Page 1

MARKET VIEW | OFFICE | SOUTH FLORIDA MIAMI-DADE | BROWARD | PALM BEACH

Q4 2017

ONE COMMERCIAL REAL ESTATE | MIAMI-DADE | RETAIL | Q4 2017


STRONG ECONOMY YIELDS TO A

MARKET TRENDS

TIGHTENING IN MIAMI’S OFFICE

Q4 2017 OFFICE REPORT

MARKET

EXECUTIVE SUMMARY In Miami vacancies continue to tighten with rising rental rates. In the last quarter, rental rates declined by 3.5% to 32.82 per SF. At the same time, vacancies decreased by 20 basispoints, while absorption rates were declining to 61,038 SF. Construction at the office segment is currently 1.8 million SF. The largest project under development is the 150,000 SF Burger King HQ in Doral, which is anticipated for late 2018.

Q4 2017

Q3 2017

FORECAST

VACANCY

8.50%

i

h

NET ABSORPTION SF

61,038

i

h

1,842,638

h

i

97,915

h

h

34.16

h

h

CONSTRUCTION SF

COMPLETIONS SF

GROSS LEASE RATE

RELATIVE TO PRIOR PERIOD | SOURCE: COSTAR PROPERTY®

ECONOMIC OVERVIEW

OUTLOOK Office demand has been strong expressed by rising rental rates and declining vacancy rates. As there are no new projects in the Downtown/ Brickell area, besides 100,000 SF in the new Panorama Tower rental rates in the urban core are expected to increase for class A space as available inventory tightens. Projected increases in jobs as well as sustained growth in international trade will help to maintain positive momentum for office product in the near term.

1 YR CHANGE

Q4 2017

CHANGE

UNEMPLOYMENT RATE

4.6%

- 16.4%

POPULATION GROWTH

2,770,020

+ 1.41%

MEDIAN HOUSEHOLD INCOME

47,346

+ 2.36%

LABOR FORCE

1,181,950

+ 1.31%

CHANGE AS PER YEAR-TO-DATE | SOURCE: US DEPARTMENT OF LABOR STATISTICS

MARKET ACTIVITY About 61,038 SF of office space was absorbed in the past quarter and 97,915 SF of new supply added to the market. Miami-Dade’s vacancy decreased by 20 basis-points to the previous period with gross asking rents increasing by 0.46% to $34.16 per SF. The leasing market in Miami is traditionally driven by a growing number of new-to-market and expanding companies many from Latin America, which are looking to establish a regional HQ or a footprint in North America. There is also strong demand for quality office assets outside Miami’s urban core as market fundamentals drive historically high average lease rate and below prerecession vacancy levels. Prime lease rates can be achieved in Brickell with class A rents averaging over $50 per SF. Miami’s economy is growing, but lagging behind the dynamic of Broward and Palm Beach. Over the past year, jobs grew by 1.3%, which was largely driven by a strong hospitality sector. Important industries for the office sector such as professional and business services, financial services and technology all had declining job numbers over the past year. That can be taken as indicator for a softening demand in office space.

35 ONE COMMERCIAL REAL ESTATE | MIAMI-DADE | OFFICE | Q4 2017


Currently there are about 1.8 million SF under construction with 264,277 SF expected to be delivered in the next quarter. Largest project under development is the new 150,000 SF Burger King headquarter in Doral. The project is announced for late 2018. Recently MiamiCentral delivered 90,000 SF of office space. The building is part of the new Brightline development, which will boost interconnectivity between Miami, Fort Lauderdale and Palm Beach. Areas with elevated activity include Coral Gables, Downtown and the Airport Area. Developers have started to become cautious due to high land values and construction costs and 1.8 million SF of supply expected to come on market in the next 2 years. Many of the projects announced are therefore outside the urban core, in areas like Wynwood, Aventura, Coconut Grove and Doral focusing on a live-work-play environment. With the economy nearing its end of its expansion cycle new developments are expected to decrease in the near term. Investment sales fell to $221 million, which are far below the $900 million in peak sales from a year ago. Largest transaction marked the sale of Lennar’s corporate center. Colony Realty Partners sold the building to Naya USA Investment & Management and Coast Capital Partners for $40 million at $138 PSF. Naya bought the 16.4-acre property as a longterm hold. Lennar and subsidiaries that include Rialto Capital Management, Eagle Home Mortgage and North American Title Company have long-term leases for the office complex.

