Tampa Reached Record Low Vacancy Rate Last Year, Tight Office Market Projected in 2020
Office Construction Returned in a Big Way But Little Impact Expected This Year

By Brian Alford
CoStar Group
Published: Feb 13, 2020

In 2019, average vacancy rates in the Tampa office market fell to 7.4% in the fourth quarter, the lowest mark ever recorded by CoStar. While office demand remained quite high, the market continued to benefit from a severely limited construction pipeline.

However, office starts exploded in 2019, with nearly 2 million square feet underway at the end of the year. In addition to the first office high-rise groundbreaking in 25 years, the roughly 400,000-square-foot 1001 Water St. building, Tampa has numerous high-profile office projects under construction, including Heights Union, SkyCenter One and Midtown Tampa.

Even though this new supply should provide relief to a historically tight market, the majority of space underway is still at least a year from completion. Office demand, as measured by office-using employment and leasing volume numbers, remains high. With leasing volume accelerating in a tight market, Tampa appears to have significant pent-up office demand. The low vacancy rate environment is likely to persist throughout 2020.

Annual rent growth continues to be a bright spot for the market. Tampa was once again one of the strongest office rent growth regions in the nation. It has now ranked in the top 10 office rent growth markets for the past five years. The strongest areas for rent growth are the core office nodes of Westshore, South Tampa and downtown Tampa.

Investors continued to target the Tampa office market, with 2019 posting sales volume over $1 billion for a sixth straight year. Liquidity remained elevated, with the total number of transactions in-line with the average over that six-year stretch.

Market pricing reached record highs, breaking $180 per square foot for the first time on record. Market capitalization rates have essentially held flat for the past four years.