East Tampa office space attracts institutional buyer

BUYER: Prudential Real Estate Investors, Portland, Ore.
SELLER: BRE/COH FL LLC
PROPERTY: 10150, 10210 and 10401 Highland Manor Drive and 4041 and 4042 Park Oaks Blvd., Tampa
PRICE: $111 million
PREVIOUS PRICE: $58.14 million and $16.69 million, December 2011

PLANS, DESCRIPTION: In one of the largest office portfolio sales this year, Prudential Real Estate Investors purchased five buildings in Highland Oaks office park for $111 million.

The 575,852 square feet of space sold for the equivalent of $193 a square foot. According to Costar, $119 per square foot is the average price for office space in the Tampa market.

The Highland Oaks office complex is home to a total of eight office buildings, including three owned and occupied by J.P. Morgan Chase. The park also houses a 150-room Hilton Garden Hotel.

The property is currently 96% occupied by 46 tenants, including Cognizant, McDonald's, Mosaic, ConAgra, The J.M. Smucker Co. and John Deere.

Amy Julian, Christian Lee and Dale Peterson of CBRE arranged the sale. Other members of the marketing team include Charles Foschini, Jose Lobon and Chris Apone. CBRE, which has handled leasing for the office park since June 2012, will continue to serve as the exclusive leasing agent for the five buildings through its first vice president in brokerage services, Roxanne Kemph.

A statement from Prudential Real Estate Investors sent to the Business Observer says the company purchased the buildings on behalf of institutional investors: “The acquisition capitalizes on the improving office market fundamentals in East Tampa and is consistent with PREI's strategy to pursue office properties below replacement cost. In addition, the office park's prominent location, combined with the substantial recent upgrades and high-quality tenants, made Highland Oaks an ideal addition to our investors' portfolio.”

Peterson says a sizable part of the reason for the large sales price stemmed from the quality of the asset.

“Highland Oaks is one of the best or the best office park in the entire Tampa market,” he says. “Duke Realty first started it in 1999 and did it in phases until 2008. It is a very high quality park setting with excellent finishes....”

But one of the biggest benefits for Highland Oaks and the East Tampa area is its access to major interstates. The property is located off Interstate 75 just south of the Interstate 4 interchange, which gives it access to two of the biggest transportation corridors in the region. Peterson says that 2 million people can get to the Highland Oaks property within 45 minutes.

Another factor driving interest to the East Tampa market, says Mary Clare Codd, managing director of office and industrial services for Colliers International, is the lack of available large-scale office property throughout Tampa Bay.

“The market is really tightening up,” she says, adding that Johnson & Johnson is occupying 110,000 square feet and Citigroup has leased 85,000 square feet and may lease more. “This used to be one of the few places that businesses would go to for large blocks of space. There's a sublease at NetPark [Tampa Bay] for a call center. But other than that there's really nothing out there. We're going back to 2007 vacancy levels.”

The vacancy rate for office space in East Tampa has fallen from 16.6% in the third quarter of 2012 down to 10.4% for the most recent quarter, according to the CoStar Group.

Both Peterson and Codd expect that if the current trends in office space persist that new development will begin, possibly in the Westshore area or in conjunction with Jeff Vinik's Channelside project.