Posts

Commercial Real Estate Indicators Signal Robust 2017 Across South Florida

, , , , ,

Year-end surges in the office, industrial and retail sectors foreshadow robust economic growth across South Florida for 2017, commercial real estate experts say.

A lack of new supply pushed office rents higher, particularly in the downtown corridors, and the optimism displayed by businesses looking to expand is prompting developers to strongly consider shovels in the ground after a decade of inactivity.

West City Partners has proposed a 500,000-square-foot office building in downtown Fort Lauderdale, although the project isn’t expected to break ground until an anchor tenant commits.

The Stiles real estate firm is in talks with Broward College for a ground lease at the two-building site on Las Olas Boulevard. Stiles would tear down the buildings and replace them with a 350,000-square-foot office tower, said Doug Eagon, the developer’s vice chairman.

“It is time to introduce the next generation of office space into the downtown market,” Eagon said.

Last year, Stiles paid $13.1 million for the Bank of America building next to Broward College.

“The firm is considering its options, with retail and residential likely,” Eagon said.

Meanwhile, demand is soaring for warehouse and distribution space as e-commerce suppliers struggle to keep up with online retail sales, according to a report from the Colliers  International real estate firm.

In the fourth quarter of 2016, Broward’s industrial vacancy rate plummetted to 4.4 percent from 6.6 percent in the fourth quarter of 2015, the Colliers data show. Palm Beach County’s vacancy dropped to a nine-year low of 4.2 percent.

Boca Raton and Jupiter had the county’s two lowest industrial vacancy rates, at 1.2 percent and 1.5 percent, respectively. Those two markets also had the two highest rents — $14.53 a square foot in Boca Raton and $11.43 a square foot in Jupiter.

“Palm Beach County has more than 422,000 square feet of industrial space under construction, the majority of it at McCraney Property Co.’s Turpike Business Park adjacent to Florida’s Turnpike at Belvedere Road,” Colliers said.

In Broward, Butters Construction and Development and Bristol Group Inc. are planning a 925,000-square-foot business park at the site of the former Deerfield Country Club off Interstate 95 and Hillsboro Boulevard.

Tom Capocefalo, senior managing director for the Savills Studley commercial real estate brokerage in Miami, said the tri-county region is geographically positioned to easily ship goods domestically or internationally to the end users.

“We’re finding that the South Florida marketplace is one of the top-tier distribution markets in the country,” Capocefalo said. “It’s incredible, the pace of it.”

“Industial developers are moving north into Palm Beach County because the county has more available property than either Broward or Miami-Dade,” said Ken Krasnow, executive managing director for Colliers in South Florida, said

“Land is a scarcity,” Krasnow said. “We’re not making any more of it.”

“Palm Beach County also had a banner year in retail, with more than 1 million square feet of space leased – the highest level since 2006 and nearly double the 515,050 of 2015,” Colliers said.

Broward totaled 1.4 million square feet in new retail leases, its best showing in a decade. The first phase of Dania Pointe, an $800 million shopping and entertainment center, is expected to open this year just east of Interstate 95 at Stirling and Bryan roads in Dania Beach.

Colliers said small blocks of space in the 2,000-square-foot range are most in demand as Broward tenants seek to control costs in an era of rising rents and the growth of e-commerce. With smaller spaces more in vogue, the challenge for retail landlords this year will be to find tenants for the available “big box” spaces across the region, market observers say.

Sports Authority filed for bankruptcy and went out of business, closing 13 stores across South Florida and auctioning 10 others. In January, Macy’s said it would close stores nationwide, including one at CityPlace in West Palm Beach.

“Landlords will first try to find a tenant to take the space in its current configuration,” said Peter Reed, managing principal at Commercial Florida Realty Services in Boca Raton. “When those efforts are exhausted, they’ll have to ask themselves, ‘How do I repurpose this?’ In some cases, they’ll be able to multi-tenant it, but in other cases the best thing may be to scrape it and do something different.”

 

Source: SunSentinel

/by

BOMA Forecasts Sunny Outlook For Miami-Dade’s CRE Industry

, , , ,

The commercial real estate market outlook for Miami-Dade: Sunny, as long as more mass transit is on the horizon, said industry experts at the Building Owners and Managers Association of Miami-Dade’s 2017 Commercial Real Estate Outlook event.

In the office market, rents are at an all-time high in certain sub-markets, said Brian Gale, Cushman & Wakefield’s vice chairman of Brokerage Services who represents nearly 5 million square feet of office space in South Florida.

On Brickell, office space is hitting around $60 a square foot for Class A space; back in 2008 the high was in the upper $40s, said Gale, during the panel discussion at the East Miami in Brickell. Downtown Miami is just behind it, and Aventura and Airport West have also hit all-time highs, too, he said. Coral Gables presents a different story, he said. In 2007-08, rent in the trophy buildings was $46-$48 a square foot; today it’s the low $40s.

“For many years, Coral Gables was the darling of the office market. I would say it has a temporary black eye with less demand and blocks of spaces still existing. But Coral Gables also has the most to gain,” Gale said.

Gale sees the South Miami market as vaulting too, once new mass transit options fully kick in for the area.

“The traffic on Useless 1 is not getting any better. … Miami Beach needs to figure out a way to get light rail over there.” Gale said. “Rental rates will continue to increase in 2017. Looking further out, being a gateway city … there is no reason to believe we couldn’t be a $70 rental market in 2022.”

Growth in shared office spaces has exploded — for instance, WeWork recently leased 65,000 feet at Brickell City Centre and there are now more than 20 shared workspace centers in downtown Miami alone. Sometimes these shared office centers can act as an incubator for a building; when the companies grow out of the co-working space they take space on other floors, Gale said. In the broader office market, expect more smaller offices, with more open spaces and cubicle areas on the outside of the floor with the glass-walled offices in the center, he added.

