Flurry of office tower sales signifies downtown Tampa's 'time has come'
By Ashley Gurbal Kritzer
Tampa Bay Business Journal
Published: Dec 1, 2014

It's been a banner year for downtown Tampa's office market.

Three towers have sold - Fifth Third Center sold for $47 million, Tampa City Center fetched $128 million and at the end of November, the Wells Fargo Center traded for $78 million.

Driving those deals is a multifaceted dynamic, investment brokers say. Higher prices and lower returns in bigger cities have created more investor in interest in secondary markets like Tampa, where investors still see potential for upside. But investors have also come to believe in the market itself, besides how it compares to its larger counterparts.

"There's no way anybody plunks down $70 million if they don't believe in the market," said Mike Davis, executive director of the capital markets group at Cushman & Wakefield of Florida Inc. "It's not just running from other markets.

There's increased demand for quality product in [central business districts] nationally, and Tampa has been a slower market to recover than others in the state in terms of the CBD. I think its time has come, and investors want to get out of ahead that."

While the aggregate sales numbers are impressive, the pricing per square foot on each of the towers is well below what it would cost to build them - giving the investors who bought them a sense of security that it will be years before they have to compete with a brand new building in the urban core.

"It's very difficult to justify a new tower today," Davis said, "although we are certainly seeing real rent growth and real absorption."

The new buyers in the market will help drive that rent growth further, said Paul Carr, senior managing director with Cassidy Turley in Tampa. New owners almost always raise rents in a building, Carr said, in order to get returns they based their offer on - and that means they're confident in the city's future.

"Each buyer has been an out-of-town group," he said, "so that's a testament to the fact that Tampa continues to attract new sources of capital."

Davis also said that the way investors view downtown Tampa has changed - depending on the building, some deals are seen as far less risky than they once were. The more stable investors view a property, the more they're willing to pay, because it represents a steady income flow.

"The profile of downtown has improved in the minds of investors," Davis said.

Ashley Gurbal Kritzer is a reporter for the Tampa Bay Business Journal.