New office leasing activity is on an upward trajectory in Broward and Palm Beach, but vacancy rates remain in the high double-digits in both counties, according to a recently released report.
Palm Beach County fared better than Broward in filling up vacant spaces in the fourth quarter of 2021, as well as boosting landlords’ confidence to raise rents. Palm Beach County also outperformed Miami-Dade County, where the overall vacancy rate hit 16 percent in the final quarter of 2021.
Broward landlords, on the other hand, were forced to provide more tenant concessions and space improvements, as new projects that came online affected vacancy rates, according to the report by Cushman & Wakefield.
The vacancy rate in Broward jumped to 16.9 percent in 2021’s fourth quarter, compared to 14.7 percent during the same period of the previous year. The increase was due to new Class A office space coming online, including at The Main Las Olas mixed-use project in downtown Fort Lauderdale, according to the report. The project’s 387,402-square-foot office tower is more than 50 percent leased.
Still, new leases totaling 2.4 million square feet helped soften the vacancy blow in Broward during the last quarter of 2021, according to the report. Online pet retailer Chewy signed the tri-county region’s biggest lease of last year, inking a deal for 221,597-square-feet for the company’s new headquarters in a new two-building office project in Plantation developed by Midtown Capital Partners.
Most new tenants flocked to Broward’s suburban office submarkets in the fourth quarter, with only 20 percent of new leases in the Fort Lauderdale commercial business district, Cushman & Wakefield found. However, the number of new leases was not enough to offset tenants vacating spaces during the last 18 months, the report shows.
As a result, the overall average asking rent dipped to $35.30 in the most recent quarter, from $35.94 a square foot in 2020’s fourth quarter, according to the report.
“Landlords in both Class A and Class B assets were more aggressive with pricing, while offering more concessions, as well as higher tenant improvement amounts to make tenants sign deals,” the report states.
Palm Beach County
Palm Beach County’s office market outperformed Miami-Dade and Broward when it came to raising occupancy. The county’s overall vacancy rate ended the latest quarter at 13.2 percent, compared to 14.5 percent during the same period of 2020, according to the report.
New leasing activity jumped 77 percent, year over year, with tenants moving into more than 2.2 million square feet of new office space, the report shows. The Palm Beach market had a total positive absorption of 528,000 square feet in 2021, the highest since 2016.
As a result, landlords raised the average asking rent by 3.8 percent to $39.86 a square foot in the most recent quarter. In 2020’s fourth quarter, Palm Beach office tenants were paying an average rent of $38.40 a square foot. In the county’s commercial business district, which includes downtown West Palm Beach, Class A rents hit $65.42 a square foot, a 6.7 percent bump compared to the fourth quarter of 2020.
Palm Beach County’s office market performance likely fueled bullish investor activity, as a number of significant office deals closed last year, including a slate of acquisitions in West Palm Beach by developer Stephen Ross. On one of the sites, acquired for $20.1 million in July, Ross’ Related Companies is building the 25-story One Flagler, where two financial firms and a Greek restaurant have signed leases.