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Studley report for south florida 4 q12
- 1. 4Q 2012 SOUTH Report Report FLORIDA S T U D L E Y O F F I C E M A R K E T A N D S PA C E D ATA R E P O R T MARKET HIGHLIGHTS Bouncing Along the Bottom LITTLE CHANGE IN AVAILABILITY RATES South Florida’s economy and office market witnessed some signs of improvement in 2012. Key South Florida’s overall availability rate, sectors such as tourism, retail and hospitality have bounced back. The region’s housing market is 22.2%, inched up by 0.1 pp for the quarter. still a bit shaky but seems to be finally stabilizing as sales and prices have picked up somewhat. The Class A rate, 23.4%, dropped by 0.5 More critically to the office market, companies in Latin America and the Caribbean are once again pp. expanding or setting up operations in South Florida – a trend that continued in the fourth quarter. RENTS DECREASE Coral Gables’ highest-caliber properties are capturing the attention of many of these businesses. Roughly one year after delivering, 396 Alhambra Circle is nearly two-thirds leased. Wine and spirits Overall rent ($26.92) fell by 0.7% quarter- distributor Diageo signed for 32,527 sf in the fourth quarter, relocating from 5301 Waterford in on-quarter. Class A rent ($30.87) declined the Miami Airport submarket. Earlier in the year, Swedish cellular provider Millicom International by 1.0%. Services leased 22,000 sf at the new building. Existing properties in Coral Gables have also seen a burst of leasing. Singer Xenos inked a 7,001-sf lease at 800 S. Douglas Road and MBF LEASING STABLE Healthcare renewed for 6,144 sf at 121 Alhambra Place. Despite this activity, demand in Coral Gables has not been strong enough to absorb the new product that has delivered – the Class A availability rate ended 2012 at 22.6%, a 3.4 pp jump from year-end 2011. Overall leasing totaled 1.4 msf, an increase of 1.5% from the previous quarter. Trailing As has been the case for about two years now, the new buildings in Coral Gables, Downtown four-quarter volume reached 5.7 msf, down Miami and Brickell create a disadvantage for landlords trying to lease space in older Class A and by 6.0%. B properties. On the other hand, movement within the market from these older properties to new construction creates vacancies – and opportunities for other tenants. Landlords have to be very MORE LARGE BLOCKS competitive when trying to capture businesses that are new to the region or that are interested in upgrading their space. Southeast Financial Center, which comprises about 20% of Downtown In Miami-Dade County, the number of large Miami’s Class A inventory, has had an availability rate of roughly 30% since midyear 2011. This contiguous blocks of space (50,000 sf or rate is on par with the submarket’s average even though the building has secured several new more) rose from 21 last quarter to 22. In tenants over the last year. For example, Banco de Crédito e Inversiones, Chile’s fourth-largest Broward County, the number of blocks bank, completed a 22,567-sf lease at the property in late September. increased from 14 to 18. The number of blocks in Palm Beach County stood at 8, Conditions are improving in the broader economy, but hiring in South Florida remains subpar and even with last quarter. demand