BAY MARKET STATISTICS
Property Class
Total Inventory S.F.
Bldgs.
Direct Vac. %
Total Vac. %
Net Absorp. Current Qtr. S.F.
Net Absorp. YTD S.F.
New Completions S.F.
Under Construc. S.F.
Avg. Direct Asking Rate Full Service
HIGHLIGHTED OFFICE SUBMARKETS Tampa CBD A B,C Overall
13 77 90
4,848,970 4,600,308 9,449,278
19.0% 11.3% 15.3%
19.8% 11.4% 15.7%
19,430 19,136 38,566
19,430 19,136 38,566
0 14,080 14,080
0 0 0
$22.77 $18.44 $21.21
39 202 241
7,731,216 8,236,407 15,967,623
22.1% 14.5% 18.2%
23.8% 15.4% 19.5%
-8,431 -66,650 -75,081
-8,431 -66,650 -75,081
0 0 0
0 0 0
$26.82 $20.01 $23.80
6,900,476 8,834,858 15,735,334
12.9% 16.0% 14.7%
13.7% 16.8% 15.4%
38,208 -55,044 -16,836
38,208 -55,044 -16,836
0 0 0
0 0 0
$22.05 $17.99 $19.72
12 161 173
1,101,160 4,218,128 5,319,288
15.5% 15.2% 15.3%
16.1% 15.6% 15.7%
49,621 46,597 96,218
49,621 46,597 96,218
0 0 0
0 0 0
$19.18 $17.62 $17.98
24 112 136
3,140,587 4,292,225 7,432,812
9.1% 17.9% 14.2%
9.6% 18.8% 14.9%
18,895 14,290 33,185
18,895 14,290 33,185
0 0 0
0 0 0
$21.69 $17.81 $19.05
1,662,161 2,237,433 3,899,594
23.4% 12.0% 16.9%
26.7% 12.0% 18.3%
-51,301 -44,888 -96,189
-51,301 -44,888 -96,189
0 0 0
0 0 0
$23.97 $19.04 $22.50
Total Vac. %
Net Absorp. Current Qtr. S.F.
Net Absorp. YTD S.F.
New Completions S.F.
Westshore A B,C Overall
I-75 Corridor A B,C Overall
44 269 313
North Pinellas A B,C Overall
Gateway A B,C Overall
St. Petersburg CBD A B,C Overall
Qtr. & Year
9 56 65
Bldgs.
Total Inventory S.F.
Direct Vac. %
Under Construc. S.F.
Overall Avg. Direct Asking Rate F.S.
Class A Avg. Direct Asking Rate F.S.
TAMPA BAY OVERALL OFFICE MARKET 2010 1Q
1,780
80,946,589
15.6%
16.3%
-233,863
-1,446,242
14,080
0
$20.19
$23.63
2009 4Q
1,778
80,919,509
15.2%
16.0%
-301,084
-1,212,379
96,360
102,080
$20.40
$24.18
2009 3Q
1,774
80,812,399
14.6%
15.5%
-498,130
-911,295
25,662
209,190
$20.69
$24.50
2009 2Q
1,772
80,774,417
14.0%
14.9%
-413,165
-413,165
55,000
229,749
$21.02
$24.81
2009 1Q
1,768
80,719,417
13.4%
14.3%
-459,064
-898,713
279,660
259,919
$21.07
$24.92
2008 4Q
1,766
80,452,077
12.5%
13.5%
-69,720
-439,649
466,235
456,597
$20.94
$24.49
2008 3Q
1,760
79,970,842
11.6%
12.9%
-290,904
-369,929
240,400
925,512
$20.93
$24.19
2008 2Q
1,755
79,655,778
10.9%
12.1%
-79,025
-79,025
143,197
1,203,576
$20.99
$24.20
2008 1Q
1,750
79,512,581
10.6%
11.9%
-169,452
-226,200
652,980
1,240,283
$21.19
$24.39
4 | COLLIERS ARNOLD
|
TAMPA BAY
OFFICE
|
FIRST QUARTER REPORT
|
2010
COLLIERS ARNOLD www.colliersarnold.com
TAMPA BAY OFFICE HIGHLIGHTED SUBMARKETS
4 OFFICES THROUGHOUT FLORIDA TAMPA (813) 221-2290 ORLANDO (407) 843-1723 CLEARWATER (727) 442-7184 FT MYERS (239) 418-0300 OUR SERVICES: BROKERAGE – SALES/LEASING TENANT REPRESENTATION PROPERTY MANAGEMENT VALUATION & ADVISORY CONSTRUCTION MANAGEMENT RECEIVERSHIPS RESEARCH & GIS
