Tampa Commercial Real Estate | Florida Commercial Property

The U.S. average apartment vacancy rate was 8 percent and the asking rental rate was $1,026.

Of the other major Florida markets, Miami had the lowest vacancy rate at 5.8 percent as well as the highest asking rental rate at $1,063. Tampa-St. Petersburg had a 10.7 percent vacancy rate and an $827 asking rent and Orlando had a 11.2 percent vacancy rate and an $869 asking rent.

New York-based Reis (Nasdaq: REIS) is a commercial real estate performance information and analysis company.

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601 Ashley - Office Space in Downtown Tampa

I just learned that  601 N. Ashley sold last month. Besides the fact that the building is immediately next to our office, I find the sale interesting as I believe it is a microcosm of what is going on in the Tampa market. Novare Development and partners purchased the building in 2005 with the intent  to convert the building to condos.

Well, life happened in the wake of what seemed like a great plan and the market downturn torpedoed any opportunity to break the building down and sell it.  The purchase price in 2005 was $7,000,000 or $114.27/sq ft.  The price on last month’s sale was $4.1 million, or  $67/sq foot, a 41% decrease.   While the Tampa Downtown Sub market hovers around 20% vacancy, it will be interesting to see what the new owners have in store for the property.

Unfortunately, the Tampa Area unemployment rate continues to climb. Until the unemployment rate increases reverses its negative trend, the area commercial real estate vacancy rates will continue to be under pressure.

The Tampa Bay area’s jobless rate jumped half a percentage point to 12.3 percent, making it the most job-challenged major metropolitan area in Florida. The region’s most sluggish county remained Hernando, which saw its unemployment rate rocket to 14.7 percent, up from 14.0 percent the prior month….from the St Pete Times (for complete article)

Excerpt from the Tampa Bay Business Journal:

Vacancy rates are continuing to rise in the Tampa Bay area’s office market as regional employment is expected to decline by 54,600 jobs by year’s end, states a fourth-quarter report by Marcus & Millichap.

About 2,100 office jobs have been eliminated monthly throughout 2009, dropping overall office employment to a level last seen in 2003, states the report. A resumption of hiring is still several months away.

That means vacancy rates will continue to climb while rental rates decline. (Complete Story)

Commentary:  We continue to see sprouts of green on the barren economic landscape right now, but unfortunately, employment and subsequently vacancy is going to continue to be an issue in to the first quarter of 2010, if not further.  As has been stated many times in this blog, Tampa, Hillsborough County and the State of Florida have been entirely too reliant on construction and growth with limited thought or planning as to what would happen when the music stopped.

For those interested, we have started a LinkedIn group to discuss the issues at hand.  (Click here for the LinkedIn Group)

If you are like me, your friends clutter your mailbox with jokes, chain mail and “must read” inspirational messages.  Frankly, I have neither the time nor the energy to read these emails that have no relevance to the business that I need to conduct throughout the day.  The emails will end up rolling quickly in to the “Delete” folder unread.  There is, however, the rare exception in which I am tricked in to reading one of these messages and sometimes, they are actually worth the read.  I had to chuckle when I read one such message yesterday.  This is a moral dilemna that was presented to job applicants that recently interviewed for a new position.  Here it goes:

You are driving down the road in your car on a wild, stormy night, when you pass by a bus stop and you see three people waiting for the bus:

1. An old lady who looks as if she is about to die.

2. An old friend that once saved your life

3. The perfect partner you have been dreaming about.

Which one would you choose to offer a ride to, knowing that there could only be one passenger in your car?

You could pick up the old lady, because she is going to die, and thus you should save her first. Or you could take the old friend because he once saved your life, and this would be the perfect chance to pay him back. However, you may never be able to find your perfect mate again.

There is no right or wrong answer, but who got the job based on their answer?

The candidate who was hired (out of 200 applicants) had no trouble  coming up with his answer.  He simply answered:

‘I would give the car keys to my old friend and let him take the lady to the hospital. I would stay behind and wait for the bus with the partner of my dreams.’

Sometimes, we gain more if we are able to give up our stubborn thought limitations.

I couldn’t help but think about commercial real estate when I read this tale, not so much as a moral dilemna, but more because these are times in which we have to think creatively.  As vacancy rises in the Tampa Area, brokers, landlords and tenants are going to have to be on the their toes to find opportunity and fill vacant spaces.

