The Resurgence of Office Space in Tampa: What You Need to Know
Office spaces may be evolving, but they are far from extinct, especially in dynamic markets like Tampa. As organizations adapt to hybrid work models, the demand for high-quality office environments remains robust. Here’s a comprehensive look at the current trends in Tampa’s office rental market, including rental rates, lease structures, and critical considerations for potential tenants.
Current Office Rental Rates in Tampa
Rising Prices for Class A Properties
In Tampa, Class A office properties are witnessing a surge in rental rates. For instance, one property experienced a $1/square foot increase within just three weeks. The demand for premium office spaces reflects a broader trend known as the flight to quality, aimed at attracting and retaining top talent.
- Westshore and Downtown Tampa: Rental rates range from $45 to $49/square foot.
- New Developments (Midtown, SkyCenter, Water Street): Rates soar between $60 and $66/square foot.
These figures represent Full-Service lease rates, meaning all operating costs are rolled into the base rent.
Understanding Lease Structures
When considering office space, it’s essential to understand the different lease structures available:
Full-Service (FS) Lease
- All-Inclusive: Covers Base Rent, Operating Expenses, janitorial services, water, electricity, and more.
Modified Gross (MG) Lease
- Base Rent + Operating Expenses: The tenant pays for additional costs like janitorial services and HVAC maintenance.
Triple Net (NNN) Lease
- Base Rent Only: Tenants are responsible for all additional costs, including operating expenses, janitorial services, and maintenance.
Note: Internet and cabling are rarely included; tenants must arrange and pay for their own providers.
Operating Expenses and Base Year
When entering a Full-Service lease, tenants should note that operating expenses are typically based on a Base Year.
- If operating costs rise after the first year, you’ll receive a proportional bill for any increases.
- It’s wise to request a cap on controllable operating expenses to yield significant savings.
Usable Square Footage vs. Rentable Square Footage
In Tampa’s multi-tenant buildings, add-on factors adjust the quoted size of office spaces:
- Typical Add-On Factor: Ranges from 16% to 20%. For example, if you’re considering a space with 2,000 usable square feet, the total rentable square feet could amount to 2,380 (after applying a 19% add-on factor).
Key Definitions:
- RSF (Rentable Square Footage): Includes both usable space and shared/common areas.
- USF (Usable Square Footage): Refers only to the space you can exclusively use.
The Timeline for Securing Commercial Space
In today’s fast-paced world, potential tenants often underestimate the time involved in securing commercial real estate.
For Spaces Under 5,000 Square Feet:
- Streamlined Approach: Look for available spaces that closely fit your layout needs.
For Spaces Over 5,000 Square Feet:
Expect a 12-month timeline to navigate through various stages, including:
- Market tours.
- Requesting proposals (RFPs).
- Architectural test fits.
- Preliminary construction bids.
- Lease negotiations and finalization.
- Design drawings and permitting.
- Buildouts and furniture installation.
Additional Financial Considerations
Tax Reductions on Commercial Leases
Effective June 1st, Florida’s state sales tax on commercial rentals decreased by 2.5% as part of ongoing legislation to phase it out. Current rates:
- Hillsborough County: 3.5%
- Pinellas County: 3.0%
Document Everything in Writing
It’s crucial to secure all negotiated terms in writing to protect your interests. Even verbal agreements should be documented to avoid misunderstandings later in the process.
Conclusion
Understanding the nuances of leasing office space in Tampa can provide significant advantages. By being informed about rental rates, lease structures, and operational practices, tenants can make strategic decisions that align with their business goals. Ensure that every detail is documented, remain aware of the evolving market, and leverage available resources to secure the ideal office space.
For more information on commercial leasing trends, check out Colliers and Tampa Bay’s commercial real estate insights.