Tampa's Robust Economy
Strengthens Real-Estate Market

Stretched around a bay midway up Florida's west coast, the Tampa-St. Petersburg region has dodged hurricane after hurricane in recent years, leaving some locals to credit a legendary Indian blessing for their meteorological good fortune. A similarly charmed economic mix of above-average job and population growth has strengthened the region's moderately priced real-estate market.

"It's a very impressive recipe for success," said Patrick Berman, director of retail brokerage at Cushman & Wakefield's Tampa branch. The area's unemployment rate fell to 3.6% in September, tying for the third-lowest level of any major metropolitan area after Washington, D.C., and Orlando, Fla., according to the Bureau of Labor Statistics. Drivers include professional and business services and tourism.

The strengthening Tampa market has helped fill the buildings in the approximately 800,000-square-foot Highwoods Preserve office complex.

While the robust economy has benefited nearly every sector of the region's real-estate market, the influx of new residents has particularly boosted demand for housing. Median home prices rose 27.8% in the third quarter to $213,500 from the year-earlier period, nearly double the national gain of 14.7% though prices are still relatively affordable at just below the national median of $215,900. Rising demand for apartments, slowing new apartment construction and the loss of rental units to condominium conversions pulled apartment vacancies down nearly three percentage points to 5.9% in the third quarter from a year earlier and rental rates edged up, said Property & Portfolio Research Inc., a Boston-based real-estate consulting firm.

The Tampa-St. Petersburg region, long dominated by single-family homes, is seeing a surge in condominium development. New condominium completions were expected to rise to 3,500 units this year from 1,700 in 2004 and an additional 4,000 are expected next year, according to Torto Wheaton Research. While there could still be a condo glut in Tampa, the new construction is nothing compared with hot condo markets such as Miami, where 10,600 units are expected to be completed next year, up from 7,000 this year. One of the bigger name projects planned in the area is the 52-story Trump Tower Tampa with units originally priced from $700,000 up to $6 million.

The improved economy is making life easier for office landlords. Office vacancies fell a full percentage point in the third quarter from a year earlier while rising demand combined with as yet restrained new supply is expected to reverse the downward-trending rents, PPR said.

Raleigh-based Highwoods Properties Inc. saw the shift in the market first-hand. It struggled to fill its approximately 800,000-square-foot Highwoods Preserve office complex in the highway I-75 corridor after the property was left vacant following WorldCom Inc.'s bankruptcy filing in 2002. This month Highwoods announced the property's space was either fully leased or sold to owner-occupants, including Depository Trust & Clearing Corp., which purchased a building there to house an operations center expected to employ about 500 people, said Stuart Z. Goldstein, a company spokesman.

Highwoods is turning its attention again to new construction including plans for the Bay Center office complex in the West Shore area, which commanded the region's highest rents in the second quarter.

Ed Fritsch, Highwoods' chief executive, also said he doesn't expect the heightened awareness of hurricanes to damp demand for space in the Tampa area. "Is it on people's minds? Yes," Mr. Fritsch said. "Is Tampa going to go dark because of the recent hurricane trend? I don't think so."

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