Although having a negative absorption of 60,427 sf in the third quarter, it was a significant improvement compared with the negative 175,131 sf in the second quarter, the report states. The county's office market absorbed an extra 175,122 sf of space in the third quarter, according to a similar report by Grubb & Ellis. Of nine suburban submarkets, four had space gains, and Boca Raton lead the county with a positive absorption of 145,903 sf.
Submarkets with a negative absorption that quarter included Delray Beach with negative 18,180 sf; Royal Palm Beach/Wellington, negative 5,812 sf; and North Palm Beach/Palm Beach Gardens, negative 1,111 sf, the Grubb & Ellis report states. That report also found that class A space saw 173,854 sf of positive growth, while class B and C space combined reported just 1,268 sf in positive growth.
According to the Cushman & Wakefield report, the Delray Beach submarket saw increased leasing in the third quarter, causing the direct vacancy rate to decrease from 13.8% at the end of the second quarter to 12.4% at the end of the third quarter. Delray Beach's direct vacancy rate, one of the county's lowest, should continue to drop as the submarket's downtown is going through a major revitalization, which may include new mixed-use projects, it adds. Overall, Palm Beach County experienced a decline in vacancy by 50 basis points to 15.4% in the third quarter, according to Grubb & Ellis.
The West Palm Beach central business district saw increased leasing activity and an overall vacancy rate decline of 1.5 percentage points from 17.3% at the end of the second quarter to 15.8% after the third quarter, the Cushman & Wakefield report states.
Interest in the Downtown region has been stimulated in part by the success of City Place, a mixed-use project, and recent talk of proposals to build office properties on three parcels of land, the Cushman & Wakefield report says. City Place, the ongoing Downtown revitalization and new residential projects have helped growth in the central business district, and further growth and improvement in the office market is anticipated through next year, it adds. The central business district also had several office buildings for sale at the end of third quarter, including Esperante, Phillips Point and One Clearlake Centre.
Asking rents in the third quarter reflected the softness of the office leasing market, according to Grubb & Ellis. Class A full-service asking rents dropped 14 cents to $27.04 per sf, and class B full-service asking rents fell 5 cents per sf to $20.39. The most significant drop was in the Palm Beach and Delray Beach submarkets, where average class A full-service asking rents fell 96 cents and 78 cents per sf, respectively. Despite this, all submarkets except two with class A buildings saw class A asking rents increase in the third quarter.
According to Cushman & Wakefield, the Palm Beach County office market is expected to continue to recover through the end of the year, seeing improved leasing activity, flat rental rates, and a rise in new construction and sales activity, making the market more prosperous.
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