Could Tampa’s real estate market be hurt by the ‘office apocalypse?’

The explosion of remote work since the COVID-19 pandemic has stoked fears of a potential “office apocalypse,” with companies canceling leases, landlords defaulting on loans and downtowns becoming ghost towns.

As cities across the country struggle to find a path forward, Tampa’s office market may provide a glimmer of hope.

“I had a major investment fund tell me ‘thank God for Tampa,’” said Anne-Marie Ayers, a principal at commercial real estate company Avison Young. “It’s just been a really stable environment for them.”

With fewer people coming to work in-person, companies have been forced to reevaluate how much space they want and if they want an office at all. Office leasing activity is down 28% nationwide compared to pre-pandemic trends, according to a presentation from real estate analytics firm CoStar.

Some fear the worst is yet to come since many of the office leases that were signed before the pandemic have yet to expire. CoStar predicts that vacancy rates will increase 4.5 percentage points by the end of 2026.

Tampa has not been immune to these changes. Leasing volume is the lowest it’s been in a decade, with only 460,000 square feet leased in the second quarter of 2023 according to a report from Avison Young.

Still, CoStar data shows that things have improved since the peak of the pandemic. There were 6.3 million square feet in recorded leases between July 2022 and June 2023. That’s up from the 5.3 million square feet leased in calendar year 2020.

At least in the short term, companies in Tampa appear to be holding steady compared to other markets. “Some people have chosen to downsize but they are not vacating their offices and canceling their leases,” said Ayers.

Landlords in certain cities like San Francisco have been forced to drop their prices to retain tenants. Meanwhile, asking rents in Tampa have increased consistently over the past five years and are up 0.5% from this time last year, according to data from commercial real estate firm Savills.

Investors are taking note. Tampa’s sales volume hit $195 million in the second quarter, a five-year high for this point in the year, according to Avison Young. This was primarily driven by the $123 million sale of Urban Centre.

Tampa’s growing population and business friendly environment may be giving it a leg up over other markets, said Mike Griffin, an executive managing director and market leader with Savills.

“The state stayed open during the pandemic,” he said. “That attracted a lot of companies like Pfizer, Rapid7, DoubleLine to move down here and they’ve grown since coming here.”

Not all workspaces are created equal though. Employers are fleeing dated suburban office parks in favor of new high end buildings in trendy neighborhoods like Water Street, Tampa Heights, Westshore and Midtown.

Those class-A offices offer amenities like on-site fitness centers, restaurants and cafes, lounges with pool and foosball tables and even shuttles to points of interest like the mall or airport. Those are all draws for employers looking to lure workers back into the office.

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Owners of those less desirable properties along the I-4 corridor will be forced to pivot and build industrial warehouses or multifamily housing on the land. If not, “you could see some defaults there,” Griffin said.