Tampa Office Real Estate Activity Highlights: Q2 2024
Absorption soared in the second quarter of this year, mainly due to one tenant. The second quarter was the best quarter for absorption, with roughly 270,000 SF since mid-2021. CAE USA completed and moved into its new 290,000-SF headquarters in the Westshore Submarket. That one move-in accounts for approximately 65% of Westshore’s trailing 12-month absorption. This, coupled with a few other large move-ins in Westshore and Downtown Tampa later this year, for instance, Masonite occupying its new 128,000 SF headquarters, will likely make 2024 the second consecutive year that Tampa has recorded positive absorption.
Tampa’s office vacancy has remained relatively stable over the past several years, sitting at 9.4% as of the third quarter of 2024. However, the vacancy rates vary widely across the region based on factors such as location, access to amenities, and overall quality of the available spaces. For instance, in Westshore, the vacancy rate has decreased 100 basis points year over year to below 12%, marking a four-year low. On the other hand, the Northeast Tampa submarket has seen an increase of by more than 150 basis points in its vacancy rate to 15%.
Asking rent growth has slowed considerably over the past few years as the upward pull from new construction has diminished. As of the third quarter of 2024, office asking rents are up year over year to $30.00/SF, down from a peak of 7.6% in 2022Q4. Annual rent growth for 4 & 5 Star buildings has been below 3% for two consecutive quarters, and asking rents for that quality subset now average $38.00/SF. Commodity-based 3- star office buildings now lead the region in rent growth, up 3.5% year over year. There is room for additional growth in that quality subset as 4 & 5 Star asking rents average 35% higher on a per SF basis. The uncertainty in the office sector and the tightening lending landscape have limited new office construction. For a project to break ground, significant pre-leasing is required. For instance, Midtown East, a 430,000-SF building located within Bromley’s mixed-use Midtown project, is already 75% accounted for. The next significant office building to break ground will be the 115,000 SF office building in the mixed-used development GaxWorx in Ybor City, which is 50% pre-
leased to Grow Financial.
Based on current trends, demand in Tampa’s primary and secondary submarkets will continue to differ significantly over the next year. However, tenants with larger requirements will find submarkets like Gateway and Northeast Tampa have space with lease rates 20% to 35% cheaper than Downtown Tampa and Westshore.
You can view our commercial properties in Tampa and elsewhere in Central Florida to see what real estate assets are available for lease / sale.
Tampa Office Real Estate Stats Highlights Q2 2024
Below are some key statistics for the office market in Tampa over the last quarter: cap rate, absorption, vacancy rate, and the current asking rate per square foot.
Cap Rate: 7.0%
Absorption: 73,745 SF
Vacancy Rate: 9.4%
Asking Rate / SF: $30.14
Tampa Office Real Estate Stats Overview – Last 12 Months
Over the last 12 months, the total deliveries of completed Tampa office real estate space is 600K square feet, while there has been an aggregated absorption of 408K square feet. The current vacancy rate of office space in the area is 9.4%, and the rental rate has grown 3.0% total during the same time. To give some context, Tampa’s office vacancy rate is below the national average of nearly 13% overall.
12 Month Deliveries (in SF): 600,000
12 Month Absorption (in SF): 408,000
Vacancy Rate: 9.4%
12 Month Rent Growth: 3.0%
Tampa Office Real Estate Sales Summary for Q2 2024
Office investment activity in Tampa has seen a notable slowdown in recent quarters. The trailing 12-month sales volume has dipped to $674 million, with the first quarter of 2024 witnessing a meager $150 million in transactions, contrasting sharply with the $325 million recorded in the same period of 2023. Moreover, these current investment levels fall well below the five-year average of $1.1 billion. Notably, the lion’s share of activity over the past year has been concentrated in the Westshore and East Tampa submarkets, jointly comprising 40% of the total transaction volume.
Investors, particularly institutional ones, are proceeding cautiously in the Tampa market. The absence of single-property trades exceeding $25 million since October 2023 underscores this trend, with only eight properties fetching over $5 million during this timeframe. The largest trade involved the sale of Regency Park North, a three-building portfolio, to New York-based private investment firm Taconic Capital for $35 million.
Cap rates have been on the rise, climbing by 30 basis points year over year to an average of around 8.9%. However, recent transactions have shown a shift in focus from the initial cap rate to the price per square foot, as buyers prioritize acquiring properties at a discount for value-add opportunities. Office sale prices have witnessed a decline over the past few years, now averaging $189 per square foot, down 6% from the peak of $201 per square foot in mid-2022. This downward trajectory is expected to persist, with the average sale price not anticipated to breach the $200 mark until 2029.
