Q1 Office Segment Sarasota and Manatee Markets

In the first quarter of 2024, the Sarasota and Manatee office markets demonstrated resilience amid evolving economic conditions. Sarasota maintained a low vacancy rate of 4.5%, despite experiencing four consecutive quarters of negative absorption totaling -130,000 square feet over the past year. This stability is attributed to minimal new office construction, with only 120,000 square feet delivered during the same period .

Average asking rents in Sarasota hovered around $29.00 per square foot, reflecting a deceleration in rent growth to 4.0% as of Q2 2024. The average sale price for office properties stood at approximately $184 per square foot, indicating steady investor interest . Capitalization rates in the region were estimated at 9.3%, slightly higher than the three-year average of 8.8%, suggesting a cautious yet optimistic investment climate.

Notable transactions in the area included the sale of a 28,000-square-foot medical office building in Sarasota for $5.6 million, a 35,000-square-foot Class B office property in Bradenton for $6.3 million, and a 22,000-square-foot professional office center in Lakewood Ranch for $4.4 million. These sales underscore the continued demand for well-located office assets in the region.

Overall, the Sarasota and Manatee office markets in Q1 2024 exhibited strong fundamentals, characterized by low vacancy rates, stable rental growth, and active investment activity, positioning the region favorably for sustained growth in the commercial real estate sector.

Office Sector Performing Well (Despite Headwinds)

Market Insights & Trends

Welcome to the quarterly update on the Tampa Bay office market. As we close out 2024, we analyze key performance indicators shaping the region's office sector. From declining vacancy rates to investment trends, here’s what you need to know.

Vacancy Rates: A Positive Shift

The Tampa Bay office market concluded 2024 with an overall vacancy rate of 20.0%, marking a 120 basis point decrease year-over-year and reaching the lowest level since Q2 2022. This decline indicates a stronger leasing environment and improving market stability.

Lease Concessions Remain Competitive

Effective lease rates—actual rents compared to asking rates—stood at 64% in Q4 2024. In this competitive landscape, landlords continue offering rent discounts, improvement allowances, and incentives to attract tenants.

Office Absorption Holds Steady

The market’s net office absorption remained in the 4% range for the past year, signaling steady leasing activity. This indicates that while challenges remain, businesses continue to lease office space at a measured pace.

Time on Market: Extended Leasing Periods

The average time to lease vacant office spaces in Tampa Bay is 250–300 days. This prolonged leasing cycle suggests that while demand is stable, tenants are taking longer to finalize space decisions.

CAP Rates Offer Investment Potential

The average CAP rate for office sales in Q4 2024 was 6.25%, reflecting investor expectations for returns on office properties. Despite evolving market conditions, office investments remain an attractive asset class in the region.

Sales to List Price Declines

The sales-to-list price ratio, which had been averaging 5.5% earlier in 2024, declined in Q4, suggesting that sellers are adjusting pricing expectations and accepting lower offers to close deals.

Employment Trends Strengthen Market Outlook

Tampa Bay’s employment landscape remains a bright spot, with local unemployment at 3.6%, outperforming the U.S. national average of 4.2%. A strong job market could fuel further office demand as businesses expand and hire more employees.

Looking Ahead: What’s Next for Tampa Bay’s Office Market?

While vacancy rates are improving, the office market continues to adjust to new tenant demands and evolving workplace strategies. Investors and landlords should remain adaptable, focusing on creative leasing structures and property enhancements to attract tenants.

Stay tuned for our next quarterly update, and reach out to David Kinnard for expert insights into leasing, acquisitions, and investment strategies.