• Can that Mall become a warehouse?
• Can you rent space for wind turbines on your roof?
• What about advertising space on the side of the building?
• Are there non-profits that can use the space?  There are special tax considerations beneficial for landlords that donate space.
• How about churches?  Some churches will gladly pay to use the space one or two days a week.
• If you are trying to lease the space on your own, is your property getting the attention needed to find tenants in a market with high vacancy?

The bottom-line is NEVER forget to think outside of the box!

Florida Real Estate: Tales of Its Death Have Been Greatly Exaggerated

Comment:  In a recent interview, Steve Hagenbuckle, Managing Director of TerraCap Partners states that Florida real estate, one of the hardest hit markets in the country will be one of the first to emerge.  Foreign buyers from Germany, Canada, UK and China, among a host of others are beginning to descend on Florida to scoff up deals on real estate that have not been seen in years.  While residential real estate is probably going to be the most significant beneficiary of the activity, commercial properties are also attractive, because of the weak US dollar against much of the world’s currencies.  I would expect that most of the international buying activity in our area will be centered on coastal residential real estate in Sarasota, Manatee and Pinellas Counties, but there are increasingly compelling arguments for international buyers to consider commercial real estate, as well.  Net lease properties with credit rated tenants are at their highest CAP rates in years and could offer outstanding value.

Excerpts:

(3:25 min mark)

Steve HagenBuckle (SH): “ …as we talked before, the southeast, right now as far as in the last 12 months,  has seen 47% of all international investing has been in the southeast on the residential side.  The State of Florida has taken on 26% of all international investing on the residential home side.  So, Over 1 out of every 4 homes bought by international investors (in the US) is bought in the State of Florida. “

Bloomberg TV (BT) :  “Where is the money coming from ,  you mention Canada, …we talked a little bit about China, what about for example the UK?  Are these people actually coming to use the property?”

SH:  Yes, they are vacation homes as well as investments….mostly vacation homes.  They are seeing that there is so much affordability that they may not see this opportunity for a long, long time.  So, they are viewing it as “now is the time.” We have a currency that is strong than the dollar currency. And, we feel that if the dollar is weakening or has the chance to do so, now is the time to move.  We are seeing a lot of interest from Latin American countries.  54% of Germans, when they buy real estate in the US, they buy in Florida. And 37% of the folks from Canada when they buy real estate in the US, they buy real estate in Florida.

Summary: Commercial construction starts fell 22.9% for the second quarter of 2009 to 84 from 109 in the same quarter 2008.  Value of permits plummeted 58.5% to $68,122,000.  Of the top 10 permits pulled by value, 3 were medical facilities, 2 were churches, and the remainder a mixed assortment of other property types, including an electrical and upgraded lift station for the City of Tampa.

Source:  Hillsborough County Planning Commission, Florida

Resid Comm Permits Activity – 2009q2_copy

Source: Florida Real Estate Journal and Cushman Wakefield

“The economy on both the national and the local Tampa Bay fronts has been nothing short of bleak during the first half of 2009. The area unemployment rate continued on a steep incline, jumping to 10.6%, up by 4.7% from the unemployment rate recorded at this point in 2008.”

“….The market continues to struggle with increased vacancy and rising sublet availability. Both the Central Business District (CBD) and non-CBD vacancies continue to climb, with the market-wide overall vacancy rate reaching 18.6% by the close of the second quarter of 2009. This is a slight seven-tenths of a percentage point increase over the first quarter, but a much more significant 5.0 percentage point spike from the same time last year.”

Comments: If you are a tenant searching for property, this is a great time.  Keep in mind, Landlords are much more willing to negotiate free rent as opposed to lower rent.  Lowering the base sets an adverse precedent in future negotiations with you and other tenants.  Most landlords will have to renegotiate their mortgages in the next few years and it is much easier to explain free rent than reduced rent.  Reduced rents can make a forward looking income statement look pretty ugly to a banker.

We have found deals as good as 6 to 12 months of free rent, for medium term leases (3-5 years).

It was reported several days ago that GVA Advantis would close its Real Estate Services Company, but the Tampa Office would remain open, providing a hub for the construction and development arms.  That decision has now been reversed, as the Tampa Bay Business Journal reported on Friday, and the Tampa office has, in fact, been closed.

Source:  Tampa Bay Business Journal

Its not surprising that we see data indicating that the Tampa Office market continues to be subject to downward pressure.  Anecdotally, however, our firm has most definitely seen an uptick in activity.  We will not see a return to 2005 activity any time soon, but our recent increased volume of inbound inquiries indicates that the world is not ending either.