2019-07-10_DTZ戴德梁行_Office_Q4_2018_Palm_Beach_County_4页_494kb

Palm Beach County Office Market Summary - Q4 2018

Core Content Overview

The report provides a detailed analysis of the office market in Palm Beach County, focusing on economic and market indicators for the fourth quarter of 2018 and the 12-month forecast. It highlights employment trends, vacancy rates, net absorption, rental rates, and leasing activity across various submarkets. Additionally, it includes key lease and sales transactions, as well as insights on investment trends and the impact of opportunity zones.

Economic Indicators

• Palm Beach County Employment:

  • Q4 2017: 695,000
  • Q4 2018: 715,000
  • Trend: Increased by 20,000, leading to a 3.0% unemployment rate (down 80 bps from 2017).
  • Impact: Strong employment growth positively influenced office space demand, particularly in the Financial Activities sector, which added 4,400 jobs YTD.

• U.S. Unemployment:

  • Q4 2017: 4.1%
  • Q4 2018: 3.7%
  • Trend: Declined by 40 bps, reflecting broader economic improvements.

Market Indicators (Overall, All Classes)

• Vacancy Rate:

  • Q4 2017: 12.9%
  • Q4 2018: 13.7%
  • Trend: Increased slightly, but remains near a historic low, 970 bps below the 2008 peak of 23.4%.

• YTD Net Absorption (sf):

  • Q4 2017: 380,000
  • Q4 2018: -39,000
  • Trend: Negative absorption, but overall absorption exceeded 79,000 sf in Q4 2018, up 6.5% YOY.

• Under Construction (sf):

  • Q4 2017: 0
  • Q4 2018: 333,000
  • Trend: Significant increase in construction, indicating future supply growth.

• Average Asking Rent:

  • Q4 2017: $37.15
  • Q4 2018: $37.04
  • Trend: Slight decrease, but rent growth is anticipated for 2019.

Market Overview

• Overall Vacancy:

  • Remained near a historic low of 13.7%, well below the 5-year average of 18.2% and 970 bps below 2008 levels.
  • Strong demand for high-quality Class A and "brick and beam" spaces drove vacancy declines, especially in Boca Raton and West Palm Beach CBD.

• Leasing Activity:

  • Total YTD leasing activity: Over 1.4 million square feet.
  • Submarket Breakdown:
    • Suburban West Palm Beach: Dominated leasing activity with 88% of total leasing.
    • Boca Raton: Outperformed with 731,790 sf of leasing activity in 2018 alone.
    • Northwest Boca Raton: Vacancy dropped 150 bps to 13.6%.
    • Southwest Boca Raton: Vacancy dropped 340 bps to 7.8%.

• Rental Trends:

  • CBD Full Service Asking Rents: Increased over 15% YOY to $48.86 psf.
  • Class A CBD Rates: Rose 8.4% YOY to $62.08 psf in West Palm Beach.
  • Class B Assets: Slightly declined in asking rates to $30.94 psf.
  • Class C Assets: Slightly declined in asking rates to $29.52 psf.

Market Highlights

• Investor Sentiment:

  • Strong interest in Class B assets, which accounted for 76% of total investment sales volume.
  • Opportunity Zones: 35 census tracts designated, with 8 near the West Palm Beach CBD, offering tax incentives for investments.

• Leasing Trends:

  • Renewals were excluded from absorption calculations, contributing to lackluster YTD absorption.
  • Tenant Confidence remains high, but uncertainty over international trade and financial market volatility has tempered expansion.

• Construction Activity:

  • Over 333,000 sf of Class A office space is under construction, expected to be delivered within 18 months.

• Future Outlook:

  • Cushman & Wakefield anticipates strong rent growth in 2019.
  • Adaptive reuse of industrial and retail buildings is gaining traction, especially in peripheral CBD areas.

Submarket Performance

Key Lease Transactions 2018

Key Sales Transactions 2018

Conclusion

Palm Beach County's office market showed resilience and strong fundamentals in Q4 2018, with low vacancy rates, positive employment trends, and increased leasing activity in key submarkets. While Class B and C rents declined slightly, the market remains attractive due to competitive rates, strong talent pools, and investment opportunities. The growth in Class A construction and increased interest in adaptive reuse indicate a dynamic and evolving market, with Cushman & Wakefield forecasting continued rent growth in 2019.