Real estate: the outlook for 2003 - South Florida's real estate market

South Florida CEO, Feb, 2003 by Richard Westlund

Tenants are more sensitive to rental rates than they have been in the past few years. The office market is no longer about being on the highest floor with the best views. Tenants want more efficient space and the best possible rent.

One of the most interesting developments in the office market is bringing a residential component to the Miami central business district. That trend will have a positive effect on the office market because people like to live where they work and work where they live. And as you build residential, that brings more retail, which serves as an amenity for the office market as well.

Tim Prunka

Executive Director for Florida and the Caribbean, lnsignia/ESG, Miami

* The healthiest of all the South Florida office markets are downtown Miami and Brickell Avenue. There are limited vacancies and just a few buildings that have space issues. That's why so many buildings have sold in recent months at record numbers.

Coral Gables still has an overhang of supply from new buildings; it's a market that's on the soft side. Miami Beach is the softest of all the major Miami-Dade office markets, while Airport West market is also soft and has the largest supply of sublease space. But we think Airport West has hit the bottom and will recover slowly with the economy.

Downtown Fort Lauderdale is about 20 percent vacant. There's also a fair oversupply in Cypress Creek, while space in West Broward is filling up, even with a lot of speculative development. People just want to be located out there.

All the markets across the board are suffering from sublease space oversupply, but South Florida hasn't suffered as badly as other national markets.

Terry Stiles

CEO, Stiles Corporation, Fort Lauderdale

* In West Broward, I think we'll see a recovery in the office market by the end of the year. Luckily, there's not a lot of new product being developed. The driver is its close proximity to Miami-Dade County. Many companies like a location that attracts employees from both counties.

I think the downtown Fort Lauderdale market will have the biggest renaissance of any submarket in South Florida. We have almost 5,000 residential units under development that will come on line in 2003 and early 2004, creating a true 24-hour city. Office employees like this urban lifestyle.

The fact that we've finished a major building [Las Olas City Centre] is impacting vacancy rates in the downtown Class A market. But we're seeing more activity today, and have recently signed an insurance company, a Latin American phone provider, and a real estate company. We're also seeing the "shadow space" [sublease] in our buildings being backfilled. We feel good about that trend -- there's certainly activity.

INDUSTRIAL

Jose Juncadella

Senior Vice President, Codina Realty Services, Coral Gables

* Last year saw negative absorption in Miami-Dade as the overall vacancy rate, including sublease space, rose to 12.3 percent. This year, we'll see a pickup in activity.

Miami International Airport is already showing an increase over last year's cargo figures. Even though some Latin countries are having problems, nations like Costa Rica, Nicaragua, Ecuador and Peru are increasing their flow of cargo traffic. We expect the airport's expansion to boost long-term demand for warehouse and distribution space. That will attract new tenants, and lead existing tenants to expand their facilities.