South Florida’s office markets report higher rents, drop in vacancy rates: Q2 reports
Overall rents ranged from $27 psf in Broward to $34 psf in Miami-Dade
Office vacancy rates fell in Miami-Dade, Broward and Palm Beach counties and asking rents rose, as the region’s office markets continue to stabilize, according to Colliers International’s second quarter reports.
In Miami-Dade, the vacancy rate fell 0.3 percent from the previous quarter to 9.4 percent, the lowest of all three counties. The tightest vacancy rates in major submarkets were in Miami Beach at 6.1 percent, Aventura at 7.1 percent and Kendall at 7.3 percent.
Class A office rents, which Colliers predicts will hold steady in the third quarter, rose 1.1 percent to $41.89 per square foot. Overall rents inched up 0.4 percent to about $34 per square foot.
Seventeen office projects (and nearly 2 million square feet of space) are under construction in Miami-Dade, most of which is part of mixed-use development. That includes projects like MiamiCentral, Panorama Tower, and the office component of Wynwood 25. Plans for a handful of new boutique office buildings in Coconut Grove were also unveiled in the first half of this year.
In the second quarter, nearly 336,000 square feet of office space was absorbed and about 109,000 square feet was delivered, the brokerage said.
A lack of new construction pushed Broward’s vacancy rate to 10.3 percent, a 0.3 percent drop, and asking rents up 0.7 percent to $27 per square foot.
Despite the growth, healthcare-related tenants like call centers reduced their footprint in Broward, and negotiated shorter leases and renewals, according to Colliers. Net absorption rose to nearly 259,000 square feet in the second quarter, but was still low on a year-over-year basis.
The western suburbs of Broward stood out with a 6.5 percent vacancy rate, continuing a trend from the first quarter. Overall rents in southwest Broward averaged $30.31 per square foot.
Palm Beach County’s Class B and C office markets drove overall rents up 2.2 percent to $28.76 per square foot, while Class A rents fell 0.4 percent to $33.35 per square foot.
Nearly 32,000 square feet of Class A space was absorbed, while 137,000 square feet of Class B and C space was leased.
Investors are also increasingly interested in value-add properties. Last month, AEW Capital Management sold One Clearlake Centre, an older tower in West Palm Beach, to a joint venture between a Dallas-based private equity real estate manager and CREC for $42.3 million. The new owners plan to renovate the building and raise rents.
Palm Beach’s overall vacancy rate, which hovered at 12.2 percent for the previous two quarters, is back on the decline. It averaged 12 percent during the second quarter, down from 15.1 percent at the start of 2015, according to Colliers.