Direct asking rents for Broward County averaged $27.65 per square foot, according to Cushman & Wakefield of Florida. Renewal activity may have helped to stabilize rents somewhat, with larger companies weighing moving costs versus favorable renewal terms.
"Rental rates and concessions have fallen to where deals were in the '90s," says Rod Loschaivo, senior director of office brokerage with Cushman & Wakefield. "Now is a great time for tenants to negotiate favorable, long-term savings or an early restructure of their lease."
Concessions among Broward office properties are estimated at 19.1% of asking rents at midyear, up from 16.7% at the end of 2008, according to Marcus & Millichap. This creates some uncertainty regarding property values and cap rates, with gross property revenue declining 10% over the past year and anticipated to continue falling by double digits before the market starts to stabilize.
"As more tenants struggle with their businesses, pressure on property owners to offer greater concessions will intensify," says Greg Matus, regional manager of Marcus & Millichap's Fort Lauderdale office. He adds that investment activity has slowed in response to the downturn in fundamentals and continuing challenges in the credit markets.
Transaction velocity in Broward County has declined at least 40% over the past year, and 50% thus far in 2009, Marcus & Millichap states in its latest market research report. It is assumed that assets listed at cap rates between 9% and 10% will generate interest among buyers underwriting for steeper decreases in occupancy and rents in the near term.
Marcus & Millichap also predicts that a greater amount of distressed assets are likely to be listed in the next 12 to 18 months, especially properties purchased or refinanced during the market peak from 2005 to 2007. Broward currently has $132 million worth of office properties in distress, with nine properties totaling 1.1 million square feet, according to Real Capital Analytics.
Overall leasing activity declined 25% over the past year to approximately 544,000 square feet, says CB Richard Ellis. Class A space leads the market in leasing activity with over 477,600 square feet.
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