South Florida Office Vacancy Rates Hit Five-Year Low

Office vacancy hit a five-year low, with brisk trading among corporate investors, who closed multimillion-dollar deals across South Florida.

Parkway Properties Inc. paid for $146 million, or about $421 per square foot, for the Courvoisier Centre (pictured left) on Miami’s Brickell Key.

In Davie, the Seminole Tribe of Florida paid $11.5 million for 101,000 square feet near the Seminole Hard Rock Hotel & Casino.

On Congress Avenue in Boca Raton, SBA Communications Corp. moved into a 160,000-square-foot building it bought for $22.65 million in November.

And Univita Health Inc. leased 91,872 square feet at Miramar Centre Business Park.

It’s a sign of a recovering office market, driven by rebounding employment and post-recession surges, a new report by Cushman & Wakefield Research for the Americas shows.

“We’ve kind of bounced right back,” said Jon Blunk, senior director of agency leasing for Cushman & Wakefield of Florida Inc. “We’re seeing a return of market-high rents from the peak, and the market is becoming healthy again. The blocks of vacancies are dwindling and there’s no real new construction that’s going to cause any change.”

In 44 major office markets nationwide and South Florida’s central business districts, vacancies fell, asking rents increased or remained stable, leasing activity spiked and net absorption trended upward, Cushman & Wakefield reported in its second quarter report.

Average rents for Class A space in the Miami area rose about 10 percent in the last year to $44 per square foot, with premium properties commanding $50.

The shift is benefiting the entire region, including downtown Fort Lauderdale and Broward County, where tenants occupy about 90 percent and 88 percent of office space, respectively, according to Costar Group data.

But Miami’s leading the charge of markets seeing the biggest rebound since 2008. Its 477 office buildings closed the second quarter with a 14.4 percent vacancy rate and average rents of nearly $32 per square foot.

“Workers are coming back. There are major high-end projects like Worldcenter, and the city’s working on new mass transportation,” said Mirta DeCespedes, Cushman’s senior research analyst. “This isn’t like the downturn. We’re a totally different city, and the confidence level of both local and global companies is extraordinary. They’re locking in long-term leases, 12 to 13 years, which we haven’t seen in years. That speaks to the future of our city, which I think is very bright.”

Low Inventory

But the brisk activity in core urban markets hasn’t reached all suburban markets. In Miami Lakes, more than 21 percent of the 1.9 million square feet is vacant. And Cypress Creek, where 10- to 15-year-old buildings dominate the inventory, the market remains soft with 18.8 percent vacancy.

“Cypress Creek is losing corporate tenants to western Broward locations,” said Reese Stigliano, senior vice president of Brenner Real Estate Group. “It’s just how the population is moving. The market is older, there’s been no new development, and tenants are going to newer buildings in Weston, Miramar and Sawgrass.”

But even with the population shifts, new office inventory has been slow to materialize.

A handful of investors, like American Express, is planning new projects. The credit card company completed a $21.5 million deal in December with Flagler Development Group to acquire 40 acres for a new corporate office in Sunrise. Another investor, Metropica Holdings LLC, gained approval this month for a $1 billion mixed-use development that would add 650,000 square feet of office space to Sunrise.

“The market is stable and growing,” Stigliano said. “The trend is going to continue, but nobody’s going to build speculative buildings until it’s more robust.”

 
Source:  DBR