The vacancy rate rose to 15.3% in the fourth quarter of 2007, up from 8.8% a year ago, according to a CB Richard Ellis Q4 office market report for Palm Beach County. The rise was attributed to the delivery of speculative office space under construction in 2006, the softening residential market and the subprime lending crisis.
According to a report by NAI/Merin Hunter Codman, the office market showed no absorption, but rents continued to increase with gross rents reaching $50 at the top end for class A space in Downtown West Palm Beach, and approximately $35 to $40 per sf for prime space in the suburbs.
NAI/Merin Hunter Codman chairman Neil Merin tells GlobeSt.com that mortgage- and housing-related tenants had been driving leasing activity in recent years, but with the housing market softening, both tenants are shrinking. "About one-third of the increased vacancy can be attributed to that factor and the other two-thirds can be attributed to the new space that came on the market," he says.
NAI/Merin Hunter Codman is predicting flat to slightly negative activity for the first two to three quarters in 2008, with modest growth towards the end of the year as the housing market begins to recover. "Palm Beach County continues to attract institutional investor interest," Merin says. "We're seeing more value-added plays lately, with investors preferring underperforming properties in need of repositioning or upgrades, rather than trophy properties like the many that changed hands in previous years."
The CB Richard Ellis market report says there is 945,000 sf of new space expected to be delivered in 2008, with expectations for a stable year with good employment.
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