Office space occupancy in Pinellas County quietly crept up from historic lows this year as small businesses started, relocated or expanded. No splashy corporations have leased several floors at a time. No banks have filled the anchor spot to gain the right to name the former Bank of America tower in downtown St. Petersburg.
But after losing 461,826 square feet of occupied office space in 2010, tenants filled 192,601 square feet in Pinellas County in 2011, according to CB Richard Ellis real estate research.
The recently upgraded City Center at 100 Second Ave. S in St. Petersburg is an example of how small tenants are raising occupancy. A new law firm took 1,800 square feet. PowerChord, an online retail management company, doubled its size by adding 5,000 square feet. SquareMouth, an online travel insurance website, leased 3,500 square feet. Riesdorph Court Reporting Service filled 1,400 square feet.
"The entire Tampa Bay area has absorbed over 1 million square feet. The direct vacancy rate is below 20 percent for the first time since 2008. That's very positive," said Jane Dizona, a vice president of CB Richard Ellis brokerage services in Tampa.
Occupancy at City Center has risen from 45 to 70 percent in the past year as new owners spent $8.5 million on renovations.
"At the end of the day an office building is a commodity. It just becomes a price-only business unless you do something with your product that's different," said Larry Feldman of Feldman Equities, an owner of the building. "By putting in a whole series of amenities in our buildings we set ourselves apart from our competitor."
City Center, the home of Northern Trust bank, has a new $2 million fitness center with 10 aerobic machines that have cable TV screens adaptable to iPads and iPods. The elevator lobbies are getting blond wood paneling and granite floors. Restrooms on most floors are also getting their share of granite and porcelain tile.
Feldman is part of the ownership group that bought the 253,590-square-foot building for $16.5 million, or about $65 a square foot, one year ago.
"The fact that the fitness center went in there was a deciding factor for my client," said Dizona, who leased 1,800 square feet to an Ohio lawyer who wanted to have an office in St. Petersburg, where he has a second home. "He and his wife are very fit. They really like the idea of being able to work out over lunchtime or after work."
First Central Tower at 360 Central Ave. is also adding amenities. A coffee cart now sells free-trade Colombian coffee as well as teas, specialty coffee, smoothies and breakfast items. There are plans for a large conference center and an employee lounge with a TV.
"(Tenants) get the free use of the conference room instead of paying rent on a conference room in their suite that they may only need periodically or monthly, bringing value to their lease by not needing to rent as much space," said Wendy Giffin, director of leasing for First Central Tower's owner, Osprey Real Estate. "The planned lounge is a nice amenity. In this economy with many employees bringing in their lunch it will offer a break from their office or desk to relax, eat or catch the news.''
The average rate for Class A space in Pinellas is $20 a square foot. Dizona predicts that those rates will stabilize and even increase this year as absorption continues to improve. Landlords would rather offer a few free months or increased amenities than lock in a lower price per square foot.
"We're seeing more concessions than dropping of lease rates. Owners want to keep that base rate up, so if they decide to sell the building in three years there is value there," she said. "They will give them free rent. On a five-year lease, they may get five months' free rent."
Feldman's investment group specializes in buying underperforming properties and revamping them. A survey of City Center tenants found that they wanted to feel safer in the parking lot. Adding more lighting was an easy, inexpensive fix, but it earned loyalty from clients who felt their landlord was listening, Feldman said.
The City Center security desk is also being moved to the center of the lobby so it will have more of a presence. The lobby restaurant is expanding and will have tables in the 65-foot-high glass atrium. Also, empty space on the second floor is being converted to a conference space that can hold up to 70 people. Tenants can use it any time for a cleanup fee of $40.
The improvements are attracting and retaining tenants, but $8.5 million is still a whopping investment during a sluggish market.
"The benefit of having bought a year ago is, we started negotiating the deal when people still thought the world was coming to an end. We bought that at an incredibly low price," Feldman said. "Even after we spend over $8 million, our cost basis is still going to be lower than all our competitors'. "
Contact Katherine Snow Smith at (727) 893-8785 or [email protected]