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By Ken Morris
Ft. Lauderdale Office Market
At present, the Ft. Lauderdale office market is showing
signs of increasing vacancy rates and negative absorption
across most sub-markets. At present the overall vacancy
factor for Class A office space in Broward County (Ft. Lauderdale
area) is 17 percent with an additional 2 percent available
for sublet space, average triple net rents are in the $31
per square foot range. Class B office space has a vacancy
factor in the 12 percent range; average triple net rents
are in the $24.11 per square foot range. A recent trend
in the market is an increase of sublet space available in
most every sub-market and what appears to be a dramatic
slow down in deal velocity.
Some noteworthy projects under construction or recently
completed includes Stiles Development Corporation’s
Lake Shore Plaza II in Sunrise which will present another
135,000 square feet of Class A suburban space to the market.
In downtown Ft. Lauderdale, Stiles Corporation has also
recently completed the 200 Las Olas Circle building which
consists of 204,000 square feet and is the newest Class
A building to be completed in Downtown Ft. Lauderdale. Also
in the Sawgrass submarket Duke Realty is constructing Sawgrass
Pointe II a Class A building which is offering 90,000 square
feet in three floors. In Miramar, Liberty Property Trust
has broken ground on the Class A Liberty Center at Monarch
Lakes building one which consist of 110,000 square feet
on four floors and delivery is expected in the third quarter
of 2008.
Overall, the office market is feeling the effects of a
slowing local and national economy. The two major economic
engines the region depends on are tourism and housing development.
Housing development in South Florida has basically skidded
to a halt which has negatively affected all of the allied
industries that rely on it for business — lenders,
title companies, law firms, building trades, etc. have all
seen major retractions in their businesses in the past quarter,
and expect that trend to continue through all of 2008. A
prime example of this effect is the large sublet in the
Sawgrass submarket is offered by ABN AMRO/Citibank which
has placed all 99,000 square feet of its regional mortgage
operations on the market. Almost every sub-market is now
seeing either flat or negative absorption.
Until the housing development industry starts to recover
and national macro economic trends start changing for the
better, it is likely that the office market will face leaner
and tougher conditions in 2008. It’s more than likely
that tenant concession packages will increase as landlords
attempt to backfill recently vacated space, or fill brand
new space that has recently been completed.
The office condominium trend of recent years appears to
be finished, at least temporarily due to lack of demand.
Many office condominium conversion projects have reverted
back to leasing the unsold space.
On the investment side, Institutional money remains the
driving force behind most building acquisitions with average
cap rates for multi-tenanted Class A buildings remaining
well below 7 percent on average. The demand for product
from institutional and foreign investors will likely keep
cap rates low for the near term even though the market leasing
fundamentals are weakening.
The Ft. Lauderdale area office market faces a tougher
year and possibly into the early part of 2009. The fact
that land remains scarce (and expensive), and construction
costs remain high do provide formidable barriers to new
buildings to be developed which should provide a moderating
effect on the market. It’s unlikely that vacancy factors
will jump dramatically but Landlords should be prepared
for tougher times ahead.
Ft. Lauderdale Industrial Market
As one of the tightest industrial markets in the country,
the Ft. Lauderdale industrial market is now showing signs
of increasing vacancy rates across most sub-markets. At
present the overall vacancy factor for industrial space
in Broward County (Ft. Lauderdale area) is 6 percent with
an additional 1 percent available for sublet space, average
triple net rents are in the $8.50 per square foot range.
The industrial market is also feeling the effects of a slowing
local economy due in part to the stalling out of the residential
development industry. Industrial tenants that are in the
allied building fields are in many cases reducing their
space and some going out of business altogether.
A recent spate of development in the market will add some
upward pressure to vacancy rates overall but do provide
some much needed space to the market. Some noteworthy projects
under construction or recently completed include the following:
• Premier Turnpike Park developed by Premier Commercial
Realty has broken ground on a 404,000-square-foot, four
building project located in the Northern part of the county
at the Sample Road/Turnpike Interchange. The project features
32-foot clear ceilings.
• Butters Development is developing the Pompano
Center of Commerce in the City of Pompano (also Northern
Broward County) that will be a 615,000-square-foot premium
manufacturing, distribution and R&D project located
just West of I-95 and South of Copans Road.
•In Southwest Broward, Flagler Development has broken
ground on the Sunwest Commerce Center located at the southeast
quadrant of I-75 and I-595 in Sunrise. The project is offering
75,000 square feet of industrial condominium space for sale.
Even though the local economy is facing tougher times
ahead this year, the industrial market will likely remain
relatively tight compared to historical standards. Southeast
Florida still remains the gateway to Latin America and many
of the goods that travel down to South America are shipped
through and stored in the region’s distribution centers.
Just as in the office market, Institutional money remains
the driving force behind most building acquisitions with
average cap rates for multi-tenanted industrial buildings
remaining well below 7 percent on average. The demand for
product from institutional and foreign investors will likely
keep cap rates low for the near term even though the market
leasing fundamentals are weakening.
The industrial market should be seeing slower deal velocity
through 2008 but well placed and thought out projects will
likely continue to do well for some time to come.
— Ken Morris, SIOR, is president of Morris Southeast/CORFAC
International in Plantation, Florida
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