Annual commercial real estate report: great expectations: after two years of high vacancies and rent concessions, the South Florida commercial real estate markets appear ready for a rebound. How soon and how strong depends on he sector—and even more on the neighborhood. But the fundamentals, as they say, are looking good - Annual Commercial Real Estate Report

South Florida CEO, Sept, 2003 by J.P. Faber, Rochelle Broder-Singer

"If you look at South Florida, the one positive [office] market is Southwest Broward," says Edgar Jones, the lead executive for the Rockefeller Group in South Florida, which began its operations here by developing a 225,000-square-foot building for Lucent in Miramar. "I think it probably has to do with availability of land, and the quality of what can be put there."

The Rockefeller Group has sufficient land to develop another 300,000 to 400,000 square feet in Miramar, and this year completed a 50,000-square-foot reservations center there for Delta. "Commercial--office and industrial--hasn't been the hottest market in the world," says Jones. "But, in the things we're doing, we're seeing the submarine come to the surface. In 2004 we'll probably be announcing something [new], if not before."

In Palm Beach County, where overall vacancy rates are similar to those in Miami-Dade (about 18.6 percent, says Cushman & Wakefield), both the good and bad news mirror the trends in the lower two counties. One the one hand, vacancy rates in the northern part of the county--home to office space for major national corporations--are higher (21.1 percent overall), while vacancy rates in Boca Raton--catering to smaller, often home-grown professional services firms--are lower (16.8 percent overall).

Indeed, the Boca Raton submarket posted the strongest numbers in the county, showing a positive absorption of 8,578 square feet of space as of mid-year 2003, versus a negative absorption of nearly 61,000 square feet as of mid-year 2002. Of the top eight leasing transactions in Palm Beach County in the second quarter of 2003, seven were in Boca, most of them for locally based corporations. By contrast, northern Palm Beach saw a negative absorption of 119,628 square feet, the result of rampant downsizing by major corporations.

"The Boca Raton market was probably hit as hard as the rest of the office market in South Florida, but historically that market has bounced back faster than all the other [Palm Beach] markets," says Malcolm Butters, president of Butters Construction & Development. Butters, who develops projects across South Florida, just completed a $13 million acquisition of the 55-acre T-Rex complex at the intersection of I-95 and Yamato Road.

In addition to 35,000 square feet of retail space fronting Yamato, Butters plans to build some 400,000 square feet of office space. One of his strategies: the sale of part of the land to Tri-Rail for its Boca Raton station. "We think it's maybe one of the best sites in all of South Florida, the largest site left in Boca Raton," says Butters. "It's right there on the highway, it offers tremendous exposure--and it offers mass transit on campus, so to speak."

Market by Market: Industrial

While Butters is bullish on the long-range office market, he's doing best today in the industrial market, which has retained fairly low vacancy rates despite the poor economy. According to Codina Realty Services, Palm Beach County had an overall industrial vacancy rate of just 6.3 percent, followed by 8 percent in Broward County and 8.3 percent in Miami-Dade. Similar to offices, the relatively low vacancy rates were driven by smaller local firms, rather than national, corporate lease holders.