Real Estate Florida - May/June 2009

WITH OFFICE VACANCY IN FLORIDA reaching 18% through the first quarter, brokers across the state are looking for any signs it won’t go higher. Now that statewide unemployment—a key barometer to the sector—appears to be peaking at around 10%, some observers believe it will be a matter of time before companies regain confidence and start planning their long-range space needs again.

Three million square feet of negative absorption was recorded in the state’s largest office markets through the first three months of

By Carl Cronan

2009, indicating possibly the worst quarter

ever for Florida’s office sector, according to Cushman & Wakefield of Florida. Now the conventional wisdom is that the worst is behind and, judging from a burst of activity in new leases and renewals lately, conditions should be more favorable going forward.

“That’s reflective of the bottom of the market,” says Larry Richey, senior managing director at Cushman & Wakefield’s Tampa office. “The pendulum has swung back the other way.”

That doesn’t necessarily mean prospective office tenants will immediately begin signing new deals, he adds, though current indecisiveness by companies could lead to pent-up demand for space in quarters to come. “This may be a watershed moment,” Richey says. “The worst is over, but we may be bumping bottom for a while.”

Tom Capocefalo, managing director of Studley’s Tampa office, is a bit more cautious in his outlook for an office market recovery, noting that increased interest being shown by prospects lately could be coming from the same small group scouting several different buildings. “Those tenants that are looking might also be downsizing,” Capocefalo observes.

One positive sign contributing to a

comeback in the office sector, Richey points out, is that no new space was delivered anywhere in Florida during the quarter, largely due to the ongoing credit freeze and at least two years of declining demand. A total of 4. 8 million square feet is currently under construction statewide, mostly in the Miami market, based on Cushman & Wakefield’s estimates.

Three new skyscrapers are well on their way to completion in Downtown Miami, while plans for others have been put on hold by the economy. Brokers there believe the city’s reputation as an international business center will eventually help fill those buildings, while tenants in suburban markets may be inclined to take up older class A urban vacancies. “These are positive signs for new buildings, although leaseup is slow,” Capocefalo says.