State of Florida Office MarketView
CBRE Global Research and Consulting
Q2 2014
TOTAL VACANCY 17.4%
ASKING RATE $24.32
NET ABSORPTION 818 K sq. ft.
CONSTRUCTION 381 K sq. ft.
COMPLETIONS 80 K sq. ft.
UNEMPLOYMENT 6.1%
*Arrows indicate change from previous year.
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Florida’s median home sale price of $180,000 is affordable compared to the national median of $213,600. The state median sale price increased 4.3% over the past year, while the national median sale price increased 4.9%. Florida is leading the nation in home sales to international buyers.
Figure 1: Total Vacancy -vs- Average Direct Asking Lease Rate (FSG) Percent Vacancy
25%
$24.50
20%
$24.00
15%
$23.50
10%
$23.00
5%
$22.50
0%
$22.00 2009
1
Orlando and Miami are on Forbes’ list of the 50 Most Creative Cities.
Florida companies are expecting growth in both revenue and employment over the next 12 months, according to the National Center for Middle-Market Companies.
Many landlords are changing to a shared-space model, with the expectation that small tenants in shared space today could grow into larger footprints in the future.
Asking Lease Rate
17.4% $24.32
Total Vacancy Average Direct Asking Lease Rate
2010
2011
2012
2013
2014 YTD Source: CBRE Research, Q2 2014.
Leasing Activity After a slow start to the year, the Florida office market is exhibiting strong fundamentals. The total vacancy rate in Q2 2014 was 17.4%, representing a 140 basis point (bps) decline year over year. North Florida posted a Q2 2014 total vacancy of 17.5%, a 90 bps improvement year over year. The most significant decrease in vacancy was in South Florida, where vacancy declined 180 bps year over year to 17.4% in Q2 2014. The CBD vacancy rates for South Florida contributed significantly to the year-overyear decrease with Broward reporting a 480 bps decline and Miami posting a 220 bps decline. Suburban markets with the sharpest year-over-year vacancy decline included Jacksonville, where vacancy declined by 210 bps, and Tampa, where vacancy declined by 180 bps. Statewide, office asking lease rates increased modestly. The overall average asking rate in Q2 2014 was $24.32, an increase of $0.40 per sq. ft. year over year. North Florida markets posted an average rate of $21.06 in the CBD and
$18.86 in the suburban sectors, after increasing $0.83 and $0.27 per sq. ft., respectively, year over year. South Florida markets reported an average rate of $34.38 in the CBD markets, an $0.85 increase, while suburban markets posted and average rate of $27.41, which was flat year over year. The Miami and Tampa Bay CBD markets were bullish in Q2 2014, with annual asking rate increases of $0.96 and $2.12 per sq. ft., respectively. Absorption has tapered compared to the same period one year ago. Year-to-date net absorption was positive for the state, with nearly 1.2 million sq. ft. compared to just over 2.5 million sq. ft. reported in the first two quarters of 2013. South Florida markets retained a similar net absorption pace compared to the previous year with Miami and Broward contributing the majority of the positive activity. North Florida markets have fallen short to date in 2014, primarily due to a loss of traction in Q1 2014. In Q2 2014, North Florida markets rebounded with over 310,000 sq. ft. of positive net absorption.
© 2014, CBRE, Inc.
Submarket
Building sq. ft.
