Monday, May 24th, 2010
By: CB Richard Ellis
The Broward County office market is expected to experience market fluctuations throughout all of 2010, yet there appears to be a slow recovery period beginning to take shape.
Currently, Florida’s overall unemployment rate stands at 12.2%, slightly higher than the 12% rate reached during the peak of the 1973-1975 recession. For the last five years, Broward County’s office employment has declined by 1.3%, but in the last 12 months, employment declined by 4.2%.
There are now currently 169,700 office workers in Broward County, according to a recent forecast by CBRE’s Econometric Advisors. Employers have begun hiring temporary workers, but it is still too early to commit to expanding payrolls until economic stability improves. Professional and business services are projected to post the best job performance. Overall, office employment in Broward County is projected to grow by 3.1% over the course of the next five years.
Total vacancy increased by 5.6% from first quarter 2009 and 1.6% from year-end 2009. Total available sublease space now stands at 631,363sf for first quarter 2010, as compared to 700,478sf for first quarter 2010.
Tenants in the market are looking to take advantage of market conditions to either upgrade their space, downsize or relocate to a location having lower overall costs. Overall leasing activity, including renewals, totaled 353,163sf for first quarter 2010, down 22.3% from the 454,314sf recorded during first quarter 2009. Notable activity includes:
- 80,448sf lease signed by Franklin Templeton at 300 Las Olas Place. They will relocate from Broward Financial Centre into a building currently occupied by Stiles Realty. The transaction was a 10-year deal valued to be around $25 million.
- 62,241sf lease signed by Broadspire Services at 1391 NW 136th Avenue in Sunrise at the former Republic Services building. Broadspire Services moved from the Plantation submarket after subleasing 51,067sf to Kaplan University.
- Microsoft renewed its 56,049sf lease at Cypress Park - Bldg II, Fort Lauderdale.
- As a result of federal action against the attorney Scott Rothstein, 34,000sf of space within the Bank of America building was returned to market first quarter 2010 when offices were vacated.
Rates
The overall average asking direct lease rate declined by 8.4% from the $18.08 psf NNN rate recorded during fourth quarter 2009. Class A space declined by 9% over this same time period last year from $20.01 NNN, while Class B space decreased from $15.83 psf NNN to $14.87 psf NNN, or 6%.
Landlords have become increasingly aggressive in attempting to retain tenants and attract tenants, providing concessions such as temporary rent abatement or reduced rental rates in exchange for early renewals from existing tenants. It is also common practice to offer free rent - usually one month for every year in a lease term.
Absorption
For the fourth consecutive year, negative net absorption was recorded as supply continued to outpace demand. During this same time period last year, overall net absorption was -483,810sf. The rate of negative absorption is starting to slow. This factor, coupled with limited new construction, will limit the amount of speculative space added to the market within the immediate future.
The majority of the activity in the market consists of lease renewals and consolidations. In review, landlords are adjusting rents and offering favorable incentives in an effort to fill their buildings. Nortel Networks recently vacated 144,000sf in the Sawgrass submarket due to bankruptcy, while other tenants may announce similar plans in 2010.
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