Excerpt from the Tampa Tribune:
…..All told, Tampa ranks 46th out of 65 metro areas by highest rate of distressed commercial property, factoring in the size of each market. Las Vegas ranked first, with an estimated 32 percent of its commercial properties in some type of distress, followed by Detroit, at 24 percent.
Most-distressed commercial real estate markets
Percentage of properties in distress
1. Las Vegas 32 percent
2. Detroit 24 percent
3. Miami 20 percent
4. Tertiary West 19 percent
5. Cincinnati 15 percent
46. Tampa 6 percent……
Complete Article from the Tampa Tribune
Comments: Daily, we receive phone calls from individuals looking for commercial real estate in the Tampa Bay area. Usually the prospective tenants will quote articles and facts about the commercial real estate market and then proceed to use these “facts” as evidence as to why they should be entitled to seriously under-valued rent or the right to purchase a property at pennies on the dollar. Adjusting the expectations of some clients can be particularly challenging. The reality of the situation is, however, that as sluggish as the market is in the area, it is really not that bad, particularly when compared to the rest of the US. Yes, vacancies are high. Yes, there are more distressed properties on the market than 2 years ago. Yes, you can find better deals that you could back in 2006. But, Tenants are still moving to the area (albeit at a reduced rate) and deals are still getting done. As of right now, the market is soft in Tampa….but it is not dead.
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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:
- 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.
- 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.
- 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.
- 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 Brookings Institute released their June report of the economic condition of the 100 largest economies in the country. The Tampa Metro Area was ranked 91 out of 100. Florida dominated with 7 areas noted on the list of the 20 Weakest Performing Areas. (…State of the Economy)
My Opinion: Its not surprising to see the Tampa region or other Florida areas on this list. The State has long relied too heavily on Tourism and Construction to support the economic base. Both of these sectors are among the most severely hit by the recent economic downturn. The frustrating part for those of us wanting a more robust market and all the energy that comes with it is the lack of progress that has been made to not only diversify our economy, but also to bring it in to the 21st century. Florida, unfortunately, has rarely placed education near the top of the list of priorities. Without a leading education system, not only do we struggle to create our own organic job growth (See the Research Triangle in NC or Austin, TX), but we also place ourselves at a competitive disadvantage for Next Generation companies looking to relocate or expand their companies. As proof, for two years running (and probably the third consecutive year when the report comes out next month), the Tampa area was ranked at the top of the list for “Worst Cities for Young Professionals,” by Forbes, but the reality is the report is one small measure, depicting a symptom, if you will, of the current malaise in which the area finds itself. Leadership and a strategic plan that focuses on Florida for not only the next election cycle, but also the next 100 years is the clear answer. I am not sure we have either at the present moment.
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