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

South Florida CEO, Feb, 2003 by Richard Westlund

Today, the new industrial parks, with their high ceiling heights and large turning radiuses, are outperforming older buildings. As for the telecom space, some specially equipped buildings have been taken back [by the lender], while others will struggle. Looking ahead, the biggest factor affecting the market will be lack of land for expansion.

Brett Dill

Executive Vice President, Swerdlow Group, Hollywood

* We're having no trouble keeping our buildings full, even with the downturn in the economy. For 2003, if we see an improvement in the national economy, I would expect South Florida to be one of the stronger industrial markets in the nation. If the economy doesn't turn around, we should at least remain stable. There's simply not enough vacant land available for developers to get into trouble again.

It's been two years since we've put up a new building. That's because the scarcity of land has put an upward pressure on prices, bringing in non-industrial or quasi-industrial users, such as manufacturing companies with Latin American sales offices or retail showrooms in front of their warehouses. Those users will pay more for the land, which may wind up pricing a typical warehousing distribution firm out of the market.

As for the telecom space, those buildings, with their enhanced physical structure, can still command a premium in the market. A call center or 24-hour service center will still pay for the hurricane-proof building, redundant power and other features.

Ed Easton

Chairman, The Easton Group, Miami

* Last year was not a good one for Miami-Dade's industrial market, but I think 2003 will be better. Sales of existing properties are commanding premium prices because of low rates and the availability of capital.

Occupancy will be growing again, leasing rates will be firming up and new construction will be off dramatically. Absorption will remain well below the all-time highs of the late 1 990s, but should still be about 1 million square feet for the year. Most of the available subleased space is being taken up rapidly, and I see that market tightening this year.

The telecom space remains hard to fill. That's where the biggest damage to the market has been done. It's hard to convert that space because of the cost; property owners just need to wait things out. Demand for freight forwarding and warehouse space is weaker than in the past. A typical user in the Airport West market might only want 35,000 square feet today, compared with 100,000 a couple of years ago.

Chris Metzger

Senior Director, Cushman & Wakefield, Fort Lauderdale

* The industrial market in Broward and Palm Beach is extremely healthy with overall vacancy rates of 8.6 percent and 6.3 percent, respectively. The demand for space in the past year has been tremendous, with very positive absorption figures. Many local companies are expanding, while a few larger companies opened up new facilities. The dot-coin collapse didn't impact the traditional industrial space, because those buildings had been structurally modified, placing them into their own sector.