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Downtown Tampa Prepares for First Speculative-Build Office Tower in 25 Years

CoStar Market Insights: Area’s Available Office Space Has Dwindled in Historically Tight Market
September 10, 2018
Image credit: Cookfox Architects

Locally based developer Strategic Property Partners plans to begin construction on 1001 Water Street, the first of two 20-story office towers planned as part of the $3 billion Water Street Tampa renovation project. Totaling approximately 380,000 square feet, 1001 Water Street would be the first office tower built in Tampa’s central business district in more than 25 years.

Perhaps even more notable, this tower would be built on a speculative basis, providing available office space to a market that was quickly running out of options for prospective new tenants.

Fueled by robust office-using employment growth, Tampa’s office demand has surged with nearly 10 million square feet of net positive absorption over the past five years. Combined with a subdued pipeline over the past decade, the vacancy rate has steadily diminished and established an all-time low of 7.4 percent earlier this year.

Though there remains nearly 12 million square feet of available space across the Tampa metropolitan area, this is only about half of what was available at this time in 2013. Furthermore, corporate relocations are particularly difficult, as large blocks of available high-end office space are increasingly rare.

According to CoStar data, there are only two properties across the entire Tampa area that could meet a requirement for 100,000 square feet or more of 4- or 5-Star office space. In downtown Tampa, there are no properties that could satisfy such a requirement.

After nearly a decade of slumber, office construction has started to pick up. With over 1 million square feet of office space underway, the Tampa metropolitan area is poised for the largest increase of office inventory since 2009. But much of this space is build-to-suit, with only 13 percent of the current construction speculative.

That is all set to change if 1001 Water Street breaks ground as expected in the second quarter of 2019. While Strategic Property Partners is in active negotiations with future tenants, and has enlisted brokerage firm Jones Lang LaSalle to exclusively lease the space, they are prepared to begin the proposed 380,000-square-foot office tower on a completely speculative basis.

Furthermore, Strategic Property Partners plans to begin construction later this year on 180,000 square feet of loft-style office space in Sparkman Wharf, as well as an additional 500,000 square feet in a 20-story office tower known as 400 Channelside. The second tower’s ground-breaking will be contingent upon the successful lease-up of 1001 Water Street.

All told, there could be as much as 1 million square feet of available space added to downtown Tampa over the next few years. This would not only create some much-needed options for prospective office tenants, but could also position Tampa to land a potential corporate relocation or headquarters.

CoStar Market Insights provides a snapshot of recent real estate trends. The CoStar Market Analytics team monitors commercial and multifamily real estate across 390 metro areas, with a granular understanding of the projects, players and economic trends that move these markets.

Learn how CoStar Market Analytics can add to your market knowledge, helping to minimize risk and maximize returns.

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