Tampa Market Report

Metro: Tampa-St. Petersburg 


Tampa Bay was early to fall into the recession that struck the nation nearly a decade ago and was late in recovering from it. But by now, pre-recession employment levels have returned and have been surpassed and, moreover, job growth in the recent period has been strong. U.S. Bureau of Labor Statistics (BLS) data for July 2016 put total non-farm employment in the Tampa Metropolitan Statistical Area (MSA) up 37,700 jobs (3.0%) from 12 months prior and up 79,100 jobs (6.5%) over 24 months. While major New Economy growth industries are lacking in vigor sufficient enough to lead the local expansion, other elements show substantial strength. Tampa hosts a significant Gulf of Mexico port (more on that below), is a major draw for tourists, and has proven attractive to lower- (and some mid-) tier financial sector business. A recent case in point is the $90 million expansion by Citigroup at its facilities in Brandon.

In addition, the region enjoys increasingly strong population growth with its associated demand for goods, services, and housing. According to Moody’s Economy.com, the population of the local MSA grew by 1.9% in 2015 for a net addition of approximately 55,000 residents—the highest rate of growth reported by this source for this area since 2005. Similar gains are expected for 2016.

For all the recent favorable data, however, employment and job growth tend to focus on the low-wage service industries and the low-paying Leisure and Hospitality sector. Low average household incomes, as described elsewhere in this report, are a chief result. Indeed, noted Savills Studley in a second quarter report, “Tampa Bay has not closed the salary gap–the region’s median household income remains nearly 10.0% below the national average. This income shortfall is partially a hangover from the severity of the recession, but it can also be attributed to a high percentage of lower wage jobs added in retail and hospitality sectors.” Job growth over the latest measured 12-month span was strongest in the Professional and Business Services sector, which added 11,300 jobs net for a gain of 5.2%. Next in jobs added and with the highest rate of job creation was the large Leisure and Hospitality sector, which grew by 5.7% July-to-July with the net addition of 8,200 jobs.

Trade, Transportation, and Utilities, the MSA’s largest industry sector, was third with a 7,400-jobs net increase—growth at 3.1%. With the expansion of the Panama Canal just completed, however, this sector bears attention. The enhanced canal will “‘open new markets for Tampa Bay,’” a top



  • The BLS reports a seasonally unadjusted unemployment rate of 4.6% in June 2016 for the Tampa-St. Petersburg- Clearwater MSA, down from 5.3% one year earlier.
  • Moody’s Economy.com reports a second quarter 2016 average household income of $103,358 for Tampa. Average household incomes of $142,735 and $127,253 are reported for the top metros in the nation and West region, respectively.

Employment Growth:

Employment by Sector:


An executive with the West Florida division of SunTrust Bank informed Tampa Bay Business Journal in late June. “‘You’re going to have ships that can carry three times the cargo. It’s really significant in terms of load.’” Tampa is the closest of Florida’s full-service ports to the newly expanded Panama Canal, added this source. Its prime location “‘means saving customers two full days or more getting to market as opposed to sailing around the state and up the East Coast.’” In addition, as a result of the expansion of cargo-handling capacity, the port is now able to handle ships of 9,000 TEUs, or 20-foot equivalents, compared to the former 4,500 TEU vessels, notes the report. “One of the largest economic engines in west central Florida, Port Tampa Bay supports nearly 80,000 jobs and generates almost $15 billion in annual economic impact.”

Most other industry sectors saw smaller year-over-year gains, with the exception of the small Manufacturing segment, which held steady, and the Information and Government sectors, which saw respective losses of 300 and 2,100 jobs for declines on the order of 1.2% and 1.5%.


With trade, services, and tourism its main economic engines, the Tampa Bay economy is unlikely to escape its characteristic vulnerabilities, including its relatively low household incomes (as described elsewhere in this report). Still, with the national economy continuing to expand, with tourism and population growth running at rates above the nation’s, and with the widening of the Panama Canal expected to enhance trade through Tampa’s port, the near-term outlook for Tampa remains favorable.




