TAMPA — Water Street Tampa on Thursday unveiled the "work" part of its live-work-play vision for Tampa with a pair of 19- and 20-story office towers — billed as downtown’s first such "trophy" office buildings in 26 years.
Add in another 180,000 square feet of loft-style offices at Channelside Bay Plaza, soon to be renamed Sparkman Wharf, and the result will be about a million square feet of Class A office space coming on the market, though not all at once.
The developer, Strategic Property Partners, says it has spoken to prospective tenants that could need a total of about 1.5 million square feet of space in either Sparkman Wharf or the 20-story tower. SPP is exchanging lease proposals with companies on about 500,000 square feet, split between the two projects.
And of those early prospects, about one third each is local, from elsewhere in Florida, or national, from which SPP expects to attract most of its future tenants.
"I don’t think the bulk is going to come from local," said David Bevirt, a veteran Washington, D.C., leasing executive SPP hired this spring as its executive vice president for corporate leasing and strategy. "I think it’s going to be more nationally."
First up will be the new offices at Sparkman Wharf, much of it located in the former movie theaters at Channelside Bay Plaza. Average ceiling heights will range from 18 to 30 feet, and developers will punch holes in the theater’s walls to let in sunlight.
Construction on the Sparkman Wharf office space is expected to begin in November with a completion in the second quarter of 2020. Bevirt sees Sparkman Wharf as good for co-working and creative businesses like architects or graphic design firms. He expects gross rents per square foot to be in the mid $40s.
Construction is expected to start early in the spring on a 20-story building at 1001 Water Street, next to the new medical school building already under construction for the University of South Florida Morsani College of Medicine and Heart Institute.
It will have about 380,000 square feet of office space, a green plaza shared with the USF med school and nine large terraces, plus a rooftop terrace.
The tower is expected to take 26 months to build and be finished in the second quarter of 2021. Gross rents are expected to be in the low to mid $50s per square foot, not including parking.
SPP is building the Sparkman Wharf and 1001 Water Street projects on "spec" — meaning without having pre-leased agreements in hand before starting construction.
That’s possible because of the capital SPP can draw on from its founders: Tampa Bay Lightning owner Jeff Vinik and Cascade Investment, the personal wealth fund of Microsoft founder Bill Gates.
Committing to the construction up-front also alleviates "delivery risk," which Bevirt said is one of the biggest issues for prospective tenants.
"Based on the activity that we have at 1001 Water Street," he said, "that will dictate the start time" for a 19-story building at 400 Channelside Drive.
The second tower will have 500,000 square feet of space accessible by two lobbies, as well as a 27,000-square-foot outdoor garden on the fourth floor with space for business meetings, informal gatherings, events, fitness activities and work breaks.
While not all of Water Street Tampa’s office space would come on line at the same time, it is still a significant addition, even in a healthy market that hasn’t seen new construction in a long time.
Class A office rents in Tampa and Hillsborough County averaged about $30 per square foot during the second quarter of this year, according to a market analysis from the real estate services firm Cushman & Wakefield.
But the economy is strong, overall Class A vacancy rates are at their lowest point in more than 20 years and occupancy in downtown Tampa is at its highest point in more than two years. So Cushman & Wakefield says asking rents in Tampa could hit $33 to $35 per square foot in the next eight to 12 months.
"I think downtown Tampa is overdue for new product," said Barry Oaks, senior director in the Tampa office of Cushman & Wakefield.
That said, there are three factors Oaks said will make it interesting to see how Water Street’s projects are received.
First, with this new construction, prospective tenants will see higher rents than they’ve seen before in Tampa. Next, the loft-style offices at Sparkman Wharf will be a new product for downtown Tampa’s office market. Finally, the 380,000 square feet in the 20-story building is a large project to kick off without pre-leasing.
To SPP executives, the offices don’t stand alone but fit into a $3 billion district that is expected to include more than 9 million square feet of new and existing hotels, apartments and condos, stores and restaurants and other development.
In talking with prospects, Bevirt said he discusses four Rs that come with being in a lively and innovation-focused work environment: The ability to recruit talent, retain it, then work with those employees to grow revenue — all of which add up to return on investment.
"Anybody that’s making the decision about moving to Water Street Tampa," he said, "whether they’re local, regional or national, once they understand the value proposition, they get it."
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