Many sellers have incurred losses on transactions in recent quarters, leading to an increasing willingness to provide financing to facilitate deals. For instance, CTO Realty sold Sabal Pavilion 1, a fully subleased building in East Tampa, in December 2023 for $22 million, marking a loss of nearly $5 million compared to its purchase price in August 2020. Additionally, CTO Realty extended a $15.4 million mortgage at a fixed interest rate of 7.5% to the buyer, Reva Companies, for a term of 179 days, as part of a strategic move to reduce legacy office exposure.
Tampa Florida Significant Office Property Sales for Q2 2024
Over the near term, office investment deals are expected to remain challenging to finalize due to several factors. A lack of motivation to put office assets on the market, except under extreme circumstances such as impending debt maturities, has led many sellers to delay listing their properties. Furthermore, disparities in pricing expectations between buyers and sellers persist, with many bids falling 5% to 15% below pricing guidance.
Here are the top office real estate sales statistics in Tampa, FL from a total of 467 sales comparables. The average cap rate of these sales was 7.0% with an average price per square foot of $181. The properties were sold with an average vacancy of 15.4%.
Sales Comparables: 467
Average Cap Rate: 7.0%
Average Price / SF: $181
Average Vacancy During Sale: 15.4%
Here are the Top 5 Tampa Office Property sales during the last 12 months:
1. 100 North Tampa – 100 N Tampa St
Rating: 5*
Bldg SF: 572,111
Year Built: 1992
Vacancy: 14.3%
Sale Date: 6/25/2024
Price: $151,300,00
Price/SF: $264
2. Netpark – 5701 E Hillsborough Ave
Rating: 3*
Bldg SF: 947,176
Year Built: 1976
Vacancy: 33.7%
Sale Date: 7/3/2024
Price: $45,000,000
Price/SF: $48
3. Regency Park North – 599 Lake Kathy Dr
Rating: 3*
Bldg SF: 58,210
Year Built: 2001
Vacancy: 100%
Sale Date: 3/14/2024
Price: $35,134,217
Price/SF: $604
4. One Clearwater Tower – 600 Cleveland St
Rating: 4*
Bldg SF: 144,346
Year Built: 1975
Vacancy: 28.2%
Sale Date: 4/1/2024
Price: $33,200,000
Price/SF: $230
5. Women’s Care Florida – 5016 W Cypress St.
Rating: 3*
Bldg SF: 63,289
Year Built: 2017
Vacancy: 0%
Sale Date: 6/28/2024
Price: $29,200,000
Price/SF: $461
Office Space Under Construction in Tampa Q2 2024
Here are the top stats for office properties currently under construction in Tampa, FL. From the 24 properties under construction there is a total of 654,292 square feet being added to the market, which represents nearly 1% of the total market.
Total Properties Under Construction: 24
Total Square Feet Being Built: 654,292
% of Inventory Under Construction: 0.5%
Preleased: 73.3%
Here are the top office real estate assets under construction in the Tampa market.
1. Midtown East – 1 Midtown Pl
Rating: 5*
Building Sq Ft: 428,292
Stories: 18
Start: January 2023
Complete: January 2025
Developer: The Bromley Companies
Owner: Highwoods Properties Inc
2. BayCare Medical Office- N Park Rd & E Sam Allen Rd
Rating: 3*
Building Sq Ft: 80,000
Stories: 6
Start: July 2021
Complete: June 2024
Developer: Not Listed
Owner: BayCare Health Systems, Inc
3. 2894 Hueland Pond
Rating: 3*
Building Sq Ft: 60,000
Stories: 2
Start: March 2023
Complete: September 2024
Developer: Not Listed
Owner: Onicx
4. 19027 Wingshooter Way
Rating: 3*
Building Sq Ft: 15,000
Stories: 1
Start: May 2024
Complete: Sept 2024
Developer / Owner: Not Listed / HCA Healthcare, INC
5. 16643 Fishhawk Blvd
Rating: 3*
Building Sq Ft: 10,075
Stories: 1
Start: Mar 2024
Complete: June 2024
Developer / Owner: Not Listed / Florida Kidney Physicians
Take a look at our featured Tampa office real estate spaces, or other Tampa commercial real estate properties here, or contact the Bounat team to start your own search for properties in the area.
* Data is courtesy of CoStar Group Inc.