Make us your home page
Instagram

Brokers use free-rent deals to fill empty Tampa Bay area offices

With the Tampa Bay area office market catching a minor case of what's infecting the housing market, commercial landlords have begun to offer a concession they've foresworn the past five years.

Can anybody say "free rent?"

Free rent re-emerged as a leasing strategy at the end of 2007, when some landlords realized they couldn't stem a rise in vacancies without boosting incentives, St. Petersburg commercial real estate broker Mike Talmadge said.

"I've seen as much as six months of free rent quoted, depending on the building," said Talmadge, who works for Echelon Real Estate Services. "A savvy tenant recognizes that vacancies create negotiating opportunities."

Why the landlord generosity? Job losses in fields such as housing, combined with fears of recession, are putting a crimp on office demand, brokers say.

The region netted an estimated 16,000 jobs in 2007, about half of the job total of 2006. In what the real estate firm GVA Advantis dubbed a "palpable pullback," vacancy rates have returned to double digits after hovering around 9 percent a year earlier.

Two of the previously strongest markets have suffered disproportionately from the slump. Downtown St. Petersburg, where just two years ago the vacancy rates stood at 5 percent, is coming to grips with 21/2 times the amount of empty offices.

Two large tenant defections, Progress Energy and Bankers Insurance Group, left plenty of cubicles begging for takers. Progress moved into a new
16-story headquarters downtown, freeing up offices at 100 Central Ave.

"About 239,000 square feet of vacancy was created just with the loss of those two tenants," Talmadge said.

Tampa's Westshore, by far the region's largest concentration of offices, is feeling its first spasm of pain. Vacancies have risen by a third, to 10 percent, from
7.2 percent. While below the Tampa Bay area average, it's not a trend that landlords relish with more than 500,000 square feet of new office buildings to come online in the next year.

"Westshore wasn't doing any type of concessions. Now, to see free rent coming back, it's indicative of uncertainly,'' said Michael Hoffman, a leasing agent with CB Richard Ellis.

One formerly hard-pressed office market has outperformed the competition. That's downtown Tampa. It's 16.3 percent vacancy was down a hair from a year earlier. A dearth of new construction there — the last office tower opened in 1992 — is helping its bottom line.

CB Richard Ellis' Anne Marie Ayers said she sees none of the distress of the last down cycle of the early 1990s. In fact, Ayers said companies are shopping around for more than 1.5-million square feet of deals in Greater Tampa.

"Our markets are in synch," Ayers said. "I'm telling you there's tenant demand in the market, and they'll pay for location and quality.''

Free rent allows landlords to give concessions without giving away the store. Building owners can maintain "face rents," the lease rates calculated in price per square foot. Keeping rents steady — at least on paper — keeps the building's investment value from slumping.

Brokers wouldn't reveal recent free-rent contracts, citing confidentiality agreements. But Danka Business Systems, in subletting downtown St. Petersburg offices last year to Bankers Insurance, lowered rent on the front end of the five-year deal, mindful of the fact that Bankers owes two landlords until its old lease in the First Central Tower expires.

Said Bankers spokeswoman Barbara Peat: "Obviously, at a time like this, there are creative leasing arrangements."

Brokers use free-rent deals to fill empty Tampa Bay area offices 03/16/08 [Last modified: Monday, March 17, 2008 2:32pm]
Photo reprints | Article reprints

© 2017 Tampa Bay Times

    

Join the discussion: Click to view comments, add yours

Loading...
  1. Rick Scott appoints 'my friend,' Jimmy Patronis, as Florida CFO

    State Roundup

    PANAMA CITY — Gov. Rick Scott on Monday picked close friend and supporter Jimmy Patronis to be Florida's next chief financial officer, a lucrative prize for loyalty that casts new light on Patronis' pro-business votes as a legislator and his support for higher electricity costs as a regulator.

    Rick Scott appoints Jimmy Patronis (background) as CFO. [STEVE BOUSQUET | Tampa Bay Times]
  2. Local gas prices plummet as Fourth of July holiday travel approaches

    Tourism

    TAMPA — Local gas prices are enjoying an unseasonal dip around the $2 mark just in time for the hectic Fourth of July holiday travel weekend.

    The price of regular unleaded gasoline has dropped to $1.99 at a Rally station on Pasadena Ave. South and Gulfport Boulevard South, South Pasadena.
[SCOTT KEELER   |   Times]

  3. Air bag recalls, lawsuits lead Takata to file for bankruptcy

    Autos

    Shattered by recall costs and lawsuits, Japanese air bag maker Takata Corp. filed Monday for bankruptcy protection in Tokyo and the U.S., saying it was the only way it could keep on supplying replacements for faulty air bag inflators linked to the deaths of at least 16 people.

    Japanese air bag maker Takata Corp. CEO Shigehisa Takada bows during a press conference in Tokyo on Monday. Takata has filed for bankruptcy protection in Tokyo and the U.S., overwhelmed by lawsuits and recall costs related to its production of defective air bag inflators.
[(AP Photo/Shizuo Kambayashi]
  4. Airbag maker Takata bankruptcy filing expected in Japan, U.S.

    Corporate

    DETROIT — Japanese airbag maker Takata Corp. has filed for bankruptcy protection in Tokyo and the U.S., overwhelmed by lawsuits and recall costs related to its production of faulty air bag inflators.

  5. Federal agencies demand records from SeaWorld theme park

    Tourism

    ORLANDO — Two federal agencies are reportedly demanding financial records from SeaWorld.

    Killer whales Ikaika and Corky participate in behaviors commonly done in the wild during SeaWorld's Killer Whale educational presentation in this photo from Jan. 9. SeaWorld has been subpoenaed by two federal agencies for comments that executives and the company made in August 2014 about the impact from the "Blackfish" documentary. 
[Nelvin C. Cepeda/San Diego Union-Tribune/TNS]