Q1 Brings Record Leasing to Palm Beach County

PALM BEACH COUNTY, FL-The Palm Beach County office market experienced record leasing activity of 777,961 sf in the first quarter, according to Cushman & Wakefield’s newly released office overview for the county. The activity created absorption of positive 169,932 sf. Not surprisingly, these results were stimulated by the rousing economy and the 2003 record sales.The figures prove a recovery is in progress and will impact the county positively by the middle of this year, according to the report. The development of the Scripps Research Institute in Palm Beach Gardens is spurring demand in all of the office submarkets.The Boca Raton submarket–generally the county’s strongest sector, showed signs of improvement in the first quarter. Leasing activity there totaled 282,290 sf, about a 50% hike over 2003′s fourth quarter and more than 75% more than the first quarter of ’03. While absorption there was still a negative 68,990 sf, this was better than the negative 87,735 sf of the previous quarter. The overall vacancy rate did stay fairly high at 17.5%. In fact, this figure changed little in the last year, when it fluctuated between 17.5% and 18%. Thus, this submarket has not yet seen a full recovery.However, brokers are optimistic that steady leasing over the next six months may lessen the vacancy rate some. The sublease space in the submarket has declined steadily, a trend that is expected to continue throughout the year.Overall in the county, space is being absorbed with new leases and expansions, as businesses rebound. One area where this can be seen is Delray Beach, which improved its overall vacancy rate from 25% at the end of last year to 19.8% after the first quarter.In the Delray Beach submarket, more transactions occurred in the first quarter than in all of 2003. The most notable of these deals was Kaplan Inc.’s sublet of 24,371 sf at the Arbors. Downtown, direct rental rates have declined from $21.28 per sf in the first quarter of last year to a current $20.30. Lower rates should mean more leasing activity this year, and the current 24,797 sf of absorption should be maintained or improved.The Palm Beach International Airport submarket also saw improvement in the first quarter, when the area saw an all-time record low 7.7% direct vacancy rate. This is a 5.9 percentage point drop from the 13.6% rate during 2003′s first quarter.Although new construction is weak in the county, strong leasing and tighter markets should increase proposals in the second half of the year, as Palm Beach County continues its recovery.