A showdown of downtowns
St. Petersburg office space is nearly full while there's plenty of room in Tampa. Experts say quality of life issues favor the west side of the bay. At least this year.
By JAMES THORNER
Published January 20, 2006
TAMPA - You know the stereotype: Everyone goes to Tampa to work and to St. Petersburg to retire.
Turns out downtown St. Petersburg is trouncing downtown Tampa as a business location in one key category: Its office space is nearly full while Tampa is struggling to find tenants.
Over the past year, St. Petersburg's office vacancy rate has sharply improved from about 10 percent to 5 percent, a near record low. Downtown Tampa is wallowing in available space with a vacancy rate pushing 18 percent.
Downtown St. Petersburg's biggest office building, the 27-story Bank of America Tower, collects rents unimaginable in the urban center across the bay.
The market's so tight in St. Petersburg that if you need large office space you might have to build it yourself. That's what Progress Energy is doing with its high-rise under construction at 299 First Ave. N.
"The stigma of St. Pete as a retirement community is just so long gone," St. Petersburg economic development director David Goodwin said. "That old stereotype is ancient history. We want that thing buried."
Meanwhile, central Tampa's office vacancy rate has improved just a hair, from 19 percent to 18 percent.
But it remains strapped with excess office space matched by few other markets in the six-county Tampa Bay region. About 1.2-million square feet of office is available.
What's right with St. Petersburg's downtown is what's wrong with Tampa's, said Thomas Kennedy, a commercial real estate expert with Grubb & Ellis.
In a nutshell: Quality of life and traffic.
"They're both beautiful cities, but I think the trouble with Tampa is that driving times are too high," Kennedy said Thursday.
Kennedy's firm provided the two-city comparison, but information from competing real estate companies shows a similar pattern.
St. Petersburg has benefitted from something long considered its weak point: A plethora of housing near downtown.
The wealth of homes in neighborhoods near downtown has turned out to be a plus in an era of traffic jams and $2.50-per-gallon gasoline.
Interstate 275's path through St. Petersburg suffers from less gridlock than when the interstate wends by downtown Tampa near the Malfunction Junction with Interstate 4.
Then there's BayWalk. The restaurant, shopping and movie theater complex occupies a block of downtown St. Petersburg.
"BayWalk made a big difference, brought a lot of people into St. Petersburg," Kennedy said at a meeting at the Tampa Westshore Marriott, where his company introduced its 2006 real estate forecast.
But it's unwise to discount downtown Tampa based on comparisons that change from year to year, Kennedy cautioned.
Tampa competes not just with St. Petersburg, but with itself. The central business district is one of several big employment centers in Hillsborough County that include the West Shore district and New Tampa.
Downtown Tampa's office space totals also dwarf St. Petersburg's: 6.4-million square feet in Tampa versus 2.5-million square feet in St. Petersburg.
Nevertheless, traffic remains a downer for downtown Tampa.
The commute can be a white-knuckle event of inexplicable traffic jams.
Bloated commutes between the suburbs and Tampa have helped spur office employment in New Tampa, where MetLife insurance relocated to buildings vacated by the bankrupt WorldCom a few years ago.
Kennedy's firm predicts 2006 will be a good one for peddlers of office space. The combined regional vacancy rate is about 11.6 percent, considered a "landlord's market" in which rents will rise.
And things are looking up for downtown Tampa. Its deficit of homes relative to St. Petersburg is due to improve with the 1,600 condominium units and apartments under construction.
When people can live where they work, central Tampa's office scene is likely to surge. "We think that's going to be a big factor in the longer term," Kennedy said.
On the other hand, downtown St. Petersburg developers won't find it easy to erect new buildings despite strong market conditions.
Several projects are on the books. The city's so-called Tropicana Block bounded by Central Avenue, First Avenue N, First Street and Second Street is ripe for office development.
But construction costs are so high, developers would need to charge rents of $27 to $30 per square foot to make a buck. St. Petersburg's average lease stands at about $21 per square foot for higher-end offices.
That has city leaders concerned.
"Until they can get that higher rent, they aren't going to build," Goodwin said.
But for the moment, St. Petersburg can bask in its success relative to its neighbor on the other side of the bay.
"I often describe downtown St. Pete as a 25-year overnight success," Mayor Rick Baker said.
James Thorner can be reached at email@example.com or 813 226-3313.