MARKET REPORT
SOUTH FLORIDA | OFFICE
Q4 23
1
ONE COMMERCIAL REAL ESTATE | OFFICE | Q4 2023
A BOUTIQUE BROKERAGE WITH INSTITUTIONAL QUALITY SUPPORT ONE Commercial Real Estate was born from a commitment to be a change agent for clients and industry professionals. Founded by Daniel de la Vega, the President of ONE Sotheby’s International Realty, we offer superior results to owners, occupiers, and developers of commercial real estate by obtaining and sharing intelligence as well as applying our knowledge, experience, competence and technical skills. Our team members have experienced several cycles that have taught valuable lessons. We have decades of on-the-ground experience and market knowledge in South Florida advising clients in all aspects of commercial real estate. We provide the insight necessary to lead informed and efficient decision making. The commercial real estate landscape has changed. Florida is impacted by global economic and political events more than most. Capital is forming new markets, redefining old ones, and continues to shape the fabric of our ever-growing landscape. Understanding these changes allows us to continue serving our clients and communities. By embracing the data and analytics we can identify movements, address obstacles, forecast challenges, and secure a vision for the future. This edition of the ONE Commercial Market Report examines the office markets in Miami-Dade, Broward, and Palm Beach counties.
Daniel de la Vega Chief Executive Officer ONE Commercial Real Estate
ONE COMMERCIAL REAL ESTATE | OFFICE | Q4 2023
2
Miami-Dade County Q4 2023 | OFFICE REPORT MIAMI’S OFFICE MARKET CONTINUES TO ATTRACT BUSINESSES, DIVERSE ECONOMY, POSITIVE DEMAND DESPITE NATIONAL TRENDS
EXECUTIVE SUMMARY With a pro-business atmosphere, an increasingly skilled workforce and strong employment growth, Miami is one of the few office markets in the country with healthy post-pandemic demand. The region continues to attract new business due to more affordable occupancy costs, with average office asking rents that are 60% below New York and San Francisco, a low corporate and no personal income tax. These factors remain
1 YEAR AGO
CURRENT
INVENTORY SF
116,985,501
117,154,124
UNDER CONSTR SF
3,695,984
4,915,941
12 MO NET ABSORP SF
1,295,668
585,550
VACANCY RATE
8.67%
8.30%
MARKET RENT/SF
$47.00
$49.35
MARKET SALE PRICE/SF
$362
$352
MARKET CAP RATE
6.56%
6.88%
CHANGE
SOURCE: COSTAR
attractive to those moving from higher-cost states
particular. Additionally, Miami’s proximity to Latin America
such as California and New York.
and the Caribbean makes it a hub for international trade and
Despite a national environment of tenants
finance, further fueling office demand.
rightsizing footprints and macroeconomic
On the supply side, there are 4.9 million SF underway, the
headwinds, net absorption in Miami over the
most in a decade, with 70% concentrated within a 3.5 mile
past 12 months remained positive at 560,000 SF,
radius of Downtown Miami. Deliveries are expected to remain
though this dropped below the average between
elevated over the next three years, averaging 1.2 million SF
2015 and 2019 of 890,000 SF. A slowing economic
annually, above the 10-year annual average of 480,000 SF.
environment, particularly for finance and tech, is
Despite this rise in supply, 60% of incoming inventory is
driving a near-term slowdown in absorption and
concentrated in eight towers, which are 70% pre-leased,
rent gains from peaks of 10.9% seen in 2022. Still,
therefore new space availability remains limited.
office asking rents in Miami are rising at a 5.0% annual rate during the first quarter of 2024, above
Going forward, rent growth will continue to moderate as
national rent gains of 0.8%.
weaker demand, driven by softer office using job gains,
The metro’s impressive demand formation has
attractiveness, coupled with a limited availability of high
benefitted downtown. New developments in the
quality space, should drive an outperformance in rent gains
corridor offer tenants the amenitized, high-quality
compared to the national average. This relative strength in
space that is sought-after in the post-pandemic
fundamentals will help buoy office market values, with Miami
working world. Diversification of the metro’s
representing just a handful of markets with forecast office
economic base has also been an important
value gains of 8% through 2024 relative to 2019 levels, above
demand driver, with growth in the professional
the 11% average decline for the 54 largest U.S. markets.
and business services and healthcare sectors, in
3
ONE COMMERCIAL REAL ESTATE | OFFICE | Q4 2023
meets rising inventory. Despite this, the market’s increased
Although office values should outperform, higher interest
MARKET REPORT
ONE COMMERCIAL REAL ESTATE | OFFICE | Q4 2023
4
SALES VOLUME & MARKET SALE PRICE PER SF $380
rates have expanded average annual transaction cap
$1.4B
FORECAST
$360
$1.2B
$340
$1B
$320
$800M
$300
$600M
$280
$400M
$260
$200M
rates from 2022 lows in the 5% range to the mid-6% pricing correction relative to peak pricing levels in 2022. Transaction activity has also cooled, with volume SALES VOLUME
MARKET SALE PRICE/SF
range through 2023. This is resulting in a near-term
totaling $967 million over the past 12 months, down from $2.5 billion transacted through the second quarter of 2022. Despite this slowdown, institutional players
$0
$240
21
22
23
SALES VOLUME
24
25
26
MARKET ACTIVITY Trailing 12-month volume has slowed to $967 million
PRICE/SF UNITED STATES
PRICE/SF
remain active, making up 26% of annual volume.
through the first quarter of 2024, below the five-year average of $1.4 billion, as dry powder remains on the
MARKET CAP RATE
sidelines, awaiting lower prices. Despite this slowdown, Miami remains attractive on a relative basis, as healthy
9.5% FORECAST
demand and limited supply drive a low vacancy rate,
9.0%
suggesting that the market is insulated from future
8.5%
economic uncertainty relative to its high-growth 8.0%
peers. This outperformance has continued to attract institutional investors, making up 26% of buyer activity
7.5%
in 2023, in line with average levels of activity over the
7.0%
prior five years.
6.5%
6.0%
The second half of 2023 saw rising volume, driven by
5.5%
two major transactions. The largest of these involves the October sale of the 4 Star 801 Brickell Ave. for $250
5.0%
21
22
3 STAR MIAMI
23
24
MIAMI
4-5 STAR MIAMI
25
26
UNITED STATES
million, or $602/SF. Monarch Alternative Capital and Tourmaline Capital Partners acquired the property from Nuveen at a 6.75% cap rate. The buyer indicated that
MARKET RENT PER SF
they looked at the asset as a well-positioned, top quality building in a growing market despite a negative office
$70 FORECAST
outlook. The property was last purchased by Nuveen in
$65
2002 at a 6.45% cap rate. The increase in the cap rate for
$60
this property relative to its last trade is more indicative of valuation pressure driven by a higher fed funds rate
$55
rather than a softening in market fundamentals. In fact,
$50
the property now has asking rents between $100/SF
$45
and $120/SF, above prior asking rents of between $70/ SF and $90/SF from 2021 to 2022, indicating tenant
$40
rollover upside.
$35
$30
21
22
3 STAR MIAMI
5
23
4-5 STAR MIAMI
24
MIAMI
ONE COMMERCIAL REAL ESTATE | OFFICE | Q4 2023
25
UNITED STATES
26
Despite a rebound in volume through the second half
OFFICE | MIAMI-DADE
TOP BUYERS LAST 12 MONTHS at a faster clip relative to Miami as office fundamentals
STOCKBRIDGE CAPITAL GROUP, LLC
deteriorate faster in other markets. In fact, Miami is one of
GID INVESTMENT ADVