In downtown St. Pete, a fallen construction crane will mean an even tighter office market
By Ashley Gurbal Kritzer
Tampa Bay Business Journal
Published: Oct 17, 2024

Long before Hurricane Milton's 100 mph winds sent a construction crane crashing into a downtown St. Petersburg office building, large contiguous blocks of office space were difficult to come by in the Sunshine City.

The crane, which fell from the construction site of the Residences at 400 Central onto 490 First Ave. S, took out 12.5% of the office market in St. Pete's central business district. With 490 First offline, there are now four multitenant buildings over 200,000 square feet in the CBD, according to the St. Petersburg Downtown Partnership.

St. Pete's downtown office market has been tight for years, driven by a combination of no new construction and demand from companies who want to plant a flag in a vibrant urban area. A speculative multitenant office building — basically unheard of in most major metros across the U.S. — is in the works at The Central, a mixed-use development in the downtown-adjacent Edge district. At the end of the third quarter, the 1.9-million-square-foot downtown office market had a direct vacancy rate of 10.5%, according to CBRE Group Inc.

The fallout from the toppled crane is two-pronged: It takes a 239,537-square-foot office building offline for the foreseeable future. It also sends the tenants who were leasing space in 490 South back out into the market to look for space, possibly on a temporary basis. The complex at 490 First consists of three buildings that were connected over the years. The middle building, which took most of the damage, was built in 1924. The ones to the west and east were built in 1968 and 1988, respectively.

Tenants in the building include law firm Johnson Pope, which has signage on the building, as well as L3Harris Technologies and the Tampa Bay Times. The Times leases 120,000 square feet in the building, though about 70,000 of that is up for lease or sublease, according to CoStar Group Inc.

The displaced tenants from 490 First seeking new space could create a challenge for other landlords, said Wendy Giffin, executive director at Cushman and Wakefield Inc.

“The challenging part of that for a landlord is that they may be in negotiations with prospects for standard lease terms of five, seven or 10 years,” Giffin said. “[Now] you have a tenant in dire need of space immediately.”

The future of 490 First depends on the extent of the damage, which is still being assessed. If the damage is severe enough, it could be demolished. There are also individual casualty clauses in each tenant's lease to consider. Those clauses could allow for anything from rent abatement to lease termination, depending on what was negotiated.

“The developer has to decide whether or not it makes sense financially to repair the building or to go another route,” said Mack Feldman, vice president of asset management at Feldman Equities. “It could be some hybrid where some portion of the building is retained.”

One option for displaced tenants is St. Pete's Gateway market, which CBRE says has a direct vacancy rate of over 20%. But Giffin said that market could become more competitive in Milton's wake, as there are other buildings that may be closed for extended periods of time due to hurricane damage, though she declined to disclose specific properties.

Dallas-based Lincoln Property Co., which acquired 490 First in 2018, said there is no time frame for removing the crane. Lincoln's Tampa Bay market office is located at 490 First.

"Our team is coordinating with its team of engineers and construction experts to ensure that a full and careful assessment of our building and the resulting damage from the crane of the neighboring development is done before removal begins," Lincoln said in a statement.