Demand for Class B office space is up as office rents continue rising in South Florida.
About 209,000 square feet of Class B office space was absorbed in the third quarter of this year compared to about 120,000 square feet of Class A space the previous year, according to a new report from Newmark Knight Frank. Nearly 1 million square feet of office space was delivered over the past year.
Overall asking rents are up to $32.87 per foot from about $31 a foot, surpassing the previous cycle’s peak of $30.38 per foot.
Despite the surge in Class B absorption, overall vacancy rates rose to 12.1 percent, up from 11.9 percent. The number of deals fell to 480 leases totaling 4.4 million square feet, down from 5 million square feet. Medical tenants took the majority of mid-sized and large lease deals, accounting for 174,500 square feet so far this year. The insurance sector followed closely with 150,000 square feet of space leased year-to-date.
Demand for office space in Miami-Dade outpaced supply with more than 206,000 square feet absorbed. However, the vacancy rate rose to 11.5 percent, up from 10.8 percent from the previous year.
The overall average asking rent for office space went up to $36.53 per square foot from nearly $35 a foot in the third quarter of 2017, according to the report.
In one notable deal, Crocker Partners and Walton Street Capital took over a limited partnership that owns Landing at MIA, a 1.52 million-square-foot business park near Miami International Airport.
Year-to-date net absorption reached 41,554 square feet, pushing vacancy up slightly to 11.6 percent, down from 11.3 percent.
Average asking rent rates for Class A buildings within Fort Lauderdale’s Central Business District range from $50 per square foot to $57 per square foot, the highest recorded for downtown Fort Lauderdale, according to the report.
Broward County saw more buildings trade than in Miami-Dade or Palm Beach. Ten office buildings totally more than 980,000 square feet sold in the third quarter. More recently, a joint venture between Pacific Coast Capital Partners and NAI/Merin Hunter Codman paid $108.5 million for 1 East Broward, a 19-story office tower in downtown Fort Lauderdale.
Palm Beach County
The office vacancy rate rose in Palm Beach County as well, up to 13.7 percent from 13.5 percent last year. Nearly 77,000 square feet of space was absorbed in the third quarter.
Office sales slowed significantly during the third quarter. One 55,000-square-foot deal brought investment sales to 2.6 million square feet for a combined $371.4 million, year-to-date.