2019-07-10_DTZ戴德梁行_Office_Q2_2019_Broward_County_4页_707kb

Broward County Office Market Summary Q2 2019

Core Content

Broward County's office market in Q2 2019 showed mixed trends, with improvements in employment and demand indicators, but challenges in absorption and vacancy rates. The market is influenced by both economic factors and supply dynamics, with a focus on submarkets and asset classes.

Economic Indicators

• Broward County Employment: Increased from 853,000 in Q2 18 to 864,000 in Q2 19, with a significant rise of 11,200 new jobs in May 2019.
• Broward County Unemployment: Declined to 3.0% in May 2019, a decrease of 20 basis points from the previous year.
• U.S. Unemployment: Continued to decline, from 3.9% in Q2 18 to 3.6% in Q2 19.

The employment gains were driven primarily by the Professional & Business Services and Education & Health Services sectors, which outperformed other metro areas in Florida. These gains supported the office market with solid leasing activity.

Market Pricing

• Overall Asking Rent: Increased by 7.3% YOY to $32.91 psf (full service).
• Class A Rent: Reached historic highs, with an average of $39.48 psf.
• Class B Rent: Rose by 4.3% YOY to $29.51 psf.
• Class C Rent: Increased by 13.1% YOY to $24.54 psf.
• Submarket Rents: Suburban submarkets saw more significant rent increases (5.1% YOY) compared to the CBD (2.2% YOY). Cypress Creek/Commercial experienced the largest rent boost of 5.2% over the past year, while Miramar saw a notable 10.3% increase in Class A rents to $37.29 psf.

Market Demand

• Overall Vacancy Rate: Dropped to 11.5% in Q2 19, a decrease of 20 bps from Q2 18, reaching another historic low.
• Submarkets with Vacancy Reduction: Northeast Broward and Northwest Broward saw the most significant drops in vacancy rates, by 480 and 430 bps respectively.
• CBD Vacancy Increase: Due to large tenant move-outs, vacancy rates in the CBD increased by 2.3 bps for Class A and 6.3 bps for Class B.
• YTD Net Absorption: Overall net absorption was negative at -99,189 sf, with the CBD contributing heavily to the decline. Suburban areas, however, saw stronger absorption with a 2.4 bps drop in vacancy rates.
• Leasing Activity: YTD leasing activity reached 936,462 sf, a 11.7% decrease compared to the mid-point of the previous year.

Market Supply

• Under Construction: Over 622,264 sf of office space was under construction at the end of Q2 19, with nearly 18% of the available space preleased.
• Submarket Construction: The CBD had 457,264 sf of new construction, while suburban areas had less.
• Construction Impact: New completions could potentially impact vacancy rates over the next 12 months, especially in the CBD, where there were over 457,000 sf of space under construction.

Key Market Highlights

• Short-term Vacancy Rates: Remain elevated and may be affected by new availabilities from upcoming completions.
• Landlord Confidence: High due to limited new construction and strong demand from technology and business services firms.
• Market Outlook: Cushman & Wakefield anticipates positive fundamentals in the long term despite an increase in availabilities.

Key Lease Transactions (Q2 2019)

• 110 SE 6th St (Ft. Lauderdale CBD): Renewal of 42,027 sf by Florida Office of the Attorney General.
• 2400 N Commerce Pkwy (Weston): Renewal of 39,029 sf by The Ultimate Software Group, Inc.
• 1625 NW 136th Ave (Sunrise): Renewal of 38,087 sf by Cross Country Home Services Inc.

Key Sales Transactions (Q2 2019)

• 1000 Corporate Drive (Cypress Creek): Sold for $24,165,000, or $187 psf, by Ghitis Property Group to Sergio R. Fernandez.
• 14700 Royal Caribbean Way (Miramar): Sold for $45,000,000, or $350 psf, by Link Industrial Properties to Dayan Group Realty.
• 55 Weston Road (Weston): Sold for $8,500,000, or $173 psf, by Park Centre West Corp to Omega Advisors, Inc.

Summary of Trends

• Employment and Unemployment: Employment rose, unemployment fell, indicating a strong economic environment.
• Rental Rates: Increased across all classes, with the most significant gains in suburban areas.
• Vacancy Rates: Overall vacancy dropped to a historic low, but CBD areas saw increases due to move-outs.
• Absorption: Negative YTD net absorption, with the CBD being the main contributor.
• Construction: Active construction pipeline, particularly in the CBD, which may impact vacancy rates in the coming months.

Conclusion

Broward County's office market is showing resilience despite some negative absorption trends. The combination of strong employment growth, rising rents, and active investment sales suggests continued positive fundamentals. However, the upcoming supply of new office space could create short-term challenges in vacancy rates. Suburban areas are outperforming the CBD in terms of demand and rent growth, indicating a shift in market dynamics. Landlords remain optimistic about long-term market health, especially as demand from technology and business services firms continues to grow.