COMPLETIONS, ABSORPTION AND VACANCY TRENDS COMPLETIONS

ABSORBTION

VACANCY

SOURCE: COSTAR PROPERTY®

520k

9.40%

460K

9.20%

400K

9.00%

320K

8.80%

240K

8.60%

160K

8.40%

80K

8.20% 8.00%

0

Q3 2016

Q4 2016

Q1 2017

Q2 2017

Q3 2017

Q4 2017

AVERAGE ASKING RENTS TRENDS CLASS A

CLASS B

OVERALL

SOURCE: COSTAR PROPERTY®

40

35

30

25

20

15

10

Q3 2016

Q4 2016

Q1 2017

Q2 2017

Q3 2017

Q4 2017

PRICE TRENDS CAP RATE

$/SF

SOURCE: REAL CAPITAL ANALYTICS

340

8.20%

320

7.70%

300

7.50%

280

6.70%

260

6.20%

240

5.70%

220

5.20%

200

4.70% Q1 2015

Q2 2015

Q3 2015

Q4 2015

Q1 2016

Q2 2016

Q3 2016

Q4 2016

Q1 2017

Q2 2017

Q3 2017

Q4 2014

ONE COMMERCIAL REAL ESTATE | MIAMI-DADE | OFFICE | Q4 2017


OFFICE STATISTICS SUBMARKET

TYPE

TOTAL INVENTORY

VACANCY (%)

(SF)

YTD NET ABSORBTION

YTD DELIVERIES UNDER CONSTRUCTION QUOTED RATES $

(SF)

(SF)

(SF)

Aventura

Total

1,945,119

10.01%

(38,896)

74,336

209,234

46.36

A

1,017,853

13.57%

19,353

74,336

46,702

48.43

B

800,818

6.65%

(58,477)

-

162,532

44.77

Biscayne Corridor

Total

2,776,811

13.29%

(25,266)

-

40,000

34.35

A

699,000

21.85%

39,780

-

40,000

35.00

B

1,026,785

12.12%

(38,768)

-

-

35.28

Brickell

Total

9,604,340

9.56%

244,088

92,000

100,000

43.48

A

5,271,098

11.05%

178,830

92,000

100,000

49.23

B

3,997,777

8.34%

61,052

-

-

35.19

Coconut Grove

Total

2,263,030

8.55%

42,209

106,000

139,293

39.05

A

653,332

19.62%

24,758

106,000

139,293

41.59

B

1,170,633

4.63%

8,976

-

-

34.41

Coral Gables

Total

10,979,231

7.20%

56,924

-

508,393

38.39

A

4,881,954

8.26%

142,124

-

411,966

41.34

B

4,088,493

7.85%

(75,225)

-

96,427

34.98

Coral Way

Total

2,369,777

2.77%

(6,421)

13,795

62,017

28.25

A

84,248

0.00%

-

-

41,117

-

B

1,124,115

2.91%

17,809

13,795

20,900

30.01

Downtown Miami

Total

12,021,778

17.34%

(257,498)

-

318,000

38.13

A

5,152,388

21.32%

(213,263)

-

318,000

44.37

B

5,634,067

14.91%

(35,356)

-

-

30.82

Kendall

Total

431,971

0.50%

5,008

7,185

-

23.50

A

-

0.00%

-

-

-

-

B

173,009

0.70%

5,969

7,185

-

23.50

Medley/Hialeah

Total

11,685,312

6.22%

263,483

53,614

35,340

30.39

A

1,827,469

14.08%

103,176

-

-

38.06

B

6,300,774

6.11%

94,604

53,614

35,340

28.38

Miami

Total

4,321,814

4.69%

79,359

-

8,000

26.05

A

793,962

12.40%

12,171

-

-

26.53

B

1,860,135

2.89%

62,780

-

8,000

26.84

Miami Airport

Total

7,015,132

3.98%

189,475

100,665

76,000

37.66

A

1,185,197

4.57%

102,841

70,000

46,000

56.92

B

2,630,391

4.10%

101,616

30,665

30,000

42.45

Miami Beach

Total

19,328,870

7.79%

271,172

246,085

225,930

28.81

A

5,860,379

10.50%

96,753

246,085

206,407

32.72

B

10,510,170

7.33%

206,747

-

19,523

26.71

Miami Lakes

Total

4,691,925

6.11%

(71,788)

