Tampa Commercial Real Estate | Florida Commercial Property

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

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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).

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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.

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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.

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One thing I have learned in over 20 years of banking and investing experience, when the consensus thinks a business cycle will happen in predictable scripted fashion, rarely does the event follow the script.  Monday morning quarterbacks and talking heads will pop up  after the fact and declare the actual result was the only logical occurance.  The majority of us were just dummies.

Well, here we are again.  The world is predicting doom and gloom for the commercial real estate sector.  Vacancies are accelerating.  Defaults have come seemingly unhitched and are running away from us.  Values have plunged.  Certainly, from most observers’ perspective, it is logical that when the 5 year balloons of the most egregiously inverted properties come up for renewal, starting in 2010 and running through 2012, the commercial market will experience a cataclysmic meltdown, sending the economy in to a rebound recession and knocking banks out across the country.    There is no doubt, that logically, this scenario is a possibility.  What this scenario does not account for, however, is the fact that markets are amazingly efficient and capitalism can sometimes really work, particularly when there is time to plan.

For more than a year, billions of dollars have been raised in funds anticipating the supposedly inevitable cornucopia of once in a lifetime deals that will fall in to investors’ laps.  To date, many of these funds have been more fizzle than sizzle.  Lets face it.  Right now, from a deal standpoint, 2009 is not turning out to be RTC 2.0.  We still may see the days of RTC circa 1991 played out with properties being purchased at 30 cents on the dollar, but something tells me that all the money that has been building in funds and on the sideline may not allow history to repeat itself.    It will be interesting to see how this all unfolds.  With history as my guide, though, I just can’t help but feel the reality will not play out the way most predict.

Here is an interesting article about the numbers of loans outstanding and funds on the sideline.

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Source: Tampa Bay Business Journal

GVA Advantis is Tampa Bay’s 9th largest real estate broker.  It is not surprising to see firms throwing up their hands and walking away from the brokerage business in the current environment.  This is undoubtedly the worst downturn of this generation and the firms in the middle feel the squeeze.    It is unclear at this time how the Tampa office will be affected.

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Atlanta Journal Constitution:  Reconfiguring Office Space

We certainly have our share of vacant space in the Tampa market.  The downtown corridor is expected to top 20% this year.  Vacancy is usually associated with failed businesses, but that is not always the case. There are many surviving businesses, for example, that needed 10,000 square feet in 2006 and now only need 6,000 square feet.  The “shadow” market vacancy rate can be much larger than the published rate, particular in downturns, like the one we are currently experiencing.   Businesses have retracted and they have either laid off workers or natural attrition has taken its course.  The problem is, the leases can run for years after the space becomes available.  What can or should these businesses do with all of their excess space.  Here are a couple of ideas:

1. Donate the space to charity – Non-Profits have been hit particularly hard by this downturn.  Many are finding it difficult to sustain themselves.  If the tenant is not using the space, donating their excess space (and allowing the non-profit to remove or reduce their current rent overhead) could allow a local charity to keep their doors open and continue their good work for the community.
2. Sublease – There is an ACTIVE sublease market.  Some of these spaces are advertised.  Other businesses prefer to not actively “market” their space.  Sub-lease spaces are almost always rented at less than current market rates. This can offer very good opportunities for companies in the market for space.
3. Renegotiating with the Landlord.  There are all kinds of ways to do this.  Your landlord understands that this is a challenging market.  They are usually willing to try to keep good tenants and there are many ways in which the landlord can show goodwill to the tenant without a major disruption in rent or income for the landlord.
4. Sharing office space.  Start-up firms are often willing to share space with an established tenant for a short period of time, while their business is getting off the ground.   There may even exist synergies between the two firms that would create business growth for both companies.

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The Development Council team in Pasco County must be doing cartwheels over their most recent coup.  T. Rowe Price will move their  location to a 75 acre campus off of State Road 54, bringing with them 1500 jobs.  Amprop is the developer on the project.  Although it is not clear, in all probability, Pasco’s gain is Tampa’s loss.  Currently, T. Rowe Price has an Investment Center located off of Boy Scout Rd., near Tampa International Airport.  It is not public knowledge, as of yet, if the firm will relocate this space to the new Pasco campus.  Common sense says a move is likely.

Source:  Tampa Bay Business Journal

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Source: Tampa Tribune

Source: www.stpete.org

A group studying whether the Rays should leave Tropicana Field in downtown St Pete has identified 5 potential alternatives in the Bay Area, three of which are in neighboring Hillsborough County.  It is clear at this point that the Rays will be moving and discussions of the Rays potentially moving across the Bay to Tampa will probably stir up competitive tensions between the two areas.  Rays’ fan support in St Pete has been lukewarm and the closed roof of Tropicana Field has been a source of controversy from the very beginning.  Travel is difficult in and around Pinellas County and fans in the Greater Tampa Bay Area have complained that their attendance at Rays games have been negatively affected by the downtown location of the “Trop.”

What is undeniable is the rebirth and development in St Petersburg that has accompanied the arrival of the Rays.  Some will say that the area was due for a makeover and the Rays were only a contributing factor to revitalization of the area.  That opinion may be true, but since the Rays threw the first pitch in 1998 to now, Downtown St Petersburg has become THE area to be for the young professional crowd and suddenly nouveau riche empty-nesters that seek a more urban, pedestrian friendly existence.  Real estate development in and around the downtown corridor was the most active and probably healthiest of the urban core areas surrounding the Tampa region.  If the Rays decide to move away from downtown St Pete, it does not take a rocket scientist to understand the seismic shift in energy and activity they carry with them in the area’s commercial real estate market.

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It is one of downtown Tampa’s most recognizeable landmarks …. and eyesores.  The Kress building dates make to 1929 and is on National Registry of Historic Landmarks.  Local government officials have been worried about the building detracting from the renewal efforts in the core center, but it does not appear that the owners of the property, the Doran Jason Group, have any immediate plans for renovation.  ”For Sale” signs have recently been placed on the building.  Were these sign placed to thwart efforts to declare the building “Demolition by Abandonment?”  In a letter to City Council, Jake Slater, Tampa’s Director of Code Enforcement, states that the building is still structurally sound.  (More from the Tampa Tribune)

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