Direct Vacancy (%)
Total Vacancy (%)
Under Construction
Avg Dir Asking Lse Rate (FSG)
14,593,894
16.9
17.2
37,227
170,410
128,580
$35.37
Miami Suburban
31,937,820
14.3
14.8
273,683
323,871
151,523
$27.72
Miami Overall
46,531,714
15.1
15.5
310,910
494,281
280,103
$30.83
Broward CBD
5,185,507
12.8
13.6
99,436
123,507
0
$30.86
Broward Suburban
22,963,755
15.4
16.1
17,318
225,135
40,000
$24.86
Broward Overall
28,149,262
15.0
15.7
116,754
348,642
40,000
$26.55
Palm Beach Suburban
23,154,131
23.0
23.3
79,639
55,489
0
$29.18
Palm Beach Overall
23,154,131
23.0
23.3
79,639
55,489
0
$29.18
6,869,507
14.3
14.5
(7,499)
699
0
$23.26
Tampa Bay Suburban
38,847,242
15.3
15.4
112,049
260,254
19,474
$19.61
Tampa Bay Overall
45,716,749
15.1
15.2
104,550
260,953
19,474
$20.13
7,662,258
15.5
16.5
(54,409)
1,233
17,124
$22.55
Orlando Suburban
29,352,856
18.6
19.4
113,074
71,391
0
$19.23
Orlando Overall
37,015,114
18.0
18.8
58,665
72,624
17,124
$19.83
Jacksonville CBD
7,330,220
22.8
22.9
24,449
(216,470)
0
$18.70
Jacksonville Suburban
16,452,436
18.0
18.2
122,978
175,764
24,041
$16.47
Jacksonville Overall
23,782,656 41,641,386
19.5 16.7
19.7 17.2
147,427
(40,706)
99,204
79,379
24,041 145,704
$17.32 $27.68
State of Florida Suburban
162,708,240
17.1
17.5
718,741
1,111,904
235,038
$23.19
State of Florida Overall
204,349,626
17.0
17.4
817,945
1,191,283
380,742
$24.32
South Florida CBD
19,779,401
15.8
16.3
136,663
293,917
128,580
$34.38
South Florida Suburban
78,055,706
17.2
17.7
370,640
604,495
191,523
$27.41
South Florida Overall
97,835,107
16.9
17.4
507,303
898,412
320,103
$29.19
North Florida CBD
21,861,985
17.6
18.0
(37,459)
(214,538)
17,124
$21.06
North Florida Suburban
84,652,534
17.0
17.3
348,101
507,409
43,515
$18.86
106,514,519
17.1
17.5
310,642
292,871
Orlando CBD
State of Florida CBD
North Florida Overall
North Florida is anticipated to sustain positive net absorption in the second half of the year as tenants occupy space as a result of new leases and expansions signed in the first half of the year. Statewide there were over 1.1 million sq. ft. of leases signed in the first half of 2014 that will have a positive impact on absorption in the second half of the year. This activity represents new leases and expansions of existing tenants. Workplace strategies emphasizing efficient use of space will continue to impact absorption. In an effort to accommodate the preferences of the millennial workforce, employers are creating open and collaborative work environments; advances in technology are allowing them to do so in smaller, smarter spaces. At the same time, telecommuting has become more popular, further reducing office space requirements.
60,639 $19.34 Source: CBRE Research, Q2 2014.
the recovery phase of the real estate cycle. Nationally, there are many primary markets where the return on investment has narrowed causing investors to look to secondary and tertiary markets to find value-add opportunity. Florida markets have started to see increased investor sales activity and will benefit from this trend.
Development
Sales Activity
Office deliveries remain muted with limited space under construction. One building of 80,000 sq. ft. was delivered in the Miami market in Q2 2014. There were no deliveries reported for the other Florida markets. Space under construction in the first half of 2014 included just over 380,000 sq. ft. The bulk of the construction activity continues to occur in the Miami market where there is 280,000 sq. ft. under construction, accounting for the majority of the space statewide.
Year to date, sales activity in 2014 has increased compared to previous years. Quarterly sales volume in 2012 averaged $500 million and in 2013 the average was over $350 million. Statewide sales volume was $661 million in Q1 2014 and $537 million in Q2 2014. The state sales volume for the first half of 2014 was approximately $1.2 billion in 70 transactions with 7.5 million sq. ft. changing hands.
A number of office projects currently underway and planned in Florida markets are taking the form of office space located within mixed-use projects. In recent years, high-density mixeduse projects have become more prevalent in Florida’s urban areas. The remaining land in and around Florida’s CBDs is becoming scarce and more valuable to developers, driving the need for higher-density projects in these areas.
Florida is following the national trend of office market recovery. According to the Second Quarter 2014 PwC Real Estate Investor Survey, each of the six tracked Florida markets are in © 2014, CBRE, Inc.
