Tampa, FL, which was hurt as severely as any U.S. metro by job losses and the housing market collapse in the wake of the Great Recession, might not have appeared on the radar of most investors looking to buy a large corporate office campus, much less a property that includes a significant speculative development play.
After recording a 10-year low office vacancy rate of 8.2% in 2007, the Tampa-St. Petersburg metro’s office vacancy rate shot up to 14% by early 2010. Housing prices plummeted by nearly 46% and the area lost nearly 141,000 non-farm jobs.
But after a slow and gradual economic recovery, Tampa’s office vacancy rate could finally slip back into single digits in the first quarter of 2016 for the first time in eight years, according to CoStar data. With virtually no new buildings delivered during that time, large blocks of available office space are in increasingly limited supply. The favorable market conditions was a major reason cited by the principals of Vision Properties, a Mountain Lakes, NJ-based commercial real estate firm, which acquired its first Tampa property, a five-building, 573,053-square-foot master-planned suburban corporate office campus along Henderson Road north of Tampa International Airport.
Vision Properties paid more than $100 million for the Renaissance Park property, sold as part of the disposition of non-core assets and exit from the Tampa market by Malvern, PA-based Liberty Property Trust (NYSE: LPT), which is also exiting South Florida and several other markets.
According to the buyer, spec office development may be in the property’s future. The 71-acre campus includes a permitted development pad for construction of an additional 111,600-square-foot building. With a dearth of large blocks of available space for large tenants in the densely populated Tampa suburbs, Vision Properties’ founder, managing partner and chief operating officer Fred Arena expects to break ground on a new building within the next 12 months.
“We would be willing to break ground on Building 6 on spec, given our confidence in the Tampa market,” Arena tells CoStar.
Will Bertolero, vice president of asset management for Vision Properties, said he has observed an uptick in suburban office construction in the company’s markets, mostly driven by the need for large contiguous space. Vision currently manages a 5 million-square-foot office portfolio with buildings in Charlotte, NC; East Rutherford and Basking Ridge, NJ, and Atlanta.
“In a lot of markets we operate in, we are seeing build-to-suit construction activity being driven by corporate relocations,” Bertolero said.
Development is clearly a key part of the play for Vision in the Renaissance Park acquisition. Like other former housing bust markets in the South such as Atlanta, Miami and Raleigh, Tampa has seen office-using employment growth and rising occupancy rates. Demand growth in Tampa’s office market has outperformed other office markets in recent quarters through a combination of job growth, robust net absorption, tax incentives and lower costs of doing business.
“Those metrics played a role in our decision,” confirmed Arena. “Over the past 36 months, there has been a lot of large tenant activity in Tampa.”
The Vision Properties executives said they’ve already responded to several RFPs and preliminary inquiries on the property, where the existing buildings are currently 100% leased.