Tampa hosts a low-cost low- key general purpose, multi- tenant office market with 40.8 million square feet of existing inventory, about half of which qualifies as Class A. With a low development profile through recent years, the market has grown tighter as a result of demand generated by economic and population growth. And while the market is not a prime relocation and expansion choice for major corporations, its low occupancy costs have made it attractive to back office support and call center operations, often to financial sector companies. In addition, notes Savills Studley, office demand arises as well from health care, real estate, and retail companies. “Expansion by smaller and larger firms has been a formula for strong office space demand,” states this source.

Reis’s data lend support. With no office space completing construction in either 2014 or 2015, net absorption over that two-year span exceeded 1.2 million square feet. The first half of 2016 followed with no new supply and net absorption at 191,000 square feet, 52,000 of which is attributed to the second quarter. While July followed with negative 20,000 (also with no new supply), that small loss will be promptly redeemed, according to the latest analysis.

Vacancy, accordingly, has been declining. The overall rate for the second quarter was 18.5%, down 20 and 50 basis points for the period and year- to-date following a 160-basis-points drop all told in 2015. Indeed, the current rate is the lowest reported by the firm for this market since early 2009. Quarter-end vacancy rates in downtown Tampa and the nearby upscale Westshore submarket, hosts to a combined total of 42.9% of total metro area inventory, were among the region’s lowest at 16.4% and 14.7%. Respective Class A vacancies in these submarkets were 12.6% and 13.9%. Notes Savills Studley, “Tenants looking for big blocks in both Westshore and Tampa’s CBD [Central Business District] have a dwindling number of options to pick from and the days of sub-$25.00 quality space

Special Real Estate Factors:

Office: “Every quarter brings news of businesses based on the East Coast or West Coast moving some or all of their operations to Tampa Bay,” states Savills Studley’s second quarter report on the local market. “Some companies are bringing back office and administrative positions that will do little to boost incomes, a few are adding higher paying professional and scientific jobs. Banking and financial services companies have generally struggled to achieve higher margins in this cycle. Some are shifting their back office and support operations to lower-cost markets such as Tampa. Banks and financial services companies based in the region have seen growth.”

“Given the tightening in the urban core,” notes this observer, “tenants will have to widen their search until new product is delivered.” That may take some time. Reis reports only one general purpose competitive office project under construction per the date of this report—the 68,000-square- foot mixed-use redevelopment by SoHo Capital LLC of the “historic” Armature Works Building. A completion date is not specified.

There is, however, one major project sitting somewhere on the horizon. “Excitement” is now “brewing” over Feldman Equities’ plans for the 52- story Riverwalk Tower on the downtown waterfront, states Savills Studley. The project would be “the first new multitenant office building in downtown Tampa in more than 20 years.” The mixed-use building will host 14 stories of office space along with 31 stories dedicated to luxury residential rentals, according to Tampa Bay Business Journal. Reis puts the planned office component at 205,000 square feet. Feldman Equities closed on the property in November 2015.

Rent growth has improved steadily over the past couple of years. At $22.60 psf and $18.25 psf, second quarter 2016 average asking and effective rates were up 1.4% and 1.5% year-to-date following gains of 2.5% and 2.7% through all of 2015. Gains for the latest quarter alone were 0.5% each. July followed with increases of 0.1%. The Class A mean asking price for the latest quarter was $25.61 psf, up 1.2% year-to-date following last year’s 2.5% rise.

With no new competitive space expected to deliver all told during 2016, the downward trend in vacancy, including Class A vacancy, should continue as absorption runs positive all told over the remainder of the year. Rent growth approaching 3.0%, best since 2007, is expected for the year.




An article published by Tampa Bay Business Journal more than a year ago brought into question the durability of the region’s robust development cycle and of the health of the market. Rising construction costs, resultant upward pressure on rents, and a supposed inability of demand to keep to pace with new supply, the vast majority of which belong to luxury projects, were cited at the time. Not all observers agreed, however.