State of Florida Office| MarketView
Miami CBD
Tampa Bay CBD
2
Q2 2014 Net 2014 Net Absorption Absorption
Q2 2014
Figure 2: Market Statistics
2
Q2 2014
Figure 3: Asking Rates by Class (FSG) Class A Class B Class C
$30
$25.48 $21.63 $19.42
State of Florida Office | MarketView
$25
City planners recognized the need to move away from singleuse zoning and have created zoning districts and future land use plans that require or encourage higher-density mixed-use projects that will sustain urban economic growth. Multifamily, currently in high demand, is the driving force behind many of these mixed-use projects occurring within and immediately surrounding the CBD markets. Retail and office components are now required as part of these projects in order to obtain density approvals. The mixed-use developments foster the live, work and play trend. However, it is yet to be determined if this type of space presents viable opportunities for occupancy by officeseeking national credit tenants. Economic Influence
$20
$15 2009
2010
2011
2012
2013
2014 YTD
Source: CBRE Research, Q2 2014.
Figure 4: Net Absorption 1.2 Million sq. ft.
YTD 000’s of sq. ft.
4,000
Florida’s economy is leading the nation in job growth and overall recovery in 2014. The state is projected to outpace the nation for the next several years. Florida’s annual job growth rate has exceeded the nation’s rate since April 2012. As of May 2014, Florida added 218,800 jobs year over year, which equates to a 2.9% increase, on a non-seasonally adjusted basis. Florida’s unemployment rate fell to 6.1% from 7.3% year over year. By comparison, nationally, unemployment stands at 6.1% compared to the previous year’s rate of 7.3%. Florida’s unemployment rate has been equal to or below the national rate for 13 consecutive months. As of May 2014, professional and business services jobs increased 4% year over year while construction jobs increased 10%. The job growth is just one component of the economic recovery and strength attributed to the state. The University of Florida’s Consumer Sentiment Index (CSI) rose in June by four points to 82, a post-recession high. Factors that impact the increase include expectations of personal finances, U.S. economic conditions, and whether it is a good time to buy big-ticket items, such as cars or appliances.
2,000 0 (2,000) (4,000) (6,000) 2009
2010
2011
2012
2013
2014 YTD
Source: CBRE Research, Q2 2014.
Figure 5: Under Construction and Completions 381 K sq. ft. 80 K sq. ft.
Under Construction YTD Completions
000’s of sq. ft.
3,000
2,000
Housing prices and sales have been holding up, with the median price of a single-family home in Florida increasing 4.3% year over year to $180,000. The stock market continues to make gains and hit new highs despite consistent tapering by the Federal Reserve in its bond-buying program known as Quantitative Easing III.
Outlook Office-using employment accounts for 15% of nonagricultural employment and is growing faster than any other sector save construction employment. The continued growth of office sector jobs is a testament to the strength of the Florida economy and will contribute to positive net absorption. Workplace trends of office space efficiency are anticipated to keep positive absorption at a moderate level. However, slow and steady growth is better for the long term health of the market and creates a stronger foundation for future growth.
1,000 3 0 2009
2010
2011
2012
2013
2014 YTD
Source: CBRE Research, Q2 2014.
© 2014, CBRE, Inc.
Figure 6: Labor Market Statistics
Figure 7: Florida Jobs by Sector
Miami-Dade
1,282,788
1,185,038
97,750
7.6
Broward
1,069,429
1,013,944
55,485
5.2
663,162
623,981
39,181
5.9
1,361,546
1,277,469
84,077
6.2
Palm Beach Tampa Bay MSA Orlando MSA Jacksonville MSA Florida United States
Employment Unemployment
Other Services Manufacturing 4% 4% Construction 5%
Unemploy%
1,197,233
1,129,305
67,928
5.7
726,372
683,998
42,374
5.8
9,632,000
9,043,000
589,000
6.1
155,841,000
146,398,000
9,443,000
6.1
Information 2%
Trade, Transportation, and Utilities 20%
Financial Activities 7%
Professional and Business Services 15%
Leisure and Hospitality 14%
Education and Health Services 15%
Total Government 14%
Source: Florida Department of Economic Opportunity, May 2014.