-

-

42.85

A

926,011

8.95%

(29,731)

-

-

48.10

B

2,626,899

6.09%

(26,540)

-

-

42.41

Miami Dade Central

Total

3,558,746

15.96%

81,679

66,780

-

21.61

A

417,048

19.48%

22,780

-

-

25.11

B

2,695,507

16.38%

73,976

66,780

-

21.24

Northeast Dade

Total

6,352,234

7.17%

166,369

20,000

96,000

23.64

A

187,342

11.93%

4,990

-

96,000

24.07

B

2,482,480

12.39%

79,280

20,000

-

23.31

Outlying Miami-Dade

Total

174,832

0.00%

-

-

-

-

A

-

0.00%

-

-

-

-

B

164,443

0.00%

-

-

-

-

South Dade

Total

2,458,582

7.09%

53,254

15,000

18,480

21.51

A

-

0.00%

-

-

-

-

B

1,432,625

9.82%

609

15,000

18,480

23.94

West Miami

Total

1,833,298

0.73%

4,541

-

5,951

25.64

A

46,118

0.00%

-

-

-

-

B

599,836

0.73%

2,784

-

5,951

26.50

Total

103,812,802

8.50%

1,057,692

795,460

1,842,638

34.16

Class A

29,003,399

12.81%

504,562

588,421

1,445,485

41.22

Class B

49,318,957

8.38%

481,836

207,039

397,153

29.69

Source: CoStar Property®

g ONE COMMERCIAL REAL ESTATE | MIAMI-DADE | OFFICE | Q4 2017


SIGNIFICANT LEASE TRANSACTIONS PROPERTY ADDRESS

TENANT NAME

SIZE

701 Brickell Ave

Meryl Lynch

105,738

2001 NW 107th Ave

FEMA

94,000

701 Brickell Ave

Bank of America

703 Waterford Way 222 NW 24th St

LEASE TYPE

LEASE RATE

SUBMARKET

Direct

N/A

Brickell

Direct

N/A

Doral

81,856

Direct

$ 31.00 FS

Brickell

International Air Transportation

26,105

Direct

N/A

Doral

Space

24,328

Direct

$ 70.00 NNN

Wynwood

SIGNIFICANT SALES TRANSACTIONS PROPERTY ADDRESS

BUYER NAME

SIZE

SALES PRICE $

$/SF

SUBMARKET

Lennar Corporate Center

Naya USA Inv

9350 Financial Center

Banyan Street Capital

289,986

40,000,000

138

Fontainbleau

105,137

33,000,000

314

Mason Building

Dadeland

Stockbridge

21,957

22,000,000

1,002

Buena Vista

4700 Biscayne Blvd

The Cushman School

37,926

13,500,000

356

Little Haiti

Ruiz Law Center

Netz Holdings USA

82,333

10,900,000

132

Flagami

MAJOR DEVELOPMENT PIPELINE PROPERTY ADDRESS

COMPLETION

Future Burger King HQ

Q4 2018

Panorama Office Tower

Q1 2018

Aventura Medical Tower

SIZE

DEVELOPER

SUBMARKET

150,000

The Hogan Group

Miami Airport

100,000

Florida East Coast Realty

Brickell

Q4 2017

100,000

N/A

Aventura

Forum Aventura

Q2 2018

96,000

Prive Consulting Group

Aventura

Offizina

Q2 2018

96,767

N/A

Coral Gables

ONE COMMERCIAL REAL ESTATE | MIAMI-DADE | RETAIL | Q4 2017


STRONG MARKET FUNDAMENTALS

MARKET TRENDS

AND LIMITED SUPPLY PUSHING

Q4 2017 OFFICE REPORT

BROWARD’S OFFICE VACANCY RATES DOWN

EXECUTIVE SUMMARY Broward’s office market continues to perform with strong net absorption, falling vacancies and healthy rent growth. In the last quarter, rental rates increased by 0.05 % to $26.95 per SF. At the same time, vacancies decreased by 47 basis-points to 8.20%. Absorption rates decreased to 212,273 SF with 87,068 SF delivered in the last quarter. Construction in the office segment is currently 577,574 SF, with 271,000 SF being delivered in the next quarter. The largest project currently under development is 300 Hillsboro; which is part of Hillsboro Technology Center in Pompano Beach.

