At Low Tide
by Laurel S. McQueen

TA QUIET FIRST QUARTER IN THE REGION’S OFFICE MARKET turned into a rout the second quarter. For the second time in two decades, quarterly leasing activity recorded a net loss for the seven counties surveyed. The region’s 17.9-per-cent vacancy rate is the highest since 1997, the year the MADDUX REPORT began tracking that rate. Hillsborough County’s vacancy rate of 19.4 percent has not been this high since 1993 (Highwoods Preserve I-V, the former 816,052-sf Intermedia property, accounts for 2.9 points of that rate).

This quarter’s regionwide loss of 254,505 sf far exceeds the only other quarterly loss reported by the MADDUX REPORT – 20,184 sf the first quarter 2002. Of this quarter’s loss, 91 per-cent occurred in Hillsborough. As a result, the county’s 12- month absorption rate plunged by 82 percent.

Tampa’s Westshore market was the big loser, its gains over the last two quarters wiped out. Six major buildings reported large losses totaling 201,000 sf. Westshore’s vacancy rate jumped 2.4 points. Crescent Resources has begun construction on the 287,000-sf Corporate Center III in Westshore. This is not reflected in this issue’s Office Guide; we got the news too late. It is reflected in the chart below.

Downtown Tampa now has experienced a net leasing loss in six of the last seven quarters. The last time downtown’s annual absorption rate was positive was in third quarter 2001. Since then, the vacancy rate has climbed by 4.8 points.

In Hillsborough, the stock of sublease space increased 6.4 percent to 308,508 sf. Most is split between Westshore (38 percent) and I-75 (41 percent). If this empty space were included, the county’s vacancy rate would be 20.5 percent.

Pinellas County’s quarterly leasing activity was again a wash. Currently Pinellas leads the region in annual absorption with 178,595 sf, most of that occurring in the Gateway area. Pinellas’ stock of sublease space rose by a third this quarter to 173,390 sf, which if included, would raise the county’s vacancy rate to 17.2 percent. Nearly half of this space is in downtown St. Petersburg. Meantime, downtown’s vacancy rate dropped 2.8 points while the annual absorption rate more than doubled. More importantly, 56,600 sf of sublease space filled up.

Bayside reported its best quarter since the end of 2001 and saw its vacancy rate drop four points. The annual absorption rate moved up 62 percent. Downtown Clearwater had a quarterly loss of 10,775 sf. Palm Harbor and north took a big hit this quarter as the entire Highland Commons building became available, pushing the submarket’s net loss to 61,150 sf.

Sarasota County leasing returned to a more normal range while the annual absorption figure moved up 74 percent. Downtown Sarasota broke its eight-quarter trend of net losses, recording 1,200 sf of positive absorption. Suburban Sarasota dropped into the single-digit vacancy range at 9.1 percent, seeing 24,020 sf of net absorption. The small Venice market is 45.4 percent vacant.

Polk was hit as two buildings totaling 49,000 sf came available at Lakeland Airside Center. The vacancy rate climbed three points. Manatee County’s activity was almost nil, while Pasco dropped back to a net loss.

Office buildings which have been fully leased for two or more quarters
do not appear in the survey charts. All office buildings continue to be updated in the database each quarter. Previous quarterly data is revised as new information is received. Survey charts may include sub-lease space, which is not included in analysis numbers. For questions regarding the survey, call the MADDUX REPORT research department at 727/321-3225 or email MADDUXResearch@AOL.com.