(Crystal Proenza is associate editor of Real Estate Florida.)
WEST PALM BEACH, FL-A second-quarter special report by Jones Lang LaSalle indicates that sublease space is on the rise in major office markets throughout the country, but has not escalated beyond the decade's peaks. Those peaks are qualified as taking place from 2001 to 2004, during the market's last downturn triggered by the dot-com bust.
The report singles out South Florida as the hardest-hit market, with increases in sublease space ranging from 105% to almost 300% compared with last year at this time. Nationally the total is up only 12.3% from 44.8 million sf last year to 50.3 million sf.
Alice Lucia, senior vice president with JLL in Fort Lauderdale, says the escalated numbers in this region are directly related to the residential market. "Many of the spaces available for sublease are in direct correlation to the subprime fallout," Lucia tells GlobeSt.com, citing tenant examples including Lydian Mortgage, Deutsche Bank, First Franklin and Countrywide Financial.
"Historically, the market has always demonstrated a shallow pool of space users that have tracked trends in business cycles," says Tom Capocefalo, managing director with Studley in South Florida. "To that extent, markets that tend to have technology, financial services or call-center operations will be the first to shift personnel resources elsewhere that will then offer space to the sublease market."
According to the JLL report, in Fort Lauderdale 234,568-sf of sublease space was on the market at the end of the second quarter, a 135.1% increase from this time last year. Miami currently has 409,594 sf of sublease space, a 105.3% increase.
West Palm Beach saw its space nearly quadruple, from 84,675 sf last year to 332,357 sf this year. That city came the closest than any other to its decade peak, which was 348,072 sf, according to JLL—only 4.5% less than the current number.
Until there is stability in the credit market and housing markets, we won't expect to see this space get absorbed, says Lucia. "Based on current economic conditions in conjunction with additional development, we don't anticipate a correction to take place until mid-2010," adds Capocefalo. "As in all markets, additional supply or, more importantly, sublease supply will compete with direct space inventory. Subject to demand, direct space and sublease space will compete with each other until absorptions start to level out."
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