Much like Broward, Palm Beach County’s office market is chewing through its existing supply without any substantial new construction in the pipeline.
That could change in the near future, though, as rising rents tip into profitability for spec office projects, according to a new report from Avison Young.
Tenants in Palm Beach County signed 600,000 square feet of leases during the second quarter, 65 percent of which were located in Boca Raton. Absorption is down significantly from the more than 700,000 square feet consumed during 2015’s second quarter.
Despite that decrease in activity, vacancy countywide still dipped slightly to 15.8 percent, continuing a years-long trend of tightening market conditions. Rents have also been gradually rising, averaging $34.13 per square foot in West Palm Beach, and as high as $50.58 for Class A space in the city’s central business district — a price point that rivals even downtown Miami.
New development, however, is at a standstill. Not a single project was in the pipeline during this year’s second quarter, with the last delivery of 140,000 square feet occurring two years ago.
“While no new construction projects are currently planned for the immediate future, the market is clearly moving toward that tipping point where construction will not only be sustainable, but may be necessary,” Avison Young wrote in the report. — Sean Stewart-Muniz