COLLIERS INTERNATIONAL www.colliers.com 294 OFFICES IN 61 COUNTRIES ON 6 CONTINENTS USA 94 CANADA 22 LATIN AMERICA 17 ASIA PACIFIC 64 EMEA 97
FIRST QUARTER 2010 TRANSACTION HIGHLIGHTS SALES ACTIVITY BLDG NAME/ PROPERTY ADDRESS
PROPERTY CLASS
BUYER NAME
SIZE (SF)
SALES PRICE
PRICE/SF
SUBMARKET
University Business Park 4115-4129 E Fowler Ave
B
ESJ Capital Patrners
99,234
$11,915,000
$120.07
I-75 Corridor
701 W MLK Blvd
C
Latemi RE 2 Inc
12,000
$1,500,000
$125.00
WestShore
CONTACTS:
BROKERAGE & CONSULTING Lee Arnold, CRE, CCIM larnold@colliersarnold.com
LEASING ACTIVITY BLDG NAME/ PROPERTY ADDRESS
PROPERTY CLASS
Memorial Center I & II
B
JP Morgan Chase
55,000
Renewal
Westshore
Park Tower 400 N Tampa St
B
BB&T Bank
51,310
New/Direct
Tampa CBD
Tampa Oaks II I-75 & Fletcher Ave
A
Genzyme
36,080
New/Direct
I-75 Corridor
Highland Oaks 4042 Park Oaks Blvd
A
Rasmussen, Inc
29,428
New/Direct
I-75 Corridor
3031 N Rocky Point Dr
A
Marsh, Inc.
21,694
Renewal
Westshore
Tampa City Center
A
Squire Sanders
15,658
Renewal
Tampa CBD
SunTrust Tower
A
Anchor Glass
19,972
New
Tampa CBD
TENANT NAME
SIZE (SF)
LEASE TYPE
SUB-MARKET
Kimberly Lamb, CPM klamb@colliersarnold.com
GIS & RESEARCH Matthew Dolan mdolan@colliersarnold.com Daniel Rice drice@colliersarnold.com MARKETING Elizabeth Cross ecross@colliersarnold.com
FOR OTHER LOCAL REPORTS VISIT – http://www.colliers.com/Markets/TampaBay/MarketReports/ This Colliers Arnold market report includes owner and non-owner occupied office space 10,000 s.f. and greater in Hillsborough and Pinellas Counties. Directional arrows compare current quarter numbers to previous quarter numbers. Arrows show change when there is a 10 cent or more change in lease rate or 0.5% or more change in vacancy rate. Due to continual updates and refinements in the historical database, some of the data in this report may not match data published in previous reports. Sources: CoStar Property and Colliers Arnold. Colliers Arnold is a member firm of Colliers International - a worldwide affiliation of independently owned and operated companies with over 294 offices throughout more than 61 countries. Questions should be directed to Colliers Arnold Research at 813/221-2290 or e-mail: research@colliersarnold.com . Report written by Matthew Dolan, 813.871.8503 or e-mail: mdolan@colliersarnold.com. Information contained herein has been obtained from sources deemed reliable but not guaranteed. No representation is made as to the accuracy thereof. Data as of 4/01/2010.
COLLIERS ARNOLD | 5
www.colliersarnold.com