June 2008 – Office Market Report
On June 13th, real estate brokers, Tony Puente, Robert Meneses and I presented the first Annual South Florida Office Market Report to over 120 members of the “CIASF” Commercial Industrial Association of South Florida. This report provides a snapshot of the Office Market Conditions for the year. For research purposes Miami-Dade County is divided into 7 regions and information for each region was provided. This information includes a description of the region, office rental rates, example of a typical lease, a typical office building sale and a typical condominium office sale. Included with each example was a complete description of the building and a photo.
Here from the report is the summary of Office Market Conditions for 2008:
· The office leasing and investment sales market is healthy, but there is a yellow (cautionary) flag waving in the wind. Demand/absorption of new space is expected to be flat or negative for 2008 with some tenant growth in legal, accounting and insurance companies, but a significant decline in demand from financial, mortgage and real estate companies.
· With no significant deliveries of office space in 2006 and 2007 up to 4 million SF of office space will be delivered over the next 12-30 month with three large buildings in the Downtown/Brickell corridor and eight in the Doral and surrounding areas. Adding to the rental supply are some condo office buildings reverting to “for lease” buildings creating a hybrid-building ownership situation.
· The leasing market will remain active with up to 20% of leases expiring in the next two years. Also, as rental rates rise to $50/RSF large tenants will seek less expense alternative locations. In addition, the “for sub-lease” market will continue growing and offer alternatives to tenants.
· Demand for office investments by institutions remains strong and will continue. However, price expectation by buyers has changed significantly with higher capitalization rates, difficult debt and finance markets resulting in lower prices.
After the information on transactions in each region was presented, I provided my analysis of the future “Supply and Demand for Office Space” for Miami-Dade. For the current demand analysis I multiplied the number of employees in the Department of Labor categories, information, finance and insurance, real estate, professional services and management by a factor of 325 SF per employee. This represents an indicator of the demand. For future demand I projected a 2,000 per year increase in employee in these categories. For the existing supply analysis I totaled the adjusted area of all office buildings in Miami-Dade over 5,000 SF. This information was from the Public Records available at the office of the Property Appraiser. For future supply I projected an annual increase in office space of 500,000 SF except for 2009 when 3,500,000 SF is expected to be put on the market. The difference between supply and demand is the vacancy rate. This rate is projected to increase above 12% in 2009 and if the assumptions are correct decline in future years to a more typical rate of 8% to 9%.
If you would like to view the entire presentation in a downloadable and printable format you can go to www.dixoncommercialre.com and click on the CIASF Office Market Report in blue at the bottom of the page or you can go directly to the report if you click on this link:
2008 South Florida Office Market Report Link
For information to join the Commercial Industrial Association of South Florida contact Nick Kallergis Executive Director at 305-443-6233.
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by Tom Dixon
