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Amid continued demand and an ever-shrinking supply, especially for top-level, Class A space, some Tampa office landlords are now commanding rents of $30 per square foot from new tenants.
The $30-per-square-foot threshold is significant because it marks the first time in more than a decade that rental rates have risen to that level, a reflection of the health of the market.
To date, only top tier towers downtown, such as the SunTrust Financial Centre and the Bank of America Plaza, have pierced the threshold, but landlords and office brokers believe other buildings are likely to follow suit if the market maintains its current activity level for the balance of 2016.
“For what I'll call Class A-plus buildings, we're already there,” says Dan Woodward, vice president in charge of Highwoods Properties' Tampa office, of the $30-per-square-foot rental rate.
“And it's not a glass ceiling by any means, given the demand and limited supply that's out in the market. We're seeing rental rates that are completely justified.”
Highwoods, which owns nearly two dozen office buildings in the Tampa area, is quoting $30 per square foot and above rents at the 35-story SunTrust Financial building, which it acquired last year for $124 million knowing that a significant amount of space would come available for lease.
Tampa has flirted with the $30 figure before, in 2006 and 2007, only to have rates settle back down with the economic recession. Just four years ago, most Tampa landlords were quoting rates in the low- to mid-$20-per-square-foot range.
Just as interestingly, the phenomenon doesn't appear to be limited to ritzy, downtown skyscrapers. Upscale offices in the Westshore suburban submarket also are quoting asking rents north of $30 per square foot, including Redstone Investment's five-building Austin Center property, commercial brokers say.
“People are being drawn both to downtown and to Westshore by the overall improvements in the Tampa market,” Woodward says.
Still, the rising rents do not appear to have reached a point to justify new downtown development — yet. Feldman Equities' owner Larry Feldman, who together with Tower Realty Partners is planning a 52-story, office, condominium and retail called Rivergate Tower, says he will be seeking rents of between $35 and $37 per square foot for the new downtown, Class A-plus offering.
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