From left: Edward Redlich and David Valdez
This was a tough year for South Florida’s commercial market, with Downtown Miami in particular seeing the influx of more than one million new square feet of office space in the form of two large office towers. But after a year that saw high vacancy rates and low absorption, Florida’s commercial real estate brokers say 2011 will be a more positive story. The Real Deal talked to some of South Florida’s top real estate minds, who said they saw an improvement in absorption and even the possibility of breaking ground on new construction.
Edward Redlich, vice president, ComReal
The vacancy rate has been steadily falling from about 11 percent to now about 9 percent. If these trends continue into 2011, we may see lease rates and purchase prices stabilize; perhaps even increase. However, much depends on our national economy and the international trade industry. The “early majority” of end-users that recently acquired industrial real estate took advantage of lower pricing for the best properties. The “late majority” of end-users may expect higher pricing and fewer good, functional properties to choose from.
Ellen Blasi, director of leasing, the Green Companies
I think the market’s going to pick up quite a bit next year. We’re seeing some activity in sales already, and several of the developers, including ourselves, will be looking at breaking ground next year. So I think next year’s going to be a good one — I’m very optimistic.
Tom Dixon, president, Dixon Commercial Real Estate
I think the best visual description would be that we’re at low tide right now. I’m not sure when it will come back in, but the tide will start to come back in over the next 12 months. Part of the reason for that prediction is that the construction of new competitive properties almost across the board from industrial to retail to office has declined over the last couple of years, and as that supply gets absorbed, I believe we’ll see an increase in rental rates and a decline in vacancy rates. But it’s going be real gradual.
Gregory Matus, vice president/regional manager, Marcus & Millichap
You’re going to see a pick-up in activity throughout the marketplace. In terms of vacancy, I think it’s going to stay pretty flat going into 2011. I don’t think you’re going to see major absorption, but I do think there are going to be a lot of workouts done with tenants to keep them in spaces, where tenants are going to be lured into projects where they can pay more affordable rents. For example, you may see a tenant who’s paying market rents in office and retail, say $25 per square foot, going to lease space for much lower rent, say 30-to-40 percent lower.
David Valdez, executive vice president, Blanca Commercial Real Estate
We have noticed a strong return in tenants’ confidence, including companies making serious consideration for adding headcount. Tenants are actively addressing evolving requirements that impact their real estate needs, and have sought to be well advised on the market. With the right strategies, there are great opportunities for tenants to procure office space at lower total occupancy cost market-wide — but particularly in the Central Business District and Coral Gables submarkets, where there are new additions to supply.