Page 1

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


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TAM PA BA Y O F F I C E | F I R S T Q U A R T E R | 2 0 1 0 www.colliersarnold.com

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