“While the need for spec office development is apparent, available land to fulfill this need is virtually nonexistent, and not even high capitalized investors are willing to take on office projects without substantial pre-leasing,” Satter says. “In a market like West Palm Beach where roughly 80% of the office market consists of below 5,000-square-foot users, worthwhile pre-leasing is difficult to achieve.”

MIAMI—West Palm Beach is reporting some of the highest office rents in Florida due to limited supply. Combined with rising base rents, operating expenses and sales tax, this in turn is causing some office tenants to consider other submarkets.

So says Jonathan Satter, principal and managing director of Avison Young's West Palm Beach office. Particularly, he tells GlobeSt.com, the Australian Corridor and Palm Beach Lakes have seen increased absorption at specific properties with well-capitalized owners meeting the needs of high-end tenants coming in.

“The trend of increased sales activity is also causing an upward pressure on gross rent,” Satter says. “For example, Esperante Corporate Center, Phillips Point, and Northbridge Center all recently sold, and with their triple-net lease structures, larger, long-term tenants facing upcoming renewals could experience 'sticker shock' on significant rental rates and tax adjustments as buildings trade.”

Avison Young reports the most significant demand for office space in West Palm Beach, especially for new-to-market tenants from other parts of the country, is for the limited water view offices. Currently, Satter says, there are less than a handful of quality office buildings that fit this criteria, each nearly fully occupied.

“While the need for spec office development is apparent, available land to fulfill this need is virtually nonexistent, and not even high capitalized investors are willing to take on office projects without substantial pre-leasing,” Satter says. “In a market like West Palm Beach where roughly 80% of the office market consists of below 5,000-square-foot users, worthwhile pre-leasing is difficult to achieve.”