As towers lease up, office space in downtown St. Pete is harder to come by
By Ashley Gurbal Kritzer
Tampa Bay Business Journal
Published: Nov 17, 2015

St. Petersburg's urban waterfront, long known for its restaurants, nightlife and arts scene, is moving beyond an entertainment district and reeling in corporate users.

The Morgan Stanley Tower, which Feldman Equities Inc. and Tower Realty Partners acquired two years, is now 100 percent occupied, up from 65 percent when the partnership closed on the building. Earlier this year, the group's nearby City Center building also achieved 100 percent occupancy. "Of course one of the most important amenities has been built into the deal - the incredible downtown St. Petersburg location," Larry Feldman, CEO of Feldman Equities Inc., said in a statement.

Melanie Jackson, who represented Paradise Advertising in its lease in the Morgan Stanley Tower, said most of the companies she works with are hoping the downtown St. Pete location will be a boon to recruiting.

"I think downtown is a huge asset to businesses, especially the tech businesses that are looking to be in a place where they can draw a lot of millennials," said Jackson, a director of office services with Colliers International Tampa Bay.

Compared to other local business districts, downtown St. Pete has a small inventory of office space, at 3.08 million square feet, according to Colliers. By comparison, downtown Tampa has 6.4 million square feet; Westshore has more than 12 million square feet.

And St. Pete's space is dwindling. The vacancy rate in the third quarter was just 7 percent, according to Colliers data - and few contiguous big blocks of space remain. Jackson said that's lower than Gateway, Westshore or downtown Tampa.

"I haven't seen it that low ever," she said. "It's really impressive."

That could put at least one developer in prime position: Kucera Properties, which is laying the groundwork for a new mixed-use tower adjacent to Priatek Plaza, on a vacant site bordered by Third Street to the west, Central Avenue to the north and First Avenue South to the south.

Kucera retained Tim Callahan of Cushman & Wakefield of Florida Inc. to market the property. Once it secures an anchor tenant - one or two companies committing to 250,000 to 300,000 square feet - it will break ground, and construction of that tower is expected to take 18 months.

That may require a shift in mindset among companies wanting to be in downtown St. Pete, Jackson said - the majority she works with will begin looking for space about six months before their leases expire. But with rents rising throughout downtown St. Pete - some floors in prime properties are commanding $26 per square foot - new construction could be profitable in the not-too-distant future.

"[Those rents] are higher than Gateway - it's reaching Westshore rents," Jackson said. "It's on par with downtown Tampa. It's pretty impressive and to make that leap into build-to-suit rate, in the low $30s, is not too much further off."

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