Excerpted from Tampa Bay Business Journal story.
Laser Spine Institute’s sudden shutdown could have far-reaching effects on commercial real estate in Tampa Bay.
The company, which ceased operations on Friday, was the only tenant in a custom-built, 176,000-square-foot office building in Avion Park, near Tampa International Airport and the Westshore business district.
All of that space — developed and still owned by Highwoods Properties Inc., which will write off more than $12 million associated with the closure — will eventually be available for other companies to lease.
The sudden availability of that much space is a welcome one in Tampa, where there are very few large blocks of contiguous office space in prime locations. But the nature of the space — much of it was clinical, as the building housed an ambulatory surgery center for Laser Spine — means it could be more expensive to renovate than traditional office space. It will also likely give developers who were considering building similar office space pause.
Atlanta-based Cousins Properties Inc. (NYSE: CUZ), for example, has been considering Corporate Center V near International Plaza, which would add a 254,258-square-foot, eight-story building to the four existing Corporate Center properties. Highwoods itself had been looking to expand Bay Center, an office park on the Westshore waterfront, by adding a new seven-story, 207,966-square-foot office building and expanding an existing parking deck.
“I would have no doubt it will affect proposed new development, especially given the ownership groups that are proposing the development,” said Brent Miller, executive vice president with JLL Inc. “It should affect the new build-to-suit market. I don’t think it’ll affect Water Street, and I don’t think it’ll affect Midtown and the Heights as much.”
Both Highwoods and Cousins are publicly traded real estate investment trusts, which makes them averse to taking on high- or even moderate-risk projects.
The overall vacancy rate in Westshore at the end of 2018 was 11 percent, according to data from Cushman & Wakefield Inc.
“Especially with the absence of large blocks of space, this is not a cause for alarm,” Miller said.
Chris Butler, managing director at Franklin Street in Tampa, agreed.
“It’s exciting to have a large, relatively new building hit the Westshore office market,” Butler said.
Both Butler and Miller said the building could present some challenges to new tenants.
“Knowing it was specifically designed for a single tenant, the big question will be if it’s conducive as a multi-tenant office building as well,” Butler said.