As it turns out, the dissenters may have been closer to the mark, so far at any rate. More than a year later, the vacancy rate as calculated by Reis sat comfortably at just 4.4%. While up 20 basis points for the quarter and year-to-date, it was down 40 year-over-year and was down 50 since the end of 2014. New product, meanwhile, continued to come online. A total of 2,618 market-rate apartments, all Class A, completed construction all told last year. Net absorption for the year ran well ahead at 3,691 units with the Class A total counted at 2,830. The first half of 2016 followed with the delivery of 1,614 new units accompanied by net absorption at 999. Respective totals for the second quarter alone were 929 units in three projects and 659 units. Class A net absorption for the period, however, was 1,072. While demand, accordingly, has slipped below same-term new supply, the differences have not been sufficiently great to this point to alter the overall strong profile, which Reis expects will remain favorable.

If there is a chink in the armor, it might be this: Class A vacancy ended the latest quarter at 5.8%, up 60 basis points since year-end. Moreover, Class A vacancy in the Central Tampa submarket, the chief hotbed for development, ended the quarter at 10.8%. While slipping slightly in 2016 to date (due to a weak first quarter), rent growth should remain favorable this year. At $980 and $941 per month, second quarter asking and effective averages were up 1.5% and 1.4% year-to-date following gains of 4.8% and 5.0% all told last year. Gains for the latest quarter alone were 1.2% and 1.1%. The second quarter Class A asking average at $1,182 per month was up 1.8% year-to-date. While the Class A mean asking price for Central Tampa, at $1,589 per month, was up 2.1% year-to-date, it declined

Special Real Estate Factors: Continued

Apartment: “Four proposals were received for the surface lot at 405 E. Kennedy Boulevard, a 1- acre city block north of Jackson Street, east of Florida Avenue, south of Kennedy Boulevard, and west of Marion Street,” Tampa Bay Business Journal reported in September. Developers submitting proposals were Mill Creek Residential, HRI, and a team comprised of Development Services Group of Memphis and Tampa developers Framework Group LLC and Forge Capital Partners.

  • More. “‘These proposals reflect the increasing interest in Tampa’s urban core and the demand for a true live, work, and play environment,’” Tampa mayor Bob Buckhorn said in a statement, as cited. Adds the report, “The city has said its vision for the block is a ‘large, mixed-use development.’ The city considers this site ‘the most prime piece of real estate’ in its portfolio of downtown properties. ‘The city believes the market should decide on the mix of uses,’ according to an addendum to the RFP. ‘It is up to the developer to explain their mixed- use scenario in their proposal.’ ‘The city’s intent in the sale of the land is to encourage residential and or office and or hospitality and retail development on the site and to help stimulate the redevelopment of the downtown Tampa.’”
  •  The lack of new additions to supply and the flat absorption that followed for the market as a whole in July were accompanied by flat vacancy and gains of 0.5% for both mean rents.

Construction remains active; 3,288 market-rate units are expected to comprise the 2016 completion total with a large volume of new supply projected for 2017 as well. Indeed, Reis’s mid-September report on individual multifamily construction projects lists a combined total of 6,492 units under way. Of these, a combined total of 3,499 units (51.4% of the metro area unit total) belonged to the Central Tampa submarket led by the Harbour Island and Channel District areas. Pre-construction work commenced in July on the 22-story, 314-unit Channel Club apartment tower from developer Mercury Advisors, Tampa Bay Business Journal reported at the time. First to deliver in Central Tampa, due online this September, will be the five-story, 262-unit Novis Westshore project in the upscale Westshore neighborhood. Due online in Central Tampa in December are four projects with a combined total of 1,260 units. Prominent among these are the $44.5 million, 374-unit Crescent Westshore complex from Crescent Communities and the 22-story, 235- unit 500 Harbour Island from Gables Residential.

The year 2016’s surge in deliveries should leave net absorption for the year in arrears by about 500 units. Vacancy, nonetheless, should end the year at about 4.5%. Rent growth above 3.0% on average is expected. The core area Class A sector bears watching for its combination of high vacancy and heated development.


