Neil Merin, chairman of NAI/Merin
Hunter Codman Inc. in West Palm
Beach. About 8% of the tenants in
buildings within his company’s management portfolio were in mortgage
banking and title insurance. However,
about half of this group had trouble
covering their rent last fall, with many
of them either declaring bankruptcy,
defaulting on leases or downsizing.
Boca Raton’s office market, which
had a minimal amount of sublease
space over the last several years, experienced a sharp jump over the past
year, according to Merin. Office vacancy there measured 15.5% by the end
of 2007, up four full percentage points
from 2006, with two percentage points
attributed to sublease availability.
Meanwhile, overall vacancy for Palm
Beach County measured 14.2% at the
end of 2007, according to Cushman &
Wakefield of Florida.
The accumulation of sublease space
has caused landlords to lower their
rents, says Merin. This trend is affecting
new buildings more than existing properties because rental rates were higher
at the newer properties, he says. Triple-net rents for new class A space in Boca
Raton were about $26 per sf as recently
as last summer, yet dropped to about
$22 per sf by year end.
Palm Beach County is an enigma,
says Tom Capocefalo, managing director of the South Florida office of Stud-ley Inc. Downtown West Palm Beach
has always had two, now three, high-profile office buildings with occupancy
as low as 80% but full-service rents of
$40 to $48 per sf, which is substantially
higher than most rents in Miami and Ft.
Lauderdale. Yet tenants who want to be
there are willing to pay those higher
rates, especially financial services firms
with wealthy local clients, he says.
In Miami-Dade County, housing has
had more of an impact on suburban offices, according to Capocefalo. There is
an increase in sublease space vacated
by housing-related businesses and architectural firms are not expanding as
aggressively as they once were, but
other kinds of firms are taking their
place, including law firms and other
companies involved in litigation and
bankruptcy, as well as international
banks, he says.
ONE TOO MANY BUILDINGS?
The Miami market had positive net absorption of 422,926 sf at the end of
2007, with 4. 5 million sf under construction, according to CB Richard
Ellis. Three downtown rental projects
are in the works in the high-powered
Brickell Avenue corridor that will add
1. 8 million sf of new office space.
“There is pent-up demand for large
blocks of space,” says Capocefalo. “Are
there one too many buildings being
built?”
It’s a lot different than last year, when
Brickell Avenue rents actually increased
because of limited supply, he says.
