MIAMI-This may be a great time to shop for office space in the South Florida market. Newly released second-quarter research from Cushman & Wakefield of Florida Inc. shows that overall second-quarter vacancy rates increased by 1.1% in Broward County and 2.9% in Miami-Dade County and dropped by only one-tenth of a percent in Palm Beach County, over the same time period last year.
In Broward, the overall vacancy rate increased to 14.6% during the quarter, up from 13.1% for the same period last year. Year-to-date net absorption is a negative 32,121 sf, down from a positive absorption of 744,252 sf last year. The amount under construction is 2.04 million sf, up from 1.9 million last year. Direct average asking rents are $21.86 per sf, up from $20.75 per sf in 2000.
In Miami-Dade, the overall vacancy rate increased to 14.2% during the quarter, up from 11.3% for the same period a year ago. Year-to-date net absorption is a negative 81,186 sf, down from a positive 728,615 sf last year. The amount under construction is 1.84 million sf, down from 2.4 million last year. Direct average asking rents are $22.24 per sf, up from $20.88 per sf last year.
In Palm Beach, the overall vacancy rate dropped slightly to 12.8% during the quarter, down from 12.9% for the same time period last year. Year-to-date net absorption is a negative 28,247 sf, down from a positive 411,204 sf last year. The amount under construction is 710,854 sf, down from 860,978 sf last year.
The increase in office vacancies is being attributed, in part, to a flood of returned or new sublease space that is coming online in all three markets as corporations reorganize and adjust to an overall weaker US economy.
“It is a great time to shop,” says Mitchell Millowitz, a Cushman & Wakefield senior director who specializes in offices properties. “As a matter of fact, on one recent deal, though I negotiated it before the market caved, one of my tenants was given an incentive package that equated to $60 per sf and still achieved a 15% reduction in rental rates.”
High-tech service providers like Atlanta-based Cingular Wireless and Madrid, Spain-based Telefonica SA, for instance, are downsizing and putting office space back on the market.
Market insiders note that Cingular could vacate in the fourth quarter this year as much as 75,000 sf of the 150,000 sf it leases in the Boca Raton submarket. Telefonica already has vacated about 80,000 sf in Miami's Brickell Avenue submarket.
The increased availability of space, however, is having little affect on direct average asking rents. In Miami-Dade, for instance, asking rents averaged about $1.36 per sf more during the second quarter this year over the average of $20.88 per sf that property owners sought during the same time period last year.
Such an inverse reaction is causing some tenants to reconsider possible alternatives, says Doug Campbell, a Cushman & Wakefield executive director who specializes in the Miami-Dade office market.
“It's becoming more and more difficult to maintain space in the Central Business District or the Brickell Avenue corridor in light of escalating rents, traffic jams and the diminishing opportunity of finding contiguous space of 15,000 sf or greater,” Campbell tells GlobeSt.com.
“Many of the tenants in these submarkets are now considering Coral Gables, which has a class A inventory of about 800,000 sf that is either existing or in the development stage. From a historic net absorption perspective, this is well over seven years of inventory.”
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