While retail real estate development in Tampa Bay, as in the nation at large, remains subdued in the post- recession period of expanding e-commerce, a couple of large projects recently were completed, are now under way, or are moving through the planning pipeline. The first phase of $35 million in infrastructure work for the largest, a massive $2 billion, 50-acre mixed-use commercial district from Strategic Property Partners planned for downtown Tampa, began in late August on Channelside Drive, according to the Business Journal. “Once all phases of the development are completed,” states the project website,


Special Real Estate Factors: Continued

Retail: While e-commerce is driving down conventional retail real estate development and, in some cases, may be driving up vacancy, restaurants in Tampa may be taking up some of the slack. “Floridians spend significantly more money on entertainment and eating out than the rest of the country—and that’s great news for commercial landlords in Tampa Bay,” the Business Journal noted in August. “Restaurants and entertainment concepts are increasingly taking up more space in retail centers as consumers choose online shopping over physical storefronts—for everything from apparel to groceries to cleaning supplies. Traditional retailers are taking up less space in shopping centers, but there are plenty of restaurants hungry for that real estate.”


“there will be up to 9.0 million square feet of new commercial, residential, educational, entertainment, cultural, and retail space.”

A total of 629,100 square feet of retail space of all types combined completed construction all told last year led by Simon Property Group’s 441,000-square-foot Tampa Premium Outlets in north suburban Lutz in Pasco County (outlet centers are one of the few retail development venues, along with mixed-use, to thrive in the post-recession e-commerce period). A sum of 242,400 square feet followed during the first half of 2016 in three projects led in size by a 152,000-square-foot freestanding Walmart Supercenter in Valrico, which delivered in March. Since mid- year, the 62,100-square-foot Rivercrest Commons neighborhood center came online in early September in Riverview.

Current development is similarly tilted in favor of large projects: 900,000 of the near-1.6 million square feet under construction per the date of this report belonged to another Simon outlet center—Cypress Creek Town Center in Wesley Chapel (also in Pasco County). The center broke ground in March 2015 for completion in March 2018. Wesley Chapel, warming up once again, was a hot area for retail and residential development prior to the recession. The other major project presently under way is the 425,300- square-foot Seminole City Center power center, a razing and redevelopment of the Seminole Mall in the town of Seminole (Pinellas County) from co-developers North American Development Group and Primerica Group One. The project’s website anticipates a 2016 opening. Large-scale retail development remains in planning phases for the Riverview-Gibsonton area on the east shore of Tampa Bay southeast of Tampa astride the I-75 corridor. Included is 1.0 million square feet of power center space at the Southshore Commons mixed-use development in Gibsonton.

The post-recession community-neighborhood shopping center market has been sluggish, but construction in this sector, encouraged by strong demand, has increased. The 9,000 square feet of such space that completed construction during 2015, the first addition made to this market since 2013, met with 267,000 square feet of net absorption. The first half of 2016 followed with the delivery of 91,000 square feet accompanied by net absorption at 60,000. Respective totals for the year, however, are projected at 362,000 and 342,000 square feet. Vacancy in this sector ended the second quarter at 10.8%, down 10 basis points for the period and up 30 year-to-date after a 70-basis-points drop in 2015. While negative absorption in July again raised the rate, a decline to 10.7% currently is projected for year-end.


Rents have grown stronger. At $15.36 psf and $13.50 psf, second quarter asking and effective averages were up 1.9% each year-to-date following increases of 3.1% and 3.4% last year, which more than doubled the increases seen in 2014. Gains for the second quarter alone were 0.6% apiece. Growth at about 3.5% is expected for the year as a whole. To that end, July recorded small gains.

At $25.36 psf, the mean second quarter asking lease rate for non-anchor power centers was up 0.8% for the period and was up 3.3% year-over- year. Quarter-end power center vacancy was low at 4.3%, up 50 basis points for the period but down 120 year-over-year.

As noted, Reis expects 2016 community-neighborhood center space net absorption to trail the year’s new supply by a modest volume. The vacancy rate should end the year below 11.0%. Rent growth above 3.0% is anticipated.

Prepared By Reis, Inc. Powered By Reis

Reis Reis Observer


September TAMPA

19, 2016

Published September 19, 2016

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