Tampa’s favorable business climate is propelling Tampa’s commercial office market forward, and it faces no major headwinds in 2017. In the last quarter of 2016, there were plenty of significant office deals closing, driven by internal expansions and by outside companies seeing new opportunities for relocation and investment in the Tampa market.
At the core of this progress is the region’s healthy and sustained population growth, which will continue to power demand for residential and retail and grow the economic base of the area. There is already a significant platform on which to build – the most current data for gross domestic product from the Bureau of Economic Analysis shows that the Tampa metro area ranks 26th largest in the country at $133 billion.
In December, financial services giant Citi solidified its significant Tampa presence by acquiring the Sabal Park office campus it occupies in east Tampa. The 3800 Citibank Center property is home to more than 5,600 Citi employees. Its operations provides support for many of Citi’s business functions around the globe, including client services, finance, human resources, legal and risk services. Citi first established a Tampa presence in 1983, and since that time has achieved steady growth and expansion of its operations here. In 2015, Citi announced plans to increase its Tampa employment by 1,163 jobs within three years. Last year, the company also announced plans to relocate 150 employees from its Hartford, CT office and consolidate human resources functions with its shared services center in Tampa.
Upbeat Employment News
Florida’s jobs report for November 2016 reflected another healthy jump in year-over-year employment growth for the Tampa metro area – 33,400 new jobs and a growth rate of 2.6 percent. The office-using industry sectors accounted for about one-third of these new jobs and grew at 3.0 percent for this period. Within this group, Professional & Business Services performed the strongest, increasing by 3.9 percent, and was a significant catalyst for the upsurge in Tampa’s office activity this past year.
Noteworthy Lease Deals in 2016
From the EDC’s perspective, there are three industry groups that were prime contributors to new office demand over this past year: Information Technology, Financial & Professional Services and Life Sciences. The companies represented are a mix of local expansions and new corporate relocations. According to data collected by Cushman & Wakefield Research, during this past year, net absorption of office space in the Tampa/Hillsborough market exceeded 676,000 square feet and new office leasing activity topped 2.4 million square feet.
Among the notable office leases reported by Cushman & Wakefield for 2016 were:
|Company||Lease SF||Submarket ||Quarter|
|Sypris Electronics||49,386||I-75 Corridor||2Q-16|
|Iron Bow Technologies||31,037||Northwest Tampa||4Q-16|
Office Sales- Off the Charts in 2016
There is considerable asset value in Tampa’s office properties relative to many other markets around the country, and this factor created intense investor interest in 2016. The result has been new building ownership for a number of Tampa office properties and, in many cases, new capital improvement dollars allocated for upgrade programs.
In October, Cousins Properties Inc. acquired Parkway Properties Inc., which included five premier Tampa office buildings totaling 1.6 million square feet. These class A properties are located in a prime section of the Westshore district and are home to the corporate operations of major firms, including Bloomin’ Brands and T. Rowe Price.
Another significant sale finalized in October. Workspace Property Trust closed on a $969 million portfolio from Liberty Property Trust. The purchase included 108 office and flex properties located in five markets, including Tampa. The Tampa portion included 34 properties spread throughout the county and totaling 1.8 million square feet.
Adding to an extensive list of downtown office towers that have changed hands over the past two years, Park Tower was acquired in November by a joint venture of City Office REIT, Feldman Equities LLC and Tower Realty Partners. The 36-story office building was originally built in 1973, but has undergone several major renovations over the years. The new owners have additional upgrades planned to further enhance the building’s features.
Among the other notable sales transactions reported by Cushman & Wakefield during 2016 were:
|Property Name||Total SF||Price ($Mil)||Submarket ||Quarter|
|Hidden River Corporate Park|
|501 E Kennedy||296,082||$42.0||Tampa CBD||1Q-16|
New Office Development on the Horizon
With Tampa’s active demand for class A office space and declining availability, the hot topic of conversation has been a new speculative office project planned by Vision Properties in northwest Tampa. Vision Properties purchased the premier five-building Renaissance Center office park in early 2016 and a development site for an additional building was included. This fall, the owner announced plans to activate the site and begin construction on a three-story, 111,600 square foot office building with planned delivery by the first quarter of 2018. The new building will incorporate the latest design features for energy efficiencies and offer a 5/1,000 parking ratio.
Plans for new development in downtown Tampa continue to evolve. In October, Hillsborough River Realty announced enhanced development plans for its long-time land holdings consisting of three strategic parcels positioned on the west bank of the Hillsborough River. Lafayette Place, the proposed mixed-use project, will blend residential, hotel, office and retail space into three buildings totaling approximately 1.7 million square feet. The project will compliment other planned development along the West Bank and in the Grand Central district.
Transportation Advances-Tampa International Airport
One key component of business success in Tampa is connectivity, especially for employees, customers and suppliers. The attraction of Tampa International Airport (TIA) and its central location with respect to the main business centers continues to be a major attraction for companies here.
In December, J.D. Powers 2016 North America Airport Satisfaction Study ranked TIA second in the nation in the large airport category. With TIA’s nearly $1 billion expansion well underway, CEO Joe Lopano and his team are working tirelessly to attract new nonstop routes, to both international and domestic destinations. Among the recent successes are:
– Havana, Cuba via Southwest Airlines (daily, nonstop flights). Tampa is home to the third largest Cuban-American population in the United States.
– Reykjavík, Iceland via Icelandair (twice weekly nonstop flights). Reykjavík has connections to more than 25 destinations in Europe.
– San Francisco, CA via United Airlines (daily nonstop flights). A direct connection for Tampa’s emerging technology companies to Silicon Valley. San Francisco also provides an international gateway to the Asia Pacific region.
As reported in November, Tampa International Airport had 417,991 boardings by international passengers in fiscal year 2016. The figure represents a 113 percent increase in international passenger traffic since 2010 which can be attributed to the addition of nonstop service on Lufthansa, Edelweiss, Copa, flights to Cuba and expanded service to destinations in Canada and the UK.
Positive Outlook for 2017
Continued employment growth in the office-using sectors will be key to a strong office market in 2017. Based upon the latest projections by UCF’s Institute for Economic Competitiveness, sustained job growth in the Tampa metro will maintain robust demand for office space this year. Office-using industries are forecast to add over 13,000 new jobs in 2017, with Professional & Business Services leading the way with a 4.3 percent annual growth rate and increasing employment by 9,900 jobs.
This is Randy Smith’s last real estate roundup for the EDC. For more information, please contact Robin DiSalvo, Market Research Analyst, at (813) 518-2652 or email@example.com.