OUTLOOK Broward County offers steady prospects. It is South Florida’s job engine and has received stable supply of new office space over the past years. Transaction volume continues to climb, and vacancy levels continue to trend downward. The Brightline train, a new highspeed passenger rail service, will promote business activity and economic development activity in Broward County. Going forward Broward will experience moderate development with stable vacancies and rising rental rates.

ONE COMMERCIAL REAL ESTATE | BROWARD | OFFICE | Q4 2017

Q4 2017

Q3 2017

FORECAST

2.20%

i

h

NET ABSORPTION SF

212,273

i

h

CONSTRUCTION SF

577,574

h

i

87,068

h

h

26.95

h

h

VACANCY

COMPLETIONS SF

GROSS LEASE RATE

RELATIVE TO PRIOR PERIOD | SOURCE: COSTAR PROPERTY®

ECONOMIC OVERVIEW 1 YR CHANGE

Q4 2017

CHANGE

UNEMPLOYMENT RATE

3.3%

- 25.0%

POPULATION GROWTH

1,961,000

+ 1.82%

MEDIAN HOUSEHOLD INCOME

58,562

+ 3.81%

LABOR FORCE

848,350

+ 2.20%

CHANGE AS PER YEAR-TO-DATE | SOURCE: US DEPARTMENT OF LABOR STATISTICS

MARKET ACTIVITY About 212,273 SF of office space were absorbed in the past quarter and 87,068 SF of new supply added to the market. Broward’s vacancy dropped slightly to 8.20% from the previous period with gross rents increasing by 0.05% to $26.95 per SF. Broward’s economy is roaring, with jobs growing by 2.2% over the last 12 months and unemployment falling to 3.3%. The economy is largely driven by construction, hospitality and education. But growth in professional and financial services also signal increasing demand for office space. Broward counties economy used to be solely focused on drawing tourism, but in recent years the region managed to evolve into a magnet for tech companies. Reason for that is a business friendly environment, which is comprised of warm weather, zero income tax and relative affordability compared to northeastern states. Life sciences, specifically pharmaceutical and medical devices are also major economic drivers for the region. 1,500 South Florida bioscience institutions employ more than 26,000 people and generate $4 billion in revenue each year. The marine sector is also growing, yielding $8.8 billion in yearly economic impact and supporting 110,000 jobs. Aviation and aerospace is a multi-billion-dollar industry that continues to see growth.


Currently there are about 577,574 SF of office space under construction. The largest development project is located in Hillsboro Technology center in Pompano Beach, it boast a total of 174,000 SF of new office space. The two buildings are part of a new state of the art business park, which is located on a former golf-course. The project is located on 75 acres and will, once completed host industrial, office and hotel product. Investor interest in Broward’s office market continues as the area benefits from strong population growth and tourism. A total of $238.5 million were sold in Q4 2017. Most notable transaction was the sale of 200 E Broward. Banyan Street and Oaktree joint venture spent $360 per square foot on the 226,000-SF, 21-story Class A tower and paid a total of $81.5 million. The deal marks the first large office sale in downtown Fort Lauderdale since February when Crocker Partners sold the 28-story office tower at 100 Southeast Third Avenue to Walton Street Capital for nearly $87 million, or $314 per square foot

COMPLETIONS, ABSORPTION AND VACANCY TRENDS COMPLETIONS

ABSORBTION

VACANCY

SOURCE: COSTAR PROPERTY®

700K

10.00%

600K

9.00%

500K

8.00%

400K

7.00%

300K

6.00%

200K

5.00%

100K

4.00%

0

3.00%

Q3 2016

Q4 2016

Q1 2017

Q2 2017

Q3 2017

Q4 2017

AVERAGE ASKING RENTS TRENDS CLASS A

CLASS B

OVERALL

SOURCE: COSTAR PROPERTY®

35

30

25

20

15

10

5

Q3 2016

Q4 2016

Q1 2017

Q2 2017

Q3 2017

Q4 2017

PRICE TRENDS CAP RATE

$/SF

SOURCE: REAL CAPITAL ANALYTICS

260

8.50%

240

8.00%

220

7.50%

200

7.00%

180

6.50%

160

6.00%

140

5.50%

120

5.00% Q1 2015

Q2 2015

Q3 2015

Q4 2015

Q1 2016

Q2 2016

Q3 2016

Q4 2016

Q1 2017

Q2 2017

Q3 2017

Q4 2014

ONE COMMERCIAL REAL ESTATE | BROWARD | OFFICE | Q4 2017


OFFICE STATISTICS SUBMARKET

TYPE

TOTAL INVENTORY (SF)

