Brokers Expect Office Sales to Remain Strong in S. Florida

MIAMI-South Florida will continue to see a large number of office sales due to low interest rates, economic growth and pent-up demand, says a new report by Marcus & Millichap Real Estate Investment Brokerage Co.According to the report, buyers are expected to continue to look for long-term opportunities in the area’s office market. The Office Research Report covers Fort Lauderdale, Miami and West Palm Beach.”South Florida’s office market is showing significant improvement in 2004,” according to Gene A. Berman, senior vice president and regional manager of Marcus & Millichap’s Fort Lauderdale office. “Buyers are attracted to rising tenant demand, which is the result of job growth in a strengthening service economy.”The demand also should result in higher price tags on local office properties, as buyers are encouraged to enter the office market and owners can sell smaller properties and buy bigger ones in better locations, the report says. “We expect that decreased vacancy will encourage owners to seek higher prices not only in Miami and Fort Lauderdale, but also in suburban Delray Beach and Coral Springs,” Berman says.This year, the median price per sf should go up about 4% to $125. Investors are expected to focus their attention on properties in Forth Lauderdale due to the high job growth projected in the MSA. Strong tenant demand in desirable regions such as Coral Gables, Cypress Creek and Pompano Beach will also encourage investor interest, the report adds.The area’s overall vacancy rate is expected to drop 110 basis points, from 15.9% to 14.8%. The vacancy improvement is the result of fewer completions and job growth. Downtown Miami and West Palm Beach are two submarkets that are attractive to tenants. Also, suburban areas are experiencing lower vacancy rates, less than 9% in Kendall, Coral Springs and Northeast Dade. On the other hand, vacancy rates are higher than average in downtown Fort Lauderdale as well as near Miami International Airport, according to the brokerage firm’s findings.In South Florida, only about 875,000 sf is scheduled to be delivered by the end of the year. This represents the lowest amount of space since 1995. Most of the new construction is occurring in Miami and West Palm Beach, but downtowns and employment hubs such as Deerfield Beach also are seeing strong activity. Many large projects in the planning stages will make the construction slowdown short term, the report states.