Executives grapple with St. Pete’s tight office market • St Pete Catalyst

Vacancies continue to fall as office rental rates soar, creating a tighter market and leaving businesses looking for Class A space in St. Petersburg.

As businesses face limited options and a lack of confidence in signing long-term leases, property developers and economic development professionals are concerned about the perception of St. Petersburg.

“In St. Pete, most of the high-rise buildings are residential, which explains this market failure,” Jason Mathis, president of the St. Petersburg Downtown Partnership, said at a Thursday meeting of the utilities committee and infrastructures. Mathis was joined by Wendy Giffin of Cushman and Wakefield, Mack Feldman of Feldman Equities, which owns First Central Tower and Morgan Stanley Tower among other things, and JP DuBuque of the St. Petersburg Area Economic Development Corporation.

The discussion is an update to a presentation given last October on how St. Pete needs more high-end offices and new offices to compete with its peer cities.

Data on class B and class C office space in St. Petersburg. All information was presented at the meeting and collected from CoStar.

Data presented by CoStar shows that downtown Class B and C offices have seen stable vacancy rates since 2018; however, more and more companies want new Class A desktop products packed with amenities to the brim and surrounded by development.

St. Petersburg vacancy and rental rates for Class A offices.

“Normally you would see so much office development because there is clear demand, but residential is so lucrative,” Mathis said.

“For offices, you need a lease signed three years in advance and the companies in our market are not big enough to have this financing for three years. The other challenge is you don’t get the return as quickly,” he said. “Capital will always flow to areas with the least risk and most rewards, and right now that’s the market residential rate.”

“A new office space in St. Petersburg hasn’t been built in three decades,” said Giffin, one of the busiest real estate agents in the market and senior manager at Cushman and Wakefield.

The newest office product will be Orange Station at the Edge, which will have a mix of uses including 50,000 square feet for offices and living units – a tactic that could be replicated and provide a live working environment.

However, there is still concern that companies, especially those with a hybrid workforce, may not want to commit to a traditional lease.

“Feldman’s company was fine with building a specific space and taking on the risk of shorter-term leases,” Giffin said.

“They [companies relocating or expanding[ are bullish about coming here, but they are cautious. One of the niches I’ve seen filling is co-working,” Giffin said, explaining the new-to-market companies are initially attracted to co-working models due to the flexible leases, amenities offered, and the ability to have individual offices and yet have collaborative sections. 

“As they grow, we are now starting to see them launch from co-working into long-term leases,” Giffin said. She and DuBuque used Code-X and AdCitrus as examples of the trend. 

CitrusAd, an Australian-founded company that helps brands utilize first-party data to make online experiences more tailored to individual shopper habits, recently relocated from the Thrive co-working hub into a 10,000-square-foot office in the 200 Central building. Code-X, a cybersecurity company, is also now leasing 5,000 square feet of office space in one of Fieldman Equities’ buildings.  

DuBuque said he has 12 “hot” prospects of companies looking to locate in St. Petersburg. Of those 12, several are considering co-working space. He is working with Giffin on securing 50,000-square-foot office space for one prospect and said there are an additional 20 active prospects with two seeking a space in excess of 40,000 square feet. 

“For the last 25 years, the message coming out is that we don’t have any inventory. We are trying to change the perception, but we can’t do anything about the reality,” he said. “If some of the actions put forth here today on commercial spaces and partnerships with the government [in changing zoning, promoting office developments] are not taken, we will be a dormitory community of our brother opposite.

Giffin and others noted the great success Tampa has had with the rise of Water Street, a $3 billion, 56-acre mixed-use development backed by Cascade Investment, and Midtown, a $500 million mixed-use development. dollars in the Westshore area of ​​Tampa, which won major leases.

St. Petersburg vs. Tampa in office space vacancy and rental rates.

Mathis, who also suggested the city consider high-risk areas along the waterfront as possible office sites (under certain conditions), said Giffin, Feldman and others plan to meet with city staff. to browse the proposed changes in the city’s St. Pete 2050. vision plan that can potentially rezone areas and have programming to attract office development.

Data on submarkets in the region such as the Gateway and the Skyway Marina District can be found here.

Jose C. Birney