Broward County Office Park Trades at 35% Discount

While the tri-county South Florida region has had an influx of out-of-state businesses, including financial services and tech companies, aging office inventory has not been immune to the lower valuations seen in other markets.

Sawgrass Technology Park, an 11-building office complex encompassing 514K SF in Sunrise, was scooped up this month by IMC Equity Group, for $49M, or about $95 per SF.

The price for the campus of two-story office buildings was about 35% less than the $74M that Utah-based Bridge Investment Group paid for the property in 2019, which translates into about $144 per SF.

IMC, based in North Miami, financed the deal with a $30M mortgage from Israel Discount Bank of New York.

The 56-acre tech park, which was built in the mid-1980s, is 30% vacant with 138K SF listed as available, according to marketing materials. Bridge upgraded the property, located at 601-1699 NW 136th Avenue, with improvements including a new amenity center with a café, lounge and fitness center.

While the overall office vacancy rate in Sunrise was close to 17% at the end of 2023, the Sawgrass submarket had the highest vacancy rate in the market at more than 22% at the end of last year, according a report from Commercial Café. Average asking rents were less than $30 per SF in Sawgrass, the report said.

In January, Bridge sold a 20-year-old, 141K SF office building in Doral for about $29M five years after purchasing it for $37M.

In April, Starwood Capital Group sold a four-building office portfolio in Mirimar for $45M, slightly more than half of what the REIT paid to acquire the property in 2015. A joint venture between YMP Real Estate Management and three other entities bought the 373K SF portfolio for about $120 per SF.

According to a report last month from Moody’s the decline in office valuations nationwide could total as much as $250B by 2026. Moody’s is projecting that nearly one-quarter of U.S. office space will be vacant by 2026, rising to 24% from the Q1 2024 vacancy rate of 19.8%, Bloomberg reported.

The persistent vacancy rates will reduce revenue for office landlords by between $8B and $10B when combined with the impact of lower rents and lease turnovers, Moody’s report said.

About 85% of North American companies who responded to a JLL poll said they have implemented hybrid work, the report said. In addition to reduced demand for office space, increased borrowing costs also have sliced office building valuations, especially for older buildings.