VACANCY (%)

YTD NET ABSORBTION (SF)

(SF)

(SF)

Commercial Blvd

Total

1,416,890

13.48%

39,454

-

5,933

21.55

A

233,266

20.88%

2,749

-

-

24.42

B

594,723

21.62%

39,127

-

5,933

20.28

Cypress Creek

Total

7,886,404

12.92%

63,373

-

81,709

24.53

A

2,394,629

16.57%

(76,506)

-

81,709

27.35

B

4,302,069

12.74%

133,004

-

-

22.65

Downtown Fort Lauderdale

Total

9,058,797

8.52%

89,790

7,321

27,388

36.51

A

4,483,077

14.41%

(78,973)

-

-

38.13

B

2,158,764

4.61%

76,898

7,321

27,388

33.50

Fort Lauderdale

Total

10,874,897

8.59%

105,472

-

8,000

24.19

A

959,668

16.09%

47,206

-

-

29.23

B

4,969,077

11.41%

24,302

-

8,000

24.17

Hallandale

Total

1,573,953

5.49%

45,601

39,600

27,744

29.46

A

-

0.00%

-

-

-

-

B

639,964

4.21%

30,496

39,600

27,744

29.16

Hollywood

Total

6,169,087

5.70%

28,270

-

-

26.64

A

334,447

11.46%

3,587

-

-

33.65

B

2,756,878

7.37%

19,083

-

-

27.64

NW Broward/Coral Springs

Total

5,106,317

9.86%

13,806

-

143,360

23.91

A

715,978

12.46%

24,185

-

-

26.83

B

2,850,081

11.86%

(13,665)

-

143,360

23.67

Outlying Broward County

Total

28,296

0.00%

2,802

-

-

33.46

A

-

0.00%

-

-

-

-

B

28,296

0.00%

2,802

-

-

33.46

Plantation

Total

8,636,026

8.39%

306,600

-

-

26.77

A

2,307,749

13.41%

144,552

-

-

32.58

B

4,185,434

8.19%

143,658

-

-

22.14

Pompano Beach

Total

6,395,506

7.54%

132,990

187,268

99,000

23.86

A

375,721

23.48%

65,218

87,068

-

27.92

B

3,865,938

6.90%

117,397

100,200

99,000

23.05

Sawgrass Park

Total

4,270,208

7.74%

432,362

400,000

-

26.01

A

2,149,071

8.48%

420,832

400,000

-

32.07

B

1,786,836

7.29%

29,250

-

-

21.91

Southwest Broward

Total

8,993,618

4.21%

173,519

64,431

184,440

29.43

A

3,500,712

6.88%

185,998

64,431

135,910

30.15

B

4,623,872

2.55%

(8,921)

