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Office sector insider sees momentum heading into 2023

While there is much to be positive about, how hybrid work will continue to affect the office market is still a concern, says JLL Executive Vice President Jim Moler.


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1. Jim Moler says heading into 2023 there is a lot of energy in the office sector with, “believe it or not,” the number of tours and companies looking at properties at records levels.

Moler, who oversees leasing and business development for JLL in the Tampa market, says activity in October was at the highest levels the company has seen in four years and that November and December were on similar tracks.

“That’s before the pandemic,” he says. “So I see a lot of momentum coming into 2023. It feels fantastic right now.”

But the activity doesn’t mean the industry has rebounded from the massive shift in how people work and the impact that’s had on the office sector.

Moler says JLL researchers found that despite the record number of companies looking at space, 15% less spaced is being leased now than before the pandemic. Yet tenants are paying 10% more in rent than before.

“That really speaks to buildings being upgraded, and the desire to be in the best buildings and the best locations,” he says. “Those cost more than some of the other options in the market.”

 

2. Something he’s excited about is a new tower heading to the Midtown Tampa development.

While the news of the building itself is big, as is the fact the Tampa Electric Co. is moving its headquarters into it when it’s complete, he says what’s important is having another best-in-class office option coming to the market.

Construction is expected to begin in early 2023.

The 25-acre Midtown development, with restaurants, retailers, hotels, offices and apartments, is quickly becoming a premier location in Tampa, drawing the attention of national companies.

Moler says this is the first time a mixed-use project of this magnitude has had a “next-level office” built as part of the overall construction. He says even with Tampa Electric taking 11 of the 17 floors there will be 130,000 square feet of space available for other tenants.

“This is yet another great option for corporate users of real estate to consider as they look at the various options,” he says.

 

3. Despite the positive signs, what worries him is what’s worried office building owners and landlords the past couple of years: the hybrid work model.

While 15% less space is being leased now than before the pandemic, “that could be more extreme, depending on what direction, ultimately, this goes.”

He says JLL — as well as the industry as a whole — began looking at the issue during the pandemic and that a couple of years later they are still working through it. “It’s interesting in that you do have demographics come into play.”

Right now, you have a seasoned workforce working with mid-level and up-and-coming professionals. Companies, Moler says, need to find a balance, establishing a culture that gets the most out of a workforce with different needs and expectations while making sure productivity doesn’t lag.

“What will that mean from a real estate perspective? That’s still the question mark,” he says.

 

author

Louis Llovio

Louis Llovio is the commercial real estate editor at the Business Observer. Before going to work at the Observer, the longtime business writer worked at the Richmond Times-Dispatch, Maryland Daily Record and for the Baltimore Sun Media Group. He lives in Tampa.

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