Office Market Update - Spring 2016

Despite the series of high-profile transactions previously mentioned, involving TerraCap and CapStone, among others, Sarasota’s much-maligned office market continues to struggle overall. Vacancy rates have declined, somewhat, to just above 10 percent over the past several months, and large blocks of quality space are becoming harder to find.

But the sector’s double-digit vacancy still carries a stigma that will prevent new construction of any significance from occurring. The only significant new office space on the horizon in downtown Sarasota, for instance, will be roughly 11,000 square feet contained in the Kolter Group’s planned 12-story The Mark, a mixed-use project set to contain more than 150 new residential units and upwards of 35,000 square feet of retail space.

The office market, too, like the industrial sector, serves as an important employment bellwether. And while mobile technology has allowed more workers to do business outside of the traditional confines of office buildings, that trend is not proficient enough yet in Sarasota to more than marginally effect the office vacancy rate. Instead, office vacancy continues to be governed more by a lack of expansion or relocations among businesses.

Three years ago, industrial sales ranged from $30 per square foot to $45 per square foot, because of the abundance of space available. Lenders were in possession of many properties and demand lagged. Today, industrial properties are selling for close to $70 per square foot – a number that is significant because it is close to replacement costs.