-

48,530

28.51

Total

70,409,999

8.20%

1,434,039

698,620

577,574

26.95

Class A

17,454,318

12.57%

738,848

551,499

217,619

31.96

Class B

32,761,932

8.45%

593,431

147,121

359,955

24.15

Source: CoStar Property® ONE COMMERCIAL REAL ESTATE | BROWARD | OFFICE | Q4 2017

YTD DELIVERIES UNDER CONSTRUCTION QUOTED RATES NNN


SIGNIFICANT LEASE TRANSACTIONS PROPERTY ADDRESS

TENANT NAME

SIZE

1801 NW 66th Ave

Sheridan Healthcare

88,716

Direct

14.00 NNN Plantation

2200 SW 10th St

South Florida Bible College

50,000

Direct

13.75 NNN Deerfield Beach

1200 Sawgrass Corporate Pky

Perfomant Financial Corp

31,714

Direct

22.00 NNN Sunrise

3500-360 Enterprise Way

Florida Vocational Institute

29,849

Direct

13.95

Miramar

27,000

Direct

13.00 MG

Davie

2240 SW 70th Ave

LEASE TYPE

LEASE RATE

SUBMARKET

SIGNIFICANT SALES TRANSACTIONS PROPERTY ADDRESS

BUYER NAME

SIZE

SALES PRICE $

$/SF

SUBMARKET

200 E Broward Blvd

Banyan Street Capital

226,000

81,500,000

361

Ft. Lauderdale

Pembroke Pointe 880

Midtown Capital Partners

144,444

42,000,000

291

Pembroke Pines

Corporate Center

Stockbridge

342,552

41,055,000

120

Ft. Lauderdale

International Place II

C-III Investment Mgmt

93,738

19,000,000

203

Sunrise

Lakeside Plaza

Naya USE Inv Mgmt

120,244

17,000,000

141

Pompano Beach

MAJOR DEVELOPMENT PIPELINE PROPERTY ADDRESS

COMPLETION

300 Hillsboro Technology Dr

Q1 2018

Cypress Creek medical Pavillon

Q1 2018

SIZE

DEVELOPER

SUBMARKET

87,068

Butters Construction

Pompano

81,709

ANF Real Estate Group

Cypress Creek

Progressive Insurance Regional Office Q1 2019

79,200

Progressive Insurance

SW Broward

9530 W Sample Rd

Q2 2018

74,000

Kaufmann Lynn Construction

NW Broward/Coral

Q2 2018

63,360

N/A

NW Broward/Coral

Springs Cleveland Clinic Springs

ONE COMMERCIAL REAL ESTATE | BROWARD | RETAIL | Q4 2017


STRONG DEMAND IN PALM

MARKET TRENDS

BEACH CALLS FOR NEW OFFICE

Q4 2017 OFFICE REPORT

DEVELOPMENT

EXECUTIVE SUMMARY Palm Beach county experienced a negative net absorption with rising vacancy rates and low new deliveries in Q4 2017. In the last quarter, rental rates increased by 2.54 % to $29.28 per SF. At the same time, vacancies increased by 16 basis-points, while absorption rates were negative 122,196 SF. Even though absorption was negative in the past quarter, Palm Beach County still offers strong fundamentals for new development as construction levels remain low.

Q4 2017

Q3 2017

FORECAST

10.77%

h

i

NET ABSORPTION SF

-122,196

i

h

CONSTRUCTION SF

281,433

h

h

10,481

i

i

29.28

h

h

VACANCY

COMPLETIONS SF

GROSS LEASE RATE

RELATIVE TO PRIOR PERIOD | SOURCE: COSTAR PROPERTY®

ECONOMIC OVERVIEW

OUTLOOK Palm Beach County’s economy is diverse and growing at a strong rate. The city has established itself as a hub for Biotech and Healthcare and is benefiting from an influx of retired baby boomers. The demand for new medical/office space is high and can currently not be satisfied. As need for new office development arises, vacancies are expected to drop while rental rates increase. The Brightline train, a new highspeed passenger rail service, will promote business activity and economic development activity in Palm Beach County.

1 YR CHANGE

Q4 2017

CHANGE

UNEMPLOYMENT RATE

3.6%

- 23.4%

POPULATION GROWTH

1,503,310

+ 2.76%

MEDIAN HOUSEHOLD INCOME

59,355

+ 2.25%

LABOR FORCE

626,120

+ 1.63%

CHANGE AS PER YEAR-TO-DATE | SOURCE: US DEPARTMENT OF LABOR STATISTICS

MARKET ACTIVITY Net absorption was negative 122,196 SF in the past quarter with only 10,481 SF of new supply added to the market. Palm Beach’s vacancy increased by 16 basis-points to 10.77% compared to the previous period with gross asking rents increasing by 2.54 % to $29.04 per SF. Palm Beach’s economy is growing at a high pace. Over the last 12 months 1.6 % new jobs were added to the labor force, which yields in a low unemployment rate of 3.6%. Palm Beach County has one of the most diverse economies in the United States. The county combines its core competencies agriculture and leisure with a strong science and technology-based component. These areas include aerospace, life sciences and health sciences. Palm Beach is also benefiting from many baby boomers reaching retirement age and who want to relocate to the South. Palm Beach is an attractive location offering a dense medical network, big city amenities but also the comforts of a suburban life-style.

