Region's law firms still a major class of tenants for downtown landlords
Commercial real estate brokerage firm JLL annually releases a nationwide report on the state of law firm occupancy and trends facing firms and office landlords alike. The 2018 Law Firm Perspective includes data and insights on markets like Tampa, Orlando and Fort Lauderdale, to name a few.
On future leases: “Many are focusing on their real estate strategy in order to take advantage of lower rents as the 10-year mark from transactions done during the recession approaches.”
On competition for space with other sectors: “Only around 63% of tech leases in 2018 have been expansionary, as compared to over 85% in the previous three years. As tech and finance have been the greatest competition for the types of space that law firms desire most, this cooling will provide for a wide array of options for firms.”
On declining office rents in some markets: “Law firms will have an opportunity to take advantage of flatlining, or even declining, effective rents in many high-profile locations on an annual basis.”
On its ranking in overall space occupancy: Law firms occupy a collective 25.78 million square feet of office space nationwide, behind only technology firms, at 89.2 million square feet; finance and insurance, with 73.63 million square feet; and government, at 27.66 million square feet. Law firms rank ahead of health care-related firms, co-working businesses, media companies, life sciences users and accounting firms.”
On the tightness in the Tampa market: “With the 25-year construction dry spell about to be broken with Water Street Tampa, the market is poised to see the alleviation of limited supply. Downtown asking rates will continue their climb, with other leasing fundamentals remaining stable before shifting in the early 2020s.”
On the impact of new office supply in Tampa: “As new supply comes online, free rent and (tenant improvement) allowances will be used as a tool to offset rent increases across the market.”
Amount asking rents in the Tampa office market have increased on average annually over the past five years. Orlando’s office rental rates, by comparison, have risen 8% in the past year alone, and further hikes are expected in 2019.
Amount of premium new office construction will demand from prospective tenants in Tampa over current Class A rental rates. In Fort Lauderdale, new office construction are expected to bump rental rates up 23% over current Class A prices.
Amount of new office space in the Westshore submarket of Tampa that will be delivered in 2019. By comparison, no new space will be delivered in either downtown St. Petersburg or downtown Tampa. Fort Lauderdale’s Las Olas submarket will be home to 400,000 square feet of new office space in 2020, and Orlando is poised to have more than 1 million square feet of new offices by 2021.
Asking rents for Class A office space, on a per square foot basis, in the Westshore submarket of Tampa. Rents in downtown Tampa and downtown St. Petersburg are hovering around $30 per square foot, as are the rates in Orlando. Fort Lauderdale leads with rents in Las Olas of about $50 per square foot.
Office vacancy rate in downtown Tampa through the first three quarters of 2018. Westshore’s office vacancy stands at 9.5%, while in downtown St. Petersburg, about 7% of all office space is available. Both Fort Lauderdale’s and Orlando’s vacancy rates downtown are similar to those in Tampa.
Tenant improvement allowance on a per square foot basis for Class A space in the Tampa area in 2018. By comparison, the amount averaged $35 per square foot in 2015. Orlando’s TI allowances are also around $40 per square foot, though that figure has roughly doubled since 2015, and Fort Lauderdale’s come in around $65 per square foot for Class A space.
Amount of all office space in downtown Tampa and in the Westshore submarket occupied by law firms. By comparison, law firms occupy roughly 30% of all office space in downtown Orlando — though that figure is down 17% from recent years — and 34% of the downtown office market in Fort Lauderdale, as a result of the presence of both county and federal courthouses.