The Tampa Bay retail sector continued to rebound after some negative impacts from the pandemic. The overall vacancy rate dropped to a pre-pandemic level of 6.2% during the quarter, down 20 basis points over last year’s elevated rate of 6.4%. In addition, businesses adversely affected by the national shutdown caused negative absorption over the previous five quarters. However, the market bounced back with more than 239,355 square feet of positive absorption year-to-date, all completed during the third quarter, which showed signs of confidence in the long-term outlook for the market. New retail space on the street level of mixed-use developments remains in high demand throughout the urban core, particularly in Class A projects such as Water Street Tampa, Midtown Tampa and downtown St Pete.
Asking rental rates continued to rise, up 3.2% year-over-year throughout the metro area, and were 8.3% higher than the third quarter of 2019. The increased rates, along with staffing shortages, government mandates, and supply chain issues, forced many of the market’s weaker tenants out of business. As retail rental rates climb alongside escalating construction and labor costs, the deal cycle has lengthened to complete lease transactions, and this trend is expected to continue throughout the end of the year and into 2022.