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> Daily Business Review Cover Story, July 25, 2001
By Terry Sheridan / Web
Published Wednesday, July 25, 2001 Published in Daily Business
Review on: Wednesday, July 25, 2001
Lauderdale's
Office market shows signs of turning soft.
Downtown Fort Lauderdale's once lean
and mean office market is getting softer and flabbier, thanks
to recent rising vacancies.
In a sign of the times, "the
downtown is echoing what is going on in the rest of South
Florida, which is what is going on in the rest of the country,"
said broker Ken Morris of Morris Southeast Group Inc.
in Plantation. "When the economy cools, the real state
market see the effect.
Fort Lauderdale's office market is
believed to be softer than Miami's or West Palm Beach's,
for several reasons.
Trammell Crow Co. and Stiles
Corp. are each building Class A towers that will add
at least 550,000 square feet of space, and neither is more
than 40 percent leased. And several tenants are leaving
town, dropping deals or downsizing. in some buildings, more
subleases are available, which competes with space leased
directly from building owners. At one Financial Plaza, between
Southeast Second Street and Broward Blvd., observers are
questioning whether there's a large tenant around anymore
that will lease the roughly 60,000 square feet of space
that Bank of America will vacate next year. The financial
giant is moving a couple of blocks southeast to Stiles'
new Las Olas City Center at Las Olas Blvd. and Fifth Avenue.
About three blocks north across Broward
Blvd., First Fort Lauderdale Place at 100 NE Third Avenue.
- thought generally regarded as a notch below "A"
properties - is in foreclosure with about 40,000 square
feet of space available.
| "The
downtown is echoing what is going on in the rest of
South Florida, which is what is going on in the rest
of the country," said broker Ken Morris of Morris
Southeast Group Inc. "When the economy cools,
the real state market see the effect." |
According to his market statistics
for the end of the second quarter in June, Morris reported
almost an 11 percent vacancy rate for Class A buildings
in Fort Lauderdale's central business district, with 317,065
square feet of space available for lease. Last year, the
vacancy rate was 10.08 percent; in 1998, it was 8.39 percent.
Average gross lease rates, for now, are holding steady at
about $26 per square foot, thought that may begin to change.
That's almost the exact opposite of
downtown Miami. currently, that market has an 8.27 percent
vacancy; in 1998, it was 14.3 percent. Lease rates average
$28 per square foot.
Downtown West Palm Beach's vacancy
rate is slightly higher than fort Lauderdale's, at 11.69
percent. But that's down from 19.67 percent in 1998. Lease
rates average $19 per square foot.
"Our pace isn't a sprint anymore,
and we've settle into a good steady jog," said broker
Norm Adams of Trammell Crow, who handles leasing
at the companies new tower under construction at 101 NE
Third Avenue. Adams said the building has 95,000 square
feet of space leased, or about 41 percent.
"I think we're on track,"
he added. "You always want more, but we've got deals
pending." He declined to reveal specifics.
Signs of a serious downturn, such
as a drop in rental rates, free rents or discounts, haven't
yet cropped up, Adams said. "That's because we aren't
seeing companies going out of business; we're seeing them
stay status quo."
Maybe, maybe not.
| " Ken
Morris, a broker at Morris Southeast Group Inc. in
Plantation, says his statistics for the end of the
second quarter in June show almost an 11 percent vacancy
rate for Class A buildings in Fort Lauderdale's Central
business district" |
At the Parmenter Co.'s 308,000
square foot corporate Center at 110 E. Broward Blvd., computer
consultant Breakaway Solutions bailed out of a 16,000-square-foot
lease deal, and other tenant is staying in the building
but will cut 30,00 square feet of space by fall, said leasing
director Ted Harris. He declined to name the tenant, but
a broker who spoke anonymously said its Certified Tours.
And in a smaller 40,000-square-foot
building annexed to the tower, Parmenenter has 27,00 square
feet of space available.
"We're on the fence post between
a tenant and landlord's market," said one broker familiar
with the downtown market. "The tenant is in the position
where he doesn't have to come to any quick decisions, and
its putting pressure on the landlord's because we wanted
to go quicker than we're seeing".
Even on Las Olas Blvd., the heart
of what's considered among the best addresses in the city,
Stiles Corp.'s 450 E. Las Olas building has about 78,000
square feet vacant out of about 210,000 square feet. That's
thanks to the departure of hotel operator Extended Stay
America, the downsizing of law firm Eckert Siemens and KPMG's
spinoff of a consulting branch, said Tom Kates, President
of the Stiles Realty.
Eventually, lease rates will likely
have to drop, particularly in the market continues to soften,
said another downtown broker. But once one landlord starts
concessions of any kind, there's a domino effect.
That's what brokers are watching carefully,
said Rod Loschiavo, a managing director at Julien
J. Studley Inc. in Fort Lauderdale.
"Is this a short or long term
issue?" he said. "Everyone's watching the economy
closely."
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