FT. LAUDERDALE, FL-After three years of contraction, roughly 700 office-using jobs are forecast to be created in Broward County in 2010, a 0.2% gain, according to Marcus & Millichap’s  Office Research Market Update for the second quarter. But newly-hired workers are not expected to stimulate demand for new space, because 2.7 million square feet of empty space has accumulated, which will be filled first, according to the report.

In recent months, there has been some increased interest by investors in the purchase of office buildings, according to Marcus & Millichap, because they foresee a little more demand for space and are heartened by the lack of new construction in the county. The only reason there hasn’t been a lot of sales activity is that few properties have been for sale in the last 12 months. The report did not list any specific sales of office buildings.

Investors, by and large, seek out the class A properties even though their performance has declined as the recession has continued. Cap rates, although variable, depending on location and asset, have averaged from the high 8% to the low 9% range for solid, class B properties, according to the report.  There have been few class A sales of late, but their cap rates are probably 100 basis points lower than for the class B properties which have sold, according to Marcus & Millichap.

All Broward submarkets have experienced higher vacancies and lower rents, and the northern half of the county has been more affected than the southern half, due to a loss of population and population-driven and housing-driven employment. Vacancy rates were more than 24% in the Cypress Creek and Coral Springs submarkets in the northern half of the county.

The already-completed 86,000 square feet of space at the Village of Gulf Stream Park, a new retail complex at the southern end of the county, will be the only office space expected to be built this year. Just 165,000 square feet of office space was added in 2009, according to Marcus & Millichap.

The vacancy rate will go up 210 basis points in 2010 to 21.1% and negative net absorption is forecast to be over 500,000 square feet compared with over 1.4 million square feet of negative absorption in 2009, according to the Marcus & Millichap report.  And with vacancy rising, rents will be falling: asking rents are expected to fall by 2.6% to $25.09 per square foot, and effective rents by 4.4% to $19.70 per square foot this year.

Soft demand underpinned a 0.7% drop in asking rents during the second quarter to $25.57 per square foot. On a year-over-year basis, asking rents countywide declined 2%. Effective rents fell 4.3% in the past 12 months, including a 1.3% dip in the second quarter to $20.23 per square foot, according to Marcus & Millichap.

Rent concessions in Broward County are still an important factor in the office rental market. They have gone from 15% of asking rents at the start of the recession to 20.9% of asking rents in the second quarter of 2010. Concessions were slightly higher in the southern half of the county, according to Marcus & Millichap, or 21.9% of asking rents.

Over the past 12 months, sales velocity declined 10%, but more than half of the transactions which did take place, did so in the last six months, an indication that there has been an increase in sales activity. But the median price for deals done during the past 12 months was $127 per square foot, 27% less than in the preceding 12 months. Several sales of properties with high vacancies contributed to the decline.