43 ONE COMMERCIAL REAL ESTATE | PALM BEACH | OFFICE| Q4 2017


Even though absorption was negative in the past quarter rental rates have been growing and there is still an urge for class A office space for Palm Beach County. Nevertheless, construction for new office space is yet due to pick up. One of the reasons is that there are higher margins with multifamily development. Currently there are about 281,433 SF of office stock under construction with 25,448 SF expected for next quarter. The largest project under development is Kyoto Gardens a 111,972 SF class A office building located in North Palm Beach, which is expected for early 2019. Investment Sales dropped to $155 million in the past quarter. The largest transaction marked the sale of Fountain Square, a 242,139 SF class B office building in Boca Raton. The building was was acquired by Bridge Investment at $54.5 million ($225 PSF). Built in 1998, Fountain Square includes three buildings, located on Military Trail near Glades Road and the nearby I-95 and Florida Turnpike. The complex recently went through a multimillion-dollar renovation. The occupancy at time of sale was 90%, which marked a from 62% in the past.

COMPLETIONS, ABSORPTION AND VACANCY TRENDS COMPLETIONS

ABSORBTION

VACANCY

SOURCE: COSTAR PROPERTY®

500K

11.60%

400K

11.40%

300K

11.20%

200K

11.00%

100K

10.80%

-

10.60%

-100K

10.40% 10.20%

-200k

Q3 2016

Q4 2016

Q1 2017

Q2 2017

Q3 2017

Q4 2017

AVERAGE ASKING RENTS TRENDS CLASS A

CLASS B

OVERALL

SOURCE: COSTAR PROPERTY®

40

35

30

25

20

15

10

Q3 2016

Q4 2016

Q1 2017

Q2 2017

Q3 2017

Q4 2017

PRICE TRENDS CAP RATE

$/SF

SOURCE: REAL CAPITAL ANALYTICS

270

7.40%

250

7.20%

230

7.00%

210

6.80%

190

6.60%

170

6.40%

150

6.20%

130

6.00% Q1 2015

Q2 2015

Q3 2015

Q4 2015

Q1 2016

Q2 2016

Q3 2016

Q4 2016

Q1 2017

Q2 2017

Q3 2017

Q4 2014

44 ONE COMMERCIAL REAL ESTATE | PALM BEACH | OFFICE | Q4 2017


OFFICE STATISTICS SUBMARKET

TYPE

TOTAL INVENTORY (SF)

VACANCY (%)

YTD NET ABSORBTION

YTD DELIVERIES UNDER CONSTRUCTION QUOTED RATES NNN

(SF)

(SF)

(SF)

Boca Raton East

Total

5,791,770

9.52%

(28,753)

-

-

31.31

A

1,762,186

14.83%

(10,100)

-

-

34.67

B

2,664,913

8.45%

(16,252)

-

-

28.48

Boca Raton North

Total

7,097,511

15.64%

1,439

-

-

26.31

A

3,645,971

15.91%

16,378

-

-

28.82

B

3,098,663

17.02%

(12,618)

-

-

23.40

Boca Raton West

Total

4,519,754

12.64%

59,902

-

-

36.41

A

2,396,640

16.49%

24,222

-

-

39.82

B

1,952,184

7.85%

35,807

-

-

30.50

Boynton/Lantana

Total

2,705,130

9.55%

126,898

7,099

-

24.52

A

311,632

4.21%

52,834

-

-

24.47

B

1,852,266

12.49%

72,341

7,099

-

24.59

Delray Beach

Total

3,934,048

21.67%

(43,870)

33,400

84,300

29.11

A

30,845

0.00%

-

-

-

-

B

2,565,119

29.82%

6,698

33,400

84,300

29.14

Jupiter

Total

3,597,180

5.76%

9,522

-

-

27.14

A

654,414

5.30%

(1,286)

-

-

33.00

B

2,309,661

6.24%

11,869

-

-

26.21

North Palm Beach

Total

8,602,962

6.79%

(7,795)