Source: Florida Department of Economic Opportunity, May 2014.
Figure 8: Q2 2014 Sales Market
Property/Address
Buyer
Building sq. ft.
Sales Price
Jacksonville
Walls Fargo Center/1 Independent Drive
Allegiance Capital JV Banyan Street Capital
900,000
$79,000,000
Broward
AMEX Fort Lauderdale/777 American Express Way
TM Real Estate Group LLC
376,000
$33,500,000
Miami
Courvoisier Centre/601 Brickell Key Dr (3 Properties)
Parkway Properties, Inc.
367,652
$145,800,000
Tampa Bay
Interstate Corporate Center/6302 E Dr Martin Luther King Jr Blvd
B & L Investments LLC
344,467
$27,500,000
Broward
Plaza 100/100 NE 3rd Ave
Brookwood Financial Partners LP
165,627
$32,500,000
Miami
Miami Lakes Business Center/5875 NW 163rd St
Miami Lakes AM LLC
145,545
$12,000,000
Miami
200 Building/200 SE 1st St
Integra Investments Llc
141,500
$21,000,000
Tampa Bay
Fountain Square II/4925 Independence Pkwy
Equus Capital Partners
132,300
$24,750,000
Orlando
SunBank Data Center/2290 Premier Row
DXRX Orlando, LLC
106,440
$8,000,000
Miami
Waterford Centre/6205 Blue Lagoon Dr
Ivy Realty
91,000
$21,935,000
State of Florida Office| MarketView
Labor Force
Q2 2014
MSA/County
Source: CBRE Research, Q2 2014. Real Capital Analytics, Q2 2014.
Figure 9: Sales Volume $1.2 Billion
YTD
Billions of $
Figure 10: Sales Volume by Market 2014 YTD
$3.0 $2.5 $2.0 $1.5 $1.0 4
$0.5
# Deals
Total sq. ft.
Volume
$/sq. ft.
Miami
17
1,839,805
$456,518,333
$248
Broward
11
1,656,783
$356,921,651
$215
Palm Beach
5
268,553
$32,825,000
$122
Tampa Bay
21
1,545,614
$145,495,769
$94
Orlando
10
859,990
$88,108,000
$102
6
1,291,052
$118,530,000
$92
70
7,461,797
$1,198,398,753
$161
Jacksonville
$0.0 2009
2010
2011
2012
2013
2014 YTD
Source: CBRE Research, Q2 2014. Real Capital Analytics, Q2 2014. © 2014, CBRE, Inc.
State of Florida
Source: CBRE Research, Q2 2014. Real Capital Analytics, Q2 2014.
4
Q2 2014
Figure 11: Q2 2014 Leases
State of Florida Office | MarketView
Market
Property/Address
Tenant
Transaction sq. ft.
Orlando
901 Heathrow/901 International Pkwy
Deloitte
130,695
Orlando
Summit Park I/1950 Summit Park Dr
EA Tiburon
128,240
Palm Beach
Broken Sound Plaza/5900 Broken Sound Pkwy
Cancer Treatment Centers of America
77,340
Tampa Bay
Rivergate Tower/400 Ashley Dr
Butler Pappas
61,276
Miami
9250 Doral/9250 NW 36th St
Prestige Health Choice
49,230
Palm Beach
Esperante' Corporate Center/222 Lakeview Ave
Cole, Scott & Kissane, PA
48,821
Orlando
Maitland Colonnades/2301 Lucien Way
Windstream Nuvox Inc
48,522
Tampa Bay
Pasco Building/805 Executive Center Dr
Valpak
47,207
Tampa Bay
Bank Of America Plaza/101 Kennedy Blvd
Trenam Kemker
44,864
Miami
Wells Fargo Center/333 Avenue of the Americas
PriceWaterhouseCoopers
43,277
Miami
550 Biltmore/550 Biltmore Way
UBS International Inc
43,000
Broward
Sawgrass Plaza /1550 Sawgrass Corporate Pkwy
Centene Corporation
42,678
Orlando
TerraCotta Bus Park /5575 Semoran Blvd
Agmus Ventures Inc
41,553
Tampa Bay
Westshore Corporate Center/600 Westshore Blvd
Undisclosed
39,560
Orlando
Liberty Summit/1901 Summit Tower Blvd
FedEx
37,940
Tampa Bay
Bridgeport Center/5201 Kennedy Blvd
Keystone Peer Review Organization
35,903
Miami
Federal Reserve Bank/9100 NW 36th St
Digital Latin America
35,031
Jacksonville
Cypress Pt Bus Prk/8201 Cypress Plaza Blvd
Selene Finance
34,200
Orlando
Lake Luma Prof Ctr /1717 Orange Ave
The Nemours Foundation
34,092
Miami
Alhambra Plaza/2 Alhambra Plz
Buena Vista Int., LLC (Walt Disney TV)
32,478 Source: CBRE Research, Q2 2014.
