(To read more on the net lease market, click here.)
PALM BEACH COUNTY-With decreased vacancy rates, higher asking lease rents and unemployment rates below the national average, the office market continues to be hot, according to a CB Richard Ellis Q2 market report.
The vacancy rate was 8.4%, down from 9.4% during the second quarter 2005. Class C space led the way with a 3.2% decrease followed by class A with a 1.3% decrease from the previous year. As a result, the average asking rents rose 9.4% to $18.31 per sf. class A office space experienced an increase of 10.1% from $18.63 per sf a year ago to $20.51 during Q2, according to the report.
While the vacancy and lease rates bode well for landlords, tenants may not be faring as well. "From the tenant's perspective, today's leasing environment represents the perfect storm--increasing occupancy, rising operating costs, escalating labor and material costs, lack of new buildings and lack of land for office development," says CB Richard Ellis senior vice president Michael Erickson, who is based in Boca Raton.
One of the most significant events experienced during the quarter was Palm Beach County Commission's approval of the City of Jupiter's proposal to house the Scripps Research Institute at Florida Atlantic University's Abacoa campus. The first phase of the project will include construction of 364,000 sf of laboratories on 30 acres. Several developers reacted quickly to the news. One developer, Rendina Cos., received approval to proceed with development of 177,000 sf of office space. Catalfumo Development is marketing two parcels in Palm Beach Gardens for creation of more than one million sf of research and development space.
On the less positive note, businesses are experiencing higher insurance premiums due to recent hurricane activity. The cost of insurance has gone up significantly during the quarter, with coverage that used to cost owners 65 cents per sf increasing to as much as $2.50 per sf.
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