There’s a flood of new businesses wanting to set up shop in Tampa Bay, a new commercial estate report says — and it’s raising rents.
But there’s not much available space out there, Franklin Street, a Tampa-based commercial real estate firm found. Vacancy rates dropped from 4.4 percent at the start of 2021 to 3.8 percent by the end the year, the lowest point in a decade. Average rent for retail and restaurant space in the region went up 7.1 percent to $21.56 per square foot in a year, according to the firm’s fourth quarter retail report.
A similar report from Colliers International found rents are going up across Tampa Bay because of high demand for space. It’s a landlord’s market, just like it’s a seller’s market for residential real estate.
“I’ve been in booms before this. This one is definitely different than the ones in the past,” said Brian Bern, Franklin Street’s managing director of retail real estate. “It’s just bigger.”
In this interview with the Tampa Bay Times, Bern explains what’s driving the lack of space, the challenges that come with a hot market and which areas of Tampa Bay are growing the most. This interview has been edited for length and clarity.
Why is there a shortage of commercial space in Tampa Bay?
It’s hard to plan for all this. It takes a lot of time to acquire a site, budget for construction and to get it approved by the counties. And it’s hard to have the foresight from three to four years ahead that Tampa would be as hot as it is today. So it’s not that there aren’t developers that don’t want to keep adding projects and building more in the Tampa Bay area. It takes years to pull everything together.
Where is the demand coming from?
It all boils down to growth. The population growth in this market is just incredible. And it’s caught the attention of retailers and businesses looking to open offices. Tampa had some amazing growth from people moving from out of state and businesses are also following. Retailers and restaurants have noticed that they’re running to catch up with the growth that’s happening here, population wise.
Why was Tampa Bay overlooked in the past?
The demand was there before — it’s just accelerated. We were always considered second tier compared to other markets in the southeast. But because of the state’s business policies and the way that our taxes are, it’s become a very attractive place for businesses to want to move here and operate here and function here. Same thing for people that come and live here. The cost of living is very attractive and so is the weather.
We’ve really entered a phase where we’ve on the national stage with everything from sports, to our business wins to people visiting and experiencing that we’ve been basically acting as normal as we possibly could be during the pandemic.
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What kind of businesses are looking to open in the area?
Really everybody. Our clients are expressing that some of their best locations are here in Florida. They’re looking to take advantage of the growth and try to keep opening stores because their stores are just performing.
What are some of the challenges for businesses in a landlord’s market?
There are centers that landlords have had vacant spaces for years, and in past cycles, still could not fill up. And now they’re getting attention because there’s just more demand right now than supply. So that’s allowing landlords to raise rents. There’s an increase in cost that tenants are experiencing in building out their stores. There’s also delays in getting equipment, fixtures and the furnishings for their spaces. All the costs to open up a business have increased dramatically.
What areas are seeing the highest demand?
I wouldn’t say there’s anything really new that’s surprising. South Tampa and downtown Tampa are definitely top of the list. And a lot has to do with the delivery of what’s going on with Water Street and Midtown. Those are some of the most attractive demographics in the market. And it’s the same in downtown St. Petersburg.
And then you go off to the suburbs. Wesley Chapel has been growing for the last two decades — and it’s not slowing down. Brandon is just as attractive as ever. It’s everywhere. It really is all across the Tampa Bay market.