The Miami-Dade office market is comprised of 103 million square-foot of inventory ranging in size from the 18.1 million square-foot Miami Airport submarket to the Outlying Miami-Dade submarket, which accounts for 172,432 square-foot. Over the course of the past 10 years, the Brickell submarket experienced the greatest introduction of new inventory of 1.5 million square-foot, amounting to 31.8% of stock added to the market.
Asking rents advanced by 1.0% during the second quarter of 2017 to an average of $33.64. This advance extends the market’s run of gains to fifteen quarters and rents are expected to grow by 1.2% by the end of the year, which is below the 10-year average of 1.9% but slightly below 2016, when rents grew by 3.1%.
The Miami-Dade economy has numerous significant assets: trade with Latin America, huge sea and airport facilities, a relatively large distribution industry base, a sizable Leisure and Hospitality sector, active residential development including a strong condominium market attractive to numerous wealthy Latin American buyers, and a rising population growth rate. Still, for all Miami-Dade’s strengths, there are weaknesses as well. Included is the small size of the high-technology business sector and the substantial lack of “New Economy” growth sectors otherwise. Accordingly, the region does not host a large well-educated work force, and household incomes are relatively low. Furthermore, changes in the nation’s trade policies, should they arise, could affect international trade volumes as well as the local condo market. Over the past 12 months jobs grew by 1.7%, but the local economy is showing signs of slowdown. Uncertainty regarding the new administration’s trade policies, which have yet to become definitive with respect to North American Free Trade Agreement (NAFTA) and trade with Cuba, could be having a braking effect
Net absorption for the Miami-Dade office market was positive 319,946 square-foot in the second quarter 2017. That compares to positive 437,651 square-foot in the first quarter 2017 and 1,542,727 square-foot year-to-date.
Currently there are over 2.1 million square-foot of office space under construction. Projects include Two and Three Miami Central adding a total of 318,000 square-foot in the downtown area and 800 Waterford in Doral adding 246,100 square-foot, which are going to be completed by the end of 2017. The Panorama Tower by Florida East Coast Realty is going to add another 100,000 square-foot of class A office space in the Brickell submarket.
With the possible threats through a weakening economy and over 2.1 million square-foot of office space under construction. Developers have become very cautious also given high land prices and construction costs. Many projects announced therefore are outside the urban core in areas like Wynwood, Aventura, Coconut Grove and Doral focusing on a live-work-play environment. With the economy nearing its end of its expansion cycle new developments are expected to decrease in the near term. Vacancies are currently at 8.8% and are expected to increase to 9.5% by the end of the year, with major developments nearing completion.
The Broward office market is comprised of 69 million square-foot of inventory ranging in size from the 7.7 million square-foot Plantation/Davie submarket to the Pompano Beach submarket, which accounts for 854,000 square-foot. Over the course of the past 10 years, the Pompano Beach submarket experienced the greatest introduction of new inventory of 561,000 square-foot, amounting to 34.7% of stock added to the market.
Asking rents advanced by 0.3% during the second quarter of 2017 to an average of $27.30. This advance extends the market’s run of gains to seventeen quarters and rents are expected to grow by 2.1% by the end of the year, which is above the 10-year average of 0.6% but slightly below 2016, when rents grew by 2.3%.
Fort Lauderdale employment gains continue to outperform the nation’s. The areas annual employment growth, exceeding 3.5%, is well above that of the U.S., and a housing-market recovery is boosting job growth in housing-related sectors such as construction and professional services. Gains in some mainstays of the local economy, including leisure and hospitality, are also healthy, likely in response to increasing tourism. Like all South Florida, Fort Lauderdale is benefiting from sizable population growth, which will help maintain job growth in coming years. Strong expansion is expected to continue in a range of industries, including the leisure and hospitality sector, which benefits from the robust tourism. Also, the professional and business services sector is showing gains as tenants expand in response to strong economic conditions. Similarly, construction employment should outperform the national rate, thanks to a recovering housing market and a growing number of apartment and condominium projects in the pipeline.
Net absorption for the overall Broward County office market was positive 128,085 square-foot in the second quarter 2017. That compares to positive 44,537 square-foot in the first quarter 2017 and 742,872 square-foot year-to-date.
Current construction consists of three projects with a combined total of 364,440 square-foot led in size by the 260,000 square-foot Plantation Walk office project at 321 North University Drive. A completion date of November 2018 is specified. For the third quarter of 2017 two buildings with a combined total of 104,400 square-foot are coming online in Hallandale Beach and Hollywood. Also under way are six owner-occupied projects with a combined total of 178,450 square-foot.
With strong local demand for office space and moderate supply dropped slightly by 10 bpts to 9.3% and are expected to continue to fall throughout the rest of the year and 2018.
The Palm Beach office market is comprised of 55 million square-foot of inventory ranging in size from the 8.4 million square-foot North Palm Beach submarket to the Palm Springs/Lake Worth submarket, which accounts for 1 million square-foot. Over the course of the past 10 years, the Boca Raton West submarket experienced the greatest introduction of new inventory of 1.1 million square-foot, amounting to 54.5% of stock added to the market.
Asking rents advanced by 0.6% during the second quarter of 2017 to an average of $30.13. This advance extends the market’s run of gains to eleven quarters and rents are expected to grow by 1.4% by the end of the year, which is above the 10-year average of 0.7% but slightly below 2016, when rents grew by 1.5%.
The slowdown in economic growth indicated for the three-county South Florida region for the recent period is apparent as well in the data for Palm Beach County. Year over year jobs were up 2.4%, which is lower than the 2.8% job gain in the three-county-MSA. However, Palm Beach differs from its neighbors Household incomes and educational levels are notably higher. Palm Beach is a haven for the famous and extremely wealthy. The county also boasts a substantial high-technology business sector. As is common among affluent, mainly suburban metro areas with their premium on lifestyle advantages, meanwhile, many forms of commercial and residential real estate development typically face strong community opposition here. Palm Beach’s population of wealthy retirees is already high, but the maturing demographics of the U.S. mean a growing number will take up residence in Palm Beach. The aging of the U.S. population over the next 30 years will be astounding in magnitude, and of all metros in the U.S. Palm Beach is one of the best positioned to capitalize.
Net absorption for the Palm Beach office market was positive 129,617 square-foot in the second quarter 2017. That compares to positive 58,235 square-foot in the first quarter 2017 and 752,051 square-foot year-to-date.
Currently there are about 108,599 square-foot of office space under construction, which includes a two-building, 63,500 square-foot Gardens Innovation Center in Palm Beach Gardens. The project broke ground last October for completion this August. The county’s long-held high expectations for its bioscience industry base, meanwhile, have been frequently frustrated. Still, the Center’s developer, LRP Publications, is hoping to attract life science companies at their development.
Vacancies in the Palm Beach area are currently around 11% and is going to move downwards closer to 10% as the economy continues to remain strong, with lack of new development in the pipeline.