-

111,972

28.95

A

1,702,437

9.72%

8,212

-

111,972

33.69

B

5,270,440

6.49%

6,648

-

-

27.70

Outlying Palm Beach City

Total

1,540,798

9.36%

57,354

37,500

58,999

26.50

A

35,468

100.00%

-

-

-

30.57

B

1,128,219

7.49%

49,822

37,500

58,999

28.12

Palm Beach

Total

1,088,142

16.89%

(59,637)

-

-

60.68

A

48,050

18.48%

(6,460)

-

-

57.79

B

711,987

21.48%

(31,263)

-

-

61.90

Palm Springs/Lake Worth

Total

1,018,032

6.05%

8,554

3,750

-

26.68

A

50,577

0.00%

-

-

-

-

B

570,805

4.96%

19,343

3,750

-

29.36

Royal Palm Beach/Wellington

Total

1,754,162

5.09%

(4,231)

-

26,162

28.02

A

124,705

5.26%

(1,194)

-

-

33.96

B

1,195,647

6.19%

(11,237)

-

26,162

27.65

West Palm Beach

Total

7,840,230

9.97%

49,569

-

-

23.83

A

1,085,378

11.80%

39,129

-

-

27.61

B

3,839,422

12.84%

(18,718)

-

-

23.76

West Palm Beach CBD

Total

5,440,844

9.56%

81,073

-

-

34.49

A

2,539,505

10.65%

88,236

-

-

40.04

B

1,992,625

8.33%

(1,729)

-

-

28.13

Total

54,930,563

10.77%

250,025

81,749

281,433

29.28

Class A

14,387,808

13.20%

209,971

-

111,972

33.73

Class B

29,151,951

11.62%

110,711

81,749

169,461

27.57

Source: CoStar Property® ONE COMMERCIAL REAL ESTATE | PALM BEACH |OFFICE | Q4 2017


SIGNIFICANT LEASE TRANSACTIONS PROPERTY ADDRESS

TENANT NAME

SIZE

LEASE TYPE

LEASE RATE

SUBMARKET

901 Yamato Rd

N/A

43,427

Direct

16.00

Boca Raton

3301 Quantum Blvd

N/A

35,000

Direct

10.00 NNN

Boynton Beach

4910 Communication Ave

IDA

22,614

Direct

14.50 NNN

Boca Raton

1905 NW Corporate Blvd

Broad and Cassel

20,000

Direct

30.00 NNN

Boca Raton

11300 US Hwy 1

Ameriprise Financial Services

15,100

Direct

25.00 NNN

North Palm Beach

SIGNIFICANT SALES TRANSACTIONS PROPERTY ADDRESS

BUYER NAME

Fountain Square

Bridge Investment

125 Worth Ave

The Frisbie Group

5503 S Congress Ave

SIZE

SALES PRICE $

$/SF

SUBMARKET

242,139

54,500,000

225

Boca Raton

49,401

30,700,000

621

Palm Beach

HCA

30,745

11,250,000

366

Lake Worth

1309 S Flagler Dr

Eastview Development

4,347

10,850,000

2,496

West Palm Beach

231 Royal Palm Way

The Procaccianti Group

11,576

9,200,000

795

Palm Beach

MAJOR DEVELOPMENT PIPELINE PROPERTY ADDRESS

COMPLETION

SIZE

DEVELOPER

SUBMARKET

3874 Kyoto Gardens Dr

Q1 2019

111,972

Cypress Realty

North Palm Beach

4th & 5th Delray

Q4 2018

84,300

iPic Entertainment

Delray Beach

Offices at Wellington Parc

Q12018

30,000

MAS Development

Palm Beach

33 W Avenue A

Q1 2018

14,599

Bi Development

Belle Glaede

3197 S Jog Rd

Q1 2018

8,800

N/A

Royal Palm Beach

ONE COMMERCIAL REAL ESTATE | PALM BEACH | RETAIL | Q4 2017


STEVEN NOSTRAND President & COO ONE Commercial Real Estate

PALM BEACH

snostrand@onecommercialre.com

JULIAN SCHEEFF Director of Intelligence ONE Commercial Real Estate jscheeff@onecommercialre.com

ALEX MAKKI Marketing Coordinator ONE Commercial Real Estate amakki@onecommercialre.com

BROWARD MIAMI-DADE

ONE Commercial Real Estate 1000 Brickell Avenue, Suite 500 Miami, FL 33131 305.704.9787

The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made to ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the material contained in this report.

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