for office space is unstable. The very highest-caliber properties are slowly reeling in the region’s most creditworthy companies and a good percentage of businesses that want to make a statement with their first South Florida location. The rest of the market is still losing a bit of ground. New buildings actually still have quite a bit more space to lease – the eight buildings in Miami- MIAMI-DADE TRANSACTION BAROMETER BROWARD TRANSACTION BAROMETER PALM BEACH TRANSACTION BAROMETER One Qtr One Qtr One Qtr One Qtr One Qtr One Qtr CBD Change Suburban Change CBD Change Suburban Change CBD Change Suburban Change Average Term: 10 yrs 7 yrs Average Term: 7 yrs 5 yrs Average Term: 7 yrs 5 yrs Concessions: Concessions: Concessions: Free Rent 6-12 months 6 months Free Rent 8 months 5 months Free Rent 12 months 7 months Tenant Improvements $50.00/sf $35.00/sf Tenant Improvements $40.00/sf $25.00/sf Tenant Improvements $40.00/sf $30.00/sf Parking 1.5 spaces/1,000 sf 3.5 spaces/1,000 sf Parking 2 spaces/1,000 sf 4 spaces/1,000 sf Parking 2 spaces/1,000 sf 4 spaces/1,000 sf Outlook: Demand remains lackluster, though some properties Outlook: Job creation remains slow and supply exceeds Outlook: Leasing activity remains steady throughout this with relatively high occupancy levels and modest near- demand. Competition continues to be intense. submarket. term rollovers are holding the line on concessions. Up Down Unchanged
- 2. ($/sf) Rental Rate Trends Dade County that have delivered since 2008 total 3.2 msf and still had 1.2 msf available $40 at year’s end. $35 $31.46 $30.87 $30 Consequently, although the office market found a floor in 2012, it was still for the most $25 part bouncing along the bottom as the year came to a close. Leasing activity was quite $25.70 $20 $23.48 stable, remaining at 1.4 msf for the second quarter in a row. Deal volume in 2012 (5.7 $15 msf) declined by 6.0% from the 6.1 msf recorded in 2011. Although leasing fell from a $10 year ago, it still exceeded the market’s long-term average of 3.4 msf by 37.6%. Despite $5 the steady leasing, at the end of 2012 South Florida had 24.7 msf being marketed for $0 Class A Class B & C lease – a 6.7% increase from a year ago. On an annual comparison, Class A space broke 2007 4Q 2008 4Q 2009 4Q 2010 4Q 2011 4Q 2012 4Q even with 11.9 msf being marketed, an increase of 0.4% from the fourth quarter of 2011. A couple of submarkets stand out as having made some inroads in terms of reducing Four-Quarter Trailing Leasing Activity* excess Class A space. These include Brickell (with a 17.2% year-on-year decline to 1.0 (msf) 4.0 Class A Class B & C msf) and Downtown Fort Lauderdale (an 8.6% decline to 1.1 msf). Even so, Class A 3.5 availability availability rates in Brickell (25.4%) and Downtown Fort Lauderdale (23.8%) 2.9 3.0 were very high as 2012 ended. 