Sublease availability in Tampa Bay’s commercial real estate market is at a “historical high," according to a new quarterly report on the local office space market.
The commercial real estate services firm JLL reported this week that 1.4 million square feet of space in Hillsborough and Pinellas counties is available for sublease, and nearly half of that has hit the market since March, when the coronavirus pandemic forced companies to send most workers home.
Kyle Koller, JLL’s research director in Florida, said 2020′s sublease inventory boom rivals that of the dot-com era 20 years ago. But it doesn’t mean all that space is suddenly vacant.
“It might be firms testing the market a little bit, seeing if they can get interest on their stakes,” said Kyle Koller, JLL’s research director for Florida. “Maybe they haven’t fully worked out what their mid-to-long-term plans are, so maybe they’re seeing what the market scope is right now. They might have no plans to vacate, or those plans might shift going forward.”
Overall, the Tampa Bay commercial real estate market has seen absorption, or space leased by tenants, decrease by 131,546 square feet in 2020.
Still, the market “has been showing pretty good signs of resiliency,” Koller said. Newer commercial developments Sparkman Wharf and Heights Union added 355,000 square feet of inventory to the market during the last quarter, although some tenants' move-ins have been delayed.
While JLL found that there has been some repricing on spaces still under construction, the average asking rents in existing properties have remained steady at $30.56 per square foot, an increase of 4 percent year over year.
“Landlords are still getting pre-COVID rents, and they’re not adjusting their asking rate based on what they don’t know, which is how long re-entry is going to take into the workplace, and to what extent,” said JLL managing director Brent Miller. “What will it take for rents to fall, to hit the cycle where they’re actually starting to decrease, is really going to depend on demands. I honestly don’t think we’ll see that play out until 2021, 2022.”
Tenants are playing wait-and-see, too.
The Tampa Bay Chamber, for example, renovated its office in One Tampa City Center this spring, but most of its staff of 16 has continued working from home due to the pandemic. Chamber president and CEO Bob Rohrlack said employees split days in the office, but are not required to come in.
“I know most people are working some type of hybrid work schedule for what’s going on,” he said. “If you can work from home and still accomplish the goals that we have, that’s fine.”
Rohrlack said it’s possible that, long-term, some employers will bring most, but not all, of their workers back to their former offices. But the overall footprint of those offices might not change that much if companies start incorporating social distancing into their floor plans.
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“There’s going to be a need for more space to spread people out,” he said.
By early to mid-2021, JLL estimates another 1 million square feet of commercial space will come on the Tampa Bay market, much of it in high-profile developments like Water Street Tampa, Midtown and Heights Union. At the moment, only 10 percent of that space is preleased.