Tampa Capital Markets Report

How is Tampa Performing?

Tampa’s commercial real estate market is thriving. The market has experienced steady growth in recent years, with increasing demand for office, industrial, and retail spaces. The city’s diverse economy, favorable business environment, and growing population were seen as key factors driving the market’s strength. Investors are attracted to Tampa’s strong multifamily fundamentals, with large deals frequently increasing over the last 12 months. Hotels continue to experience robust sales in early 2023, maintaining the strong momentum from the previous two years’ record volumes. Retail and industrial investors are turning their attention to secondary markets, such as Tampa and Orlando, searching for higher yields that are becoming more difficult to achieve elsewhere.

Multifamily

Over the past two years, Tampa has experienced robust activity in apartment investment. As of Q1 2023, total sales volume over the past 12 months reached $3.5 billion, accounting for roughly two percent of all multifamily sales volume, according to CoStar Group. Investors are showing great interest in Tampa’s multifamily market, with the frequency of large deals increasing over the past year. The past 12 months have seen approximately a dozen deals over $100 million, which is significantly higher than the five-year average. A noteworthy transaction was the sale of the 260-unit property called The Boulevard, located at 2098 Seminole Blvd, for $76.7 million in January 2023, selling for $295,000 per unit.

Hospitality

Hotel sales continue to be strong, even after two years of high transaction volume in the Tampa market. In Q1 2023, two upscale hotels were sold, starting with the Doubletree by Hilton Rocky Point Waterfront in January for $75.9 million. The hotel has 291 rooms and was sold for $261,000 per key. The second sale was in March 2023 for the upscale AC Hotel St. Petersburg, which opened in February and was sold for $59.6 million or $347,000 per key. The hotel is part of a 36-story mixed-use tower called Ascent St. Petersburg that includes 357 apartments.

Tampa’s strong growth in ADR and RevPAR over the past two years has attracted the attention of investors. In Q4 2022, the market price per room hit a new record of $188,000 and again in Q1 2023 at $197,000. However, the price per room is projected to decline in Q2 and Q3 2023 due to a predicted economic slowdown and the potential for a mild recession. Market cap rates have been decreasing for more than 10 years and are expected to level off near the current rate of approximately 7.3 percent.

Retail

Retail investment sales have totaled approximately $1.4 billion in transaction volume over the past year. A significant portion of the investment activity occurred in Q1 2022 when almost $600 million worth of retail properties were sold. This quarter was the second highest recorded, with the highest in Q4 2021. This significant increase in investor activity is evident in the 10-year annual average transaction volume of roughly $1.1 billion.

The rise in competition for assets is causing an increase in overall retail pricing, with the average price per square foot growing by 10 percent annually and by almost 15 percent in the last two years. During 2022, portfolio sales dominated the activity, although there were a few notable deals. One of the most significant sales occurred in April 2022, a freestanding retail building covering 39,700 square feet. The building was sold to a private investor for $24.6 million. This sale was part of a portfolio sale of two buildings worth $44.5 million, including a strip center covering 27,300 square feet.

Industrial

Investors are aggressively looking for well-located distribution properties in Tampa, and sales activity has been robust over the last year, totaling $1.4 billion. With approximately $550 million in trades, Q4 2022 was the second-best quarterly performance on record. High demand pushes incremental price rises, and investors are eager to explore alternatives while finding properties in infill regions is getting more difficult. One of the most notable transactions included the recently constructed Home Depot distribution center in the Southeast Hillsborough submarket, which occupies 493,204 square feet and was purchased for $103 million, or $208 per square foot.

Office

Investors are still interested in office investments in Tampa despite rising interest rates that may reduce initial returns. The city has seen a sales volume of around $1.5 billion in the past year, with two strong quarters accounting for almost $900 million. Several of these transactions occurred in the city’s submarkets, including downtown Tampa, Northeast and East Tampa, North and South Pinellas, and Westshore. 2022 was the strongest for office sales volume in the past decade, with seven transactions of over $50 million.