In the industrial sector, with job growth projected to slow in 2017 and 2018, is that a concern with 1.8 million square feet coming online in 2017 and 1.4 million in 2018?

“That’s actually less than half of what we have seen in 2015 and 2016.” said JLL Managing Director Brian Smith, who led the team representing NBC Universal/Telemundo Enterprises in the record breaking lease of over 550,000 square feet for a world headquarters broadcast center in western Miami-Dade.

He said he looks more closely at population growth. In both the office and industrial markets, new-to-market tenants are pushing the records. The last three years have brought more than 700,000 square feet of new-to-market office tenants. But that’s more than the previous 15 years combined, Gale said.

The last two years saw 300,00 square feet of new-to-market industrial tenants, but this year it will be 2 million and perhaps 3 million square feet.

“John Deere, new names. We have quickly become one of the most important industrial markets on the globe,” said Smith. “Three large deals in the works may be the biggest ever, in addition to the NBCUniversal deal.”

To be sure, urbanization has transformed the retail landscape, with Miami’s downtown population now approaching 90,0000 people, a 30 percent increase since 2010, with an incredibly affluent demographic, said David Moret, president of Highline Real Estate Capital, which acquires and redevelops office and retail properties with capital partners.

Retail rents are in the stratosphere on Lincoln Road, surpassing $300 a square foot. They are hitting $200 in the Design District and Coconut Grove and Wynwood are flirting with $100 a foot, Moret said. How far will they go?

“I think we have gotten ahead of ourselves,” Moret said. “ I think there will be a reset. … We are already seeing resistance. We are seeing leasing volume way down on Lincoln Road.”

He sees the biggest impact coming from millennials, a group that will have the most spending power by 2017. This means tenant mix is more important than ever.

“Successful centers are going to be about creating experiences, to give people a reason to go there instead of click on their phone,” said Moret.

 

Source: Miami Herald

/by

Renting And Flipping – New Miami Condos Is All The Rage

, ,

The majority of new condo buyers in Miami have been looking to capitalize on their investments by flipping the units or renting them out, according to research by CraneSpotters.com.

Looking at the four largest condo towers completed in greater downtown Miami since construction resumed in 2011, anywhere from 45 percent to 96 percent of the units sold by the developers in each building were placed back on the market or put up for rent. That indicates a high level of investor ownership in those buildings, and also raises some questions.

With more than 18,100 condo units either under construction, planned with approvals or proposed in greater downtown Miami, according to CraneSpotters.com, is there enough rental demand at higher price points to support that many new units? And how will they be impacted by the nearly 7,800 apartments in the development pipeline?

The recently completed condo towers in Miami sold in the mid-$400s per square foot, but the average price per square foot for new projects is more than double that now, CraneSpotters.com principal Peter Zalewski said. When the sales prices climb, so must rents. Are there enough high-earning renters in Miami to fill those units?

“We strongly believe that when Brickell CityCentre opens and people will be able to walk to a shopping mall with a Saks Fifth Avenue, 11 cinemas and 500,000 square feet of retail, Brickell condos will raise in value and so will rents,” said Carlos Rosso, head of the Related Group’s condominium division. “Twenty-four-hour urban living close to the workplaces is and will continue to be in high demand.”

Here’s a look at how the four largest recently completed condo projects in Miami have performed:

CondoFlipping - Nine at Mary Brickell VillageNINE AT MARY BRICKELL VILLAGE
Units: 390
Units sold/price per square foot: 300 for $501
Active MLS listings/price per square foot: 17 for $469
Units resold: 0
Asking rentals/price per square foot: 95 for $2.78
Closed rentals/price per square foot: 23 for $2.47

CondoFlipping - 1100 Millecento Residences1100 MILLECENTO RESIDENCES
Units: 382
Units sold/price per square foot: 376 for $435
Active MLS listings/price per square foot: 99 for $403
Units resold: 1
Asking rentals/price per square foot: 67 for $2.59
Closed rentals/price per square foot: 120 for $2.25

CondoFlipping - BrickellHouseBRICKELLHOUSE
Units: 374
Units sold/price per square foot: 374 for $504
Active MLS listings/price per square foot: 91 for $627
Units resold: 7
Asking rentals/price per square foot: 64 for $3.63
Closed rentals/price per square foot: 77 for $3.24

CondoFlipping - MyBrickellMYBRICKELL
Units: 192
Units sold/price per square foot: 192 for $360
Active MLS listings/price per square foot: 31 for $379
Units resold: 8
Asking rentals/price per square foot: 19 for $2.67
Closed rentals/price per square foot: 126 for $2.01

It looks like some of these condo towers are more like apartment buildings. Projects in other South Florida cities have behaved quite differently. For instance, in Broward County’s largest newly completed condo tower:

CondoFlipping - BeachwalkBEACHWALK – HALLANDALE BEACH
Units: 300
Units sold/price per square foot: 289 for $448
Active MLS listing/price per square foot: 49 for $532
Units resold: 1
Asking rentals/price per square foot: 6 for $2.97
Closed rentals: 0

There’s a fair amount of resale activity, but not many rentals. However, Beachwalk has a rental pool system managed by the hotel management that doesn’t show up on MLS, so many unit owner participate in that. CraneSpotters.com also looked at the largest recently completed condominium in Palm Beach County, Bay Colony Juno Beach, and found only two of its 121 units on the rental market, although it had 23 resales.

For more on the South Florida condo market, see this week’s feature story with comments from the region’s leading condo experts. Most of them agree that sales are slowing.

 

Source: SFBJ

/by