What the marquee Tampa office buildings up for sale mean for the market
By Ashley Gurbal Kritzer
Tampa Bay Business Journal
Published: Jul 15, 2014

If and when the marquee Tampa office buildings on the market sell, it will signal strong investor confidence in the Tampa economy and likely mean higher rents for office tenants in those buildings.

"You're not buying if you think things are going to get worse,” said Mike Davis, executive director of the capital markets group at Cushman & Wakefield of Florida Inc. "People are making the bet on Tampa.”

Corporate Center at International Plaza and Hidden River Corporate Center are on the market, as the Tampa Bay Business Journal first reported July 15. They join downtown office towers Tampa City Center and Fifth Third Center, which are also up for sale.

The suburban properties, however, are part of a giant, multi-city portfolio that HFF LP is marketing to a very small, very exclusive group of potential buyers. Because of the size of the portfolio, the new buyer could sell off some of the assets - including those in Tampa, which is viewed by some institutional investors as a small secondary or large tertiary market, said Clay Wommack, a vice president with CBRE Group Inc.

"With a large sale like that, it's anticipated some [properties] will immediately be flipped,” Wommack said.

"There's always the uncertainty of what they will do, and it takes about a year for new ownership to get their hands around what they just bought and determine what to do with it.”

But with all of the properties, tenants are likely to see higher rental rates, Davis said, as the properties on the market are among the nicest in the city - and the prices will be high enough to require raising the rent, for buyers to get the returns they're projecting.

And while it's not necessarily good news for office tenants, it will be a boon to the commercial real estate market, pushing prices closer to levels that will justify new construction, Davis said.

The smaller the gap between existing office space and the price to rent newly built space, the more likely it is that a company would be willing to pay more to have, as Davis puts it "the latest and greatest” in corporate real estate. Top-tier suburban office space rents for about $31 a square foot; Downtown's top rates are around $29 or $30 a square foot, Davis said, and closer to $35 a square foot is necessary to justify new construction.

"We're not quite there yet,” he said. "But we're beginning to knock on the door.”

Ashley Kritzer is a reporter for the Tampa Bay Business Journal.