2.5 2.1 2.8 2.0 South Florida’s office market is still suffering from lethargic labor markets and widespread 1.5 2.0 business caution. The region’s strongest employment growth has been in industries such 1.0 as healthcare, retail and leisure/hospitality – sectors that typically do not lease traditional 0.5 office space. Employment numbers underscore the extent to which South Florida lags 0.0 *Sum of leasing activity in prior four quarters the nation and other Florida metro areas in terms of job creation, and office-using 2007 4Q 2008 4Q 2009 4Q 2010 4Q 2011 4Q 2012 4Q employment in particular. As of November, South Florida had only recouped 29.1% of the office-using jobs it lost during the recession, well below the U.S. recovery rate of 64.9%. Availability Rate Trends (%) Office-using employment in the region increased by 1.0% in 2012, well below the growth 30% rates for the nation as a whole (+1.9%) and for Tampa Bay (+3.4%) during the same 25% 23.4% period. 20% 16.5% 21.2% Most local companies remain reluctant to commit to capital expenditures unless they 15% know such outlays will pay near-term dividends. These expenditures include investment 10% 12.8% in office space or payroll expansion. Companies have kept their spending in check with good reason. Economic growth in South Florida has been lackluster and the broader 5% national economy provides ample causes for concern heading into 2013 – including a standoff on the debt ceiling, federal spending cuts and further tax hikes. Many tenants Class A Class B & C 0% 2007 4Q 2008 4Q 2009 4Q 2010 4Q 2011 4Q 2012 4Q are renewing or in some cases signing short-term extensions. The largest lease renewal of the quarter was Holland & Knight’s deal for 98,000 sf at 701 Brickell Avenue. Overall Large Block Trends* 25 22 South Florida’s office market still relies principally on demand from corporate space 20 19 users such as banks and law firms, which are shedding space where and when they 17 can. These core space users are seeking both quality and optimal efficiency. Expansions 18 15 remain few and far between and most entail the filling out or addition of a floor. Foley & 15 Lardner, for example, added 11,051 of space in its renewal and expansion lease at One 10 8 Biscayne Tower. In Downtown Fort Lauderdale, Boies, Schiller & Flexner completed a 5 *Contiguous spaces >=50,000 sf 22,632-lease at 401 East Las Olas Boulevard. Miami-Dade Broward Palm Beach 0 Although availability actually increased slightly in 2012, landlords have pulled back 2010 4Q 2011 2Q 2011 4Q 2012 2Q 2012 4Q somewhat on concession packages in many Class A properties. Most landlords have MAJOR TRANSACTIONS Major Transactions Tenant Sq Feet Address Market Area Holland & Knight 98,000 701 Brickell Avenue Brickell Foley & Lardner LLP 36,531 2 South Biscayne Boulevard Downtown Miami Diageo 32,527 396 Alhambra Circle Coral Gables/Grove Boies, Schiller & Flexner 22,632 401 East Las Olas Boulevard Downtown Fort Lauderdale Banco de Crédito e Inversiones 22,567 200 South Biscayne Boulevard Downtown Miami Ferraro Law Firm 21,363 600 Brickell Avenue Brickell Apotex Corp. 20,043 2400 North Commerce Parkway SW Broward Aplifi 14,621 500 West Cypress Creek Road Cypress Creek/Fort Lauderdale Regus 11,760 2200 North Commerce Parkway SW Broward Lydecker Lee Berga Dezayas LLC 8,853 1221 Brickell Avenue Brickell Ediets, Inc. 8,577 555 South Andrews Avenue North Broward Todo 1 8,073 10451 NW 117th Avenue West Miami/Airport Singer Xenos 7,001 800 South Douglas Road Coral Gables/Grove Spectrum Programs, Inc. 6,425 790 East Broward Boulevard Downtown Fort Lauderdale Exfuse 6,410 4200 Northcorp Parkway North Palm Beach Sum of Top 15 Leases 325,383 Sum of 4th Quarter Leasing Activity 1.4 MSF
- 3. little ability to increase rents, though. Overall asking rent slipped by 0.7% from $27.12 to Overall Rental Rate Comparison $26.92, while Class A rent dipped by 1.0% from $31.18 to $30.87. Even submarkets with Brickell $38.53 a significant amount of new product have seen rents stagnate. Class A rents decreased Coral Gables/Grove $32.28 by 1.4% to $35.02 in Coral Gables and by 2.7% to $34.87 in Downtown Miami. Class A Downtown Miami $31.78 US Index $30.16 rent in Brickell ticked up by 0.1% to $41.35 but were down by 0.3% from a year ago. Miami-Dade County $29.62 NE Dade $28.65 Smaller and mid-sized tenants still have ample options to consider. Creditworthy tenants SW Broward $28.02 South Dade willing to make long-term commitments can command very generous terms, particularly $27.21 Downtown Frt Ldrdle $27.03 in areas such as Boca Raton, which ended 2012 with an overall availability rate of South Florida $26.92 26.9% For instance, The John Hancock Financial Network/The Partners Network signed Palm Beach $26.15 a 10-year and 10-month, 15,000-sf lease at the Fountains Center in Boca Raton. The Boca Raton $25.69 Broward County $24.49 property is just a couple of blocks from the financial advisors’ current space at 7000 W. Sunrise/Plantation $24.45 Palmetto Park Road. The company will receive signage on top of the building as part Hollywood/Hallandale $24.26 of the lease. In Miami-Dade County, properties in peripheral submarkets such as West Palm Beach County $24.22 N Palm Beach $23.84 Kendall and South Dade offer very strong bargains to tenants with geographical flexibility. West Miami/Airport $23.49 Availability in those submarkets exceeds 30%. Cypress Cr/Ft Ldrdle $22.95 Miami Lakes/Hialeah $22.60 Market Office property sales in South Florida have not registered the comeback seen in top North Broward $22.10 Submarket Boynton/Delray $21.08 markets such as New York City, Washington, DC and Boston. Few owners of properties Type with steady cash flow are willing to part with these assets. Buildings with significant New $34.21 vacancies are generally selling at a steep discount from their last purchase price. For Relet $25.68 Sublet $24.09 example, Sawgrass International Corporate Park, a four office building portfolio, sold for ($/sf) $0 $10 $20 $30 $40 $51.5 million ($148.60 psf) last summer. At time of sale, vacancy was more than 30%. During 2012, South Florida registered only one sale exceeding $100 million (Miami Center at 201 S. Biscayne Boulevard) and just a handful of sales surpassing $50 million. Availability Rate Comparison The more widespread availability of commercial loans has helped some owners avoid South Dade 14.3% Market having to sell at such a steep loss. On the other hand, certain properties are headed Hollywood/Hallandale 14.4% Submarket to special servicing, a painful reminder that some buildings are still working their way Coral Gables/Grove 16.8% through the fallout from the recession. Miami Lakes/Hialeah 17.1% US Index 17.4% SW Broward 18.2% Looking Forward NE Dade 18.9% Little change is expected in either the national or local economies during 2013. Assuming N Palm Beach 19.3% a major shock is avoided and Washington works through its standoff regarding federal West Miami/Airport 19.5% spending, most economists expect hiring to pick up a bit in the second half of 2013. The Brickell 20.2% improving housing market supports state and local revenue growth in Florida and boosts Miami-Dade County 20.2% related sectors such as construction and mortgage brokers. Tenants still have a deep Sunrise/Plantation 21.7% pool of diverse types of space to consider and should generally remain in the driver’s South Florida 22.2% seat, particularly if they are creditworthy tenants willing to commit to space. The market Broward County 22.3% is also ideal for companies eager to consolidate multiple operations. Downtown Frt Ldrdle 22.9% Palm Beach 23.1% North Broward 24.3% ABOUT OUR FIRM Palm Beach County 25.8% is the only global tenant advisory firm with a pure tenant representative delivery platform. Cypress Cr/Ft Ldrdle 26.3% Founded in 1954, Studley pioneered this conflict-free business model. Today, with 24 offices nationwide Boca Raton 26.9% and an international presence through its London office and AOS Studley throughout Europe, Studley pro- Downtown Miami 31.4% vides strategic real estate consulting services to top-tier corporations, law firms, nonprofits, government Boynton/Delray 45.4% agencies and institutions of higher education. Information about Studley is available at www.studley.com. (%) 0% 10% 20% 30% 40% 50% OFFICE-USING EMPLOYMENT TRENDS Millions South Florida Millions National 0.7 10.0% 30 Total Empl. 4.0% Total Empl. % Ann. Change % Ann. Change 8.0% 3.0% 29 0.6 6.0% 2.0% 28 1.0% 4.0% 2008 0.5 0.0% 2009 2.0% 27 -1.0% 2009 0.0% 26 0.4 -2.0% -2.0% -3.0% 25 0.3 -4.0% -4.0% 24 -6.0% -5.0% 2002 2003 2004 2005 2006 2007 2008 2010 2012 2011 2002 2003 2004 2005 2006 2007 2010 2012 2011 0.2 -8.0% 23 -6.0% Source: Bureau of Labor Statistics STUDLEY OFFICE MARKET AND SPACEDATA REPORT
- 4. MARKET SNAPSHOT: 4Q 2012 SUBMARKET TOTAL LEASING ACTIVITY VACANT AVAILABLE AVAILABILITY RATE ASKING RENTS PER SF Inventory Last 5 % 5 pp 5 % 5 SF 12 Yr This Change Yr Yrs This Change Yr Yrs This Change Yr Yrs (1,000’s) Mos Average Qtr from Ago Ago Qtr from Last Ago Ago Qtr from Ago Ago (1) Last Qtr Qtr Last Qtr Miami Lakes/Hialeah 3,539 99 95 606 1.2% 529 206 17.1% 0.2% 15.0% 6.6% $22.60 0.5% $23.68 $22.79 Miami Lakes/Hialeah - Class A 885 15 29 254 -4.4% 284 46 28.7% -1.3% 32.1% 9.5% $24.45 1.2% $25.43 $23.70 West Miami/Airport 12,035 863 772 2,351 -2.5% 2,227 1,272 19.5% -0.5% 20.3% 12.1% $23.49 -0.6% $23.26 $23.80 West Miami/Airport - Class A 5,355 599 499 882 -0.8% 854 469 16.5% -0.1% 16.5% 10.2% $25.84 0.3% $25.42 $24.21 Downtown Miami 7,988 279 301 2,508 5.7% 2,122 627 31.4% 1.7% 30.3% 9.9% $31.78 -2.1% $33.46 $30.56 Downtown Miami - Class A 5,027 170 225 1,435 2.2% 1,419 298 28.5% 0.6% 28.2% 7.7% $34.87 -2.7% $39.41 $34.93 Brickell 6,967 758 477 1,409 -2.0% 1,753 783 20.2% -0.4% 25.2% 13.6% $38.53 0.2% $37.65 $39.29 Brickell - Class A 4,100 538 316 1,042 -5.7% 1,259 276 25.4% -1.5% 30.7% 8.4% $41.35 0.1% $41.48 $42.55 Coral Gables/Grove 8,557 505 435 1,433 -1.9% 1,412 687 16.8% -0.3% 16.8% 9.0% $32.28 -0.3% $31.05 $35.25 Coral Gables/Grove - Class A 4,180 273 256 943 5.3% 801 389 22.6% 1.1% 19.2% 10.5% $35.02 -1.4% $34.41 $38.74 North Broward 4,255 195 164 1,033 7.4% 919 502 24.3% 1.7% 21.9% 11.8% $22.10 -0.6% $22.59 $22.65 North Broward - Class A 928 0 52 384 11.9% 351 134 41.4% 4.4% 37.8% 14.6% $24.12 -2.1% $25.89 $24.37 Cypress Creek/Fort Lauderdale 8,610 446 416 2,262 4.1% 2,051 1,146 26.3% 1.0% 24.0% 13.5% $22.95 -0.3% $22.58 $22.37 Cypress Creek/Fort Lauderdale - 2,992 172 137 518 -3.9% 636 310 17.3% -0.7% 21.3% 11.2% $24.97 0.2% $25.57 $25.22 Class A Sunrise/Plantation 7,288 212 436 1,583 1.6% 1,454 1,065 21.7% 0.3% 21.0% 17.3% $24.45 -0.4% $24.59 $26.34 Sunrise/Plantation - Class A 4,579 123 326 1,132 1.3% 1,062 737 24.7% 0.3% 23.6% 19.5% $26.67 -1.0% $27.50 $27.88 Downtown Fort Lauderdale 6,090 307 337 1,393 1.7% 1,461 1,325 22.9% 0.4% 24.2% 22.1% $27.03 -0.5% $27.76 $29.96 Downtown Fort Lauderdale - 4,479 239 277 1,065 1.0% 1,165 1,088 23.8% 0.2% 26.0% 23.8% $28.06 -0.1% $28.51 $30.47 Class A Southwest Broward 3,715 200 183 677 7.5% 532 357 18.2% 1.3% 15.6% 10.1% $28.02 -0.9% $28.23 $28.77 Southwest Broward - Class A 2,329 140 142 484 0.3% 389 284 20.8% 0.1% 17.2% 13.1% $29.24 -0.3% $29.41 $30.02 North Palm Beach 4,875 173 163 942 -5.6% 931 668 19.3% -1.1% 19.9% 15.2% $23.84 4.5% $23.10 $27.33 North Palm Beach - Class A 1,775 91 71 419 1.8% 442 243 23.6% 0.4% 24.9% 16.5% $25.11 1.2% $25.69 $33.59 Palm Beach 7,543 379 354 1,739 1.8% 1,724 1,369 23.1% 0.4% 23.7% 19.4% $26.15 -3.3% $27.11 $32.42 Palm Beach - Class A 3,151 117 164 607 -2.5% 573 665 19.3% -0.5% 18.6% 25.4% $32.16 -0.3% $32.51 $35.51 Boynton/Delray 2,047 86 99 929 -0.5% 556 378 45.4% -0.3% 28.5% 22.3% $21.08 -0.3% $21.44 $22.53 Boynton/Delray - Class A 304 1 26 78 13.5% 46 54 25.5% 3.0% 15.0% 25.7% $19.15 1.9% $18.82 $23.49 Boca Raton 11,784 600 760 3,172 -6.6% 3,068 2,699 26.9% -1.9% 27.5% 25.4% $25.69 -0.6% $26.20 $28.64 Boca Raton - Class A 6,706 342 480 1,927 -9.7% 1,897 1,884 28.7% -3.1% 28.7% 29.7% $26.68 -1.0% $27.28 $29.20 MIAMI-DADE TOTAL 52,094 2,995 2,473 10,533 1.6% 9,964 4,693 20.2% 0.3% 20.1% 10.4% $29.62 -0.7% $29.64 $30.29 MIAMI-DADE TOTAL - Class A 23,298 1,704 1,458 5,257 -1.6% 5,262 1,872 22.6% -0.4% 23.1% 9.9% $34.01 -0.8% $35.06 $33.79 BROWARD COUNTY TOTAL 33,290 1,506 1,687 7,427 3.4% 6,938 4,618 22.3% 0.7% 21.3% 14.9% $24.49 -0.5% $24.68 $26.05 BROWARD COUNTY TOTAL - 15,786 683 962 3,628 0.9% 3,645 2,587 23.0% 0.2% 23.3% 17.6% $26.96 -0.6% $27.55 $28.75 Class A PALM BEACH COUNTY TOTAL 26,249 1,237 1,376 6,782 -3.6% 6,279 5,114 25.8% -1.0% 24.7% 21.5% $24.22 -0.6% $24.96 $29.30 PALM BEACH COUNTY TOTAL - 11,936 551 741 3,030 -6.4% 2,957 2,846 25.4% -1.7% 25.1% 26.8% $28.53 -0.3% $29.08 $34.34 Class A SOUTH FLORIDA TOTAL 111,633 5,739 5,535 24,742 0.7% 23,181 14,425 22.2% 0.1% 21.6% 14.4% $26.92 -0.7% $27.17 $28.40 SOUTH FLORIDA TOTAL - 51,020 2,938 3,161 11,915 -2.1% 11,864 7,305 23.4% -0.5% 23.6% 16.5% $30.87 -1.0% $31.67 $31.46 Class A SOUTH FLORIDA CONTACTS 200 S. Biscayne Blvd. Suite 1830 Miami, FL 33131 (305) 423-1919 Corporate Research Contact The information in this report is obtained from sources deemed Steve Coutts - SVP, National Research reliable, but no representation is made as to the accuracy thereof. scoutts@studley.com Statistics compiled with the support of The CoStar Group. Copyright © 2013 Studley (212) 326-8610 (1) Percentage point change for availability rates. Unless otherwise noted, all rents quoted throughout this report are average asking gross (full service) rents psf. Statistics are calculated using both direct and sublease information. STUDLEY OFFICE MARKET AND SPACEDATA REPORT