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Business Observer Friday, Aug. 26, 2022 1 month ago

Once-sleepy office hub aims to capitalize on desirable location

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Long viewed as a buttoned-up business cluster filled with 9-to-5 workers, malls and hotels, Tampa’s Westshore District seeks to reinvent itself as a place to call home.
by: Brian Hartz Tampa Bay Editor

With all the buzz about Water Street Tampa and Midtown Tampa, it’s easy to forget the city has another up-and-coming live/work/play neighborhood: the Westshore District. On Aug. 16, the Westshore Alliance reminded everyone of that at its 20th annual Westshore Development Forum, held at the DoubleTree by Hilton hotel near Tampa International Airport.

But wait, isn’t Westshore just a collection of office buildings, hotels, restaurants and malls, populated mainly by 9-to-5ers and business travelers?

Yes, but the district is evolving.

Some 15,000 Tampa residents call it home, and more than 3,600 apartments have been built in the district since 2009, with another 1,000-plus planned or already under construction. It also boasts more than 300 acres of parks, beaches and trails, and the City of Tampa has a plan to link Westshore and downtown via a bike path along Gray Street that would connect to the popular Tampa Riverwalk.

Tampa Mayor Jane Castor speaks at the Aug. 16 Westshore Development Forum. (Photo by Eric Bunch/NTP2)

“We just need to figure out a way to fund it,” says Danni Jorgenson, the city’s transportation engineering manager, who was part of a panel discussion at the forum. In a time of economic uncertainty and soaring costs for housing, groceries and other necessities — “it is a housing crisis,” says Tampa Mayor Jane Castor, another speaker at the forum — finding money for elaborate new bike trails could be difficult.

Another panelist, Hillsborough Transportation Planning Organization Executive Director Beth Alden, spoke to the difficulty of funding the many projects that could address Tampa’s widely acknowledged Achilles’ heel: transportation.

“We’d love to be able to invest in rapid transit,” Alden says. “There have been some great plans done for bus rapid transit, for reuse of rail corridors for new light rail, better ferry service — you name it, it’s been studied.”

Those projects, she adds, “would compete well for federal grants and for state grants. But you cannot build those without a local match for the federal grants. So, where are you going to divert the transportation funding from? Are you going to take it out of maintenance? We’re not funding the basics right now. So we could move forward with a rapid transit system, if there were adequate funding at the local level.”

In the near term, however, investment in Westshore is booming, and the district, despite the lack of rapid transit and elaborate bike trails, is becoming more liveable — a crucial quality as skilled, educated workers increasingly opt for walkable neighborhoods with plentiful amenities and short commutes, assuming they aren’t working remotely, that is.

 

Westshore Corporate Center (Courtesy photo)

In or out of office

Speaking of remote work, the pandemic-driven trend has had a noticeable effect on Westshore, which, with more than 4,000 businesses and 102,000 employees, is Florida’s largest office community. Office vacancy rates, however, have shot up by 20.2%, according to research from commercial real estate brokerage Cushman & Wakefield. Consequently, rental rates have dipped from $42 to $33.44 per square foot over the past two and a half years.

If you dig deeper into the numbers, however, there is some good news for office landlords. 

“Leasing activity is up,” says Cushman & Wakefield Senior Director Mercedes Angell, who spoke at the forum. “Let me repeat that: Leasing is up. We are so fortunate to be here in the Tampa market. Our fellow cities across the country are not so fortunate. Tampa has been very, very active in terms of office leasing. In 2021, we had 2.7 million square feet of leasing activity. That’s not renewals. That’s new leases and expansion.”

Throughout Tampa, Angell adds, more than two-thirds of office leasing activity has been in Class A buildings, and of the city’s 18.3 million square feet of Class A office space, 7.6 million, nearly 42%, can be found in Westshore. “That means there’s a flight to quality,” she says. “Class A has knocked it out of the park. Companies want the new, sexy product, and if it’s furnished, all the better.”

Also, Westshore has accounted for 40% of all office leasing activity in Tampa, year to date. And with three recently completed office buildings — Midtown West, SkyCenter One and The Loft at Midtown — coming online in 2021 and two more, Midtown East and Corporate Center V, in development, that level of activity will likely only increase.

“The office sector has been dealing with new realities,” Angell says. “Some good, some not so good.”

Another “good” reality is the low sublease vacancy rate — just 3%. “This is nothing compared to what’s going on in Chicago, New York and San Francisco,” Angell says. “They are closer to 40%-50%.”

 

Hotels and housing

Westshore is also on track to become a highly coveted live/work/play neighborhood as opposed to simply a business district where the sidewalks are, as the old saying goes, rolled up after 5 p.m. Despite rising interest rates and shortages of labor and materials, hotel and apartment construction is on the rise.

On the hotel front, 580 rooms have been added to the Westshore market in the past three years, and another 100 — the Holiday Inn Express & Suites at 2055 N. Dale Mabry Highway — are under construction. However, Wyatt Krapf, senior director at Berkadia, a Tampa commercial real estate firm, believes a slowdown in the hotel construction pipeline could be a positive for the district’s existing inventory in that it will drive up demand.

Revenue per available room, RevPAR, is “at an all-time high,” Krapf says, speaking at the forum. From June 2021 to June 2022, RevPAR surged from $99.64 to $136.37, a 36.9% jump and way above pre-pandemic levels. Average daily rate, another influential hotel industry metric, has also been on a blistering upward trajectory, rising from $142 to $180.31, or 27%, year to date (June 2021 to 2022).

“We were the ‘least worst’ performer in 2020,” Krapf says. “We did pretty well, all things considered, and we’ve bounced back in a big way. We’re now well above our prior peak in 2019, and these tailwinds should continue.”

Multifamily housing growth, however, has proceeded at a more modest pace, with just The Emerson on Rocky Point and its 180 apartments under construction. But eight buildings with more than 3,000 units, collectively, are in various stages of pre-development. Some of these will take the form of repurposed office space, such as the former AAA headquarters on Westshore Boulevard, which Ally Capital Group plans to convert to a 360-unit apartment building.

Nearly two-thirds, 65%, of the people who work in Westshore also live there, so the influx of new apartments will give existing residents more housing choices — and hopefully some decrease or at least stabilization in rent costs — while accommodating rising demand for residential development in the area. And there will be high demand: According to Tampa Hillsborough Expressway Authority forecasts, Tampa’s population is on track to grow by 30% between now and 2040, while the number of jobs in the city is forecast to increase by 42.7% over the next decade.

“We’re going to see tremendous growth over the next 20 years,” says Darron Kattan, managing director of multifamily investment sales at Franklin Street, who spoke at the forum. “What we’re seeing now is just the beginning, as long as we stay business friendly. I think that’s what’s attracting a lot of people here — and the weather.”

(This story has been updated to correct the spelling of Darron Kattan's name.)

Brian Hartz is the Business Observer’s Tampa Bay editor. He has worked for the publication since 2017. Brian holds a master’s degree in journalism from Indiana University and has been a St. Petersburg resident since 2013. He has also worked for newspapers and magazines in Indiana...

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