Figure 12: Under Construction as of 06/30/2014 Under Construction
Property/Address
City
Submarket
Building sq. ft.
Average Asking Rate
Miami
Brickell City Centre Phase I/78 SW 7th St
Miami
Brickell
128,580
N/A
Miami
Sunset Office Center/1515 Sunset Dr
Miami
Coral Gables
60,799
$35.00
Miami
SoMi Building/5966 S Dixie Highway
Miami
One Netanya/323 Sunny Isles Blvd
Miami
Kendall
50,000
$27.00
Sunny Isles Beach
Aventura
40,724
N/A
Broward
Riviera Point/7971 Riviera Blvd
Miramar
SW Broward
40,000
N/A
Tampa Bay
Building 5/5331 Primrose Lake Cir
Tampa
Northeast Tampa
19,474
$23.00
Orlando
800 N Orange/800 N Orange Ave
Orlando
Downtown
17,124
N/A
Source: CBRE Research, Q2 2014.
Figure 13: Delivered Q2 2014
5
Market
Property/Address
City
Submarket
Building sq. ft.
Average Asking Rate
Miami
Doral Park Centre/3895 NW 107 Ave
Doral
Airport/Doral
80,000
$26.00
Source: CBRE Research, Q2 2014.
© 2014, CBRE, Inc.
Inventory 23,782,656
Vacancy % Asking Rate 19.7% $17.32
Inventory 37,015,114
Inventory Size + 40 million sq. ft.
Vacancy % 18.8%
Asking Rate $19.83
Tampa Bay Inventory 45,716,749
Vacancy % 15.2%
Asking Rate $20.13
Palm Beach
30 – 39 million sq. ft.
Inventory 23,154,131
25 – 29 million sq. ft.
Vacancy % Asking Rate 23.3% $29.18
Broward
Below 25 million sq. ft.
Inventory 28,149,262
Vacancy % 15.7%
Asking Rate $26.55
State of Florida Office| MarketView
Orlando
Q2 2014
Jacksonville
Miami Inventory 46,531,714
Vacancy % 15.5%
Asking Rate $30.83
CONTACTS For more information about this Local MarketView, please contact: Shanna Drwiega Research Analyst CBRE 101 East Kennedy Boulevard, Suite 1500 Tampa, FL 33602 t: +1 813 273 8433 e:
[email protected]
Abu I. Mansoor Senior Research Analyst CBRE 200 East Las Olas Boulevard, Suite 1620 Fort Lauderdale, FL 33301 t: +1 954 331 1733 e:
[email protected]
Quinn Eddins Director, Research and Analysis CBRE 777 Brickell Avenue Suite 900 Miami, FL 33131 t: +1 305 428 6325 e:
[email protected]
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DISCLAIMER Information contained herein, including projections, has been obtained from sources believed to be reliable. While we do not doubt its accuracy, we have not verified it and make no guarantee, warranty or representation about it. It is your responsibility to confirm independently its accuracy and completeness. This information is presented exclusively for use by CBRE clients and professionals and all rights to the material are reserved and cannot be reproduced without prior written permission of CBRE.
© 2014, CBRE, Inc.
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