SOUTHEAST SNAPSHOT, FEBRUARY 2011

Ft. Lauderdale Office Market

In the second half of 2010 in the Ft. Lauderdale office market, there were a few significant deals that were signed but the majority of the leases mirrored the market, in which the average deal size was less than 4,000 square feet. For example, law firm Stephens Lynn Klein, P.L. leased 2,243 square feet at 200 SW 1st Avenue in Downtown Ft. Lauderdale and Resources Global Professionals leased 3,031 square feet at 100 NE 3rd Avenue in Downtown Ft. Lauderdale.

In a nutshell, the Class A and B Broward County office markets remain under stress. The Downtown Ft. Lauderdale market is suffering with a very high vacancy rate of 28 percent compared with the Western submarkets of Plantation (17 percent with some positive absorption) and the SW Broward market including Weston and Miramar with a vacancy factor of 23 percent.

What is interesting to note is the overall lack of sublet space in the market. Usually, when vacancy rates are high, there is a substantial amount of available sublet space and that is currently not the case. However, there are a few notable exceptions (DHL Americas is subleasing 60,000 square feet in Plantation at Cornerstone One) but in general it’s a different trend from previous downturns where there was an abundant amount of sublet space competing with direct space. This could be attributed to tenants just folding their tents instead of trying to sublet their space.

On average, it is taking 18 months or longer to lease vacant units. Landlords are continuing to offer generous tenant improvement packages, lowering their quoted rental rates, and offering significant free rent. Unless and until the office employment picture gets brighter, the office market is not going to recover significantly any time soon. 

The older Class B buildings are starting to suffer from a flight to quality as the Class B tenants are now taking advantage of the downturn in the office market and are relocating to nicer environments for the same or less money than they were paying at the end of their previous lease.

Broward County Class A office average asking rent is currently a little more than $29 per-square-foot per year while Downtown Ft. Lauderdale Class A space is averaging nearly $32 per-square-foot per year. Premium space in the downtown is commanding as much as $44 per-square-foot per year.

By comparison, average asking rent for Broward County Class B space is a little more than $22 per-square-foot-per year with the most affordable space on the market offered at $10.45 per-square-foot per year.

There are a few bright spots in that leasing activity picked up late last year and has continued into early 2011. The increased activity and a broader sense of optimism about the economy should make for a better year in the Greater Ft. Lauderdale area. The lack of new office development will ultimately help lower vacancy factors across the board when demand begins to pick up. 

— Ken Morris, SIOR, and principal of Morris Southeast Group/CORFAC International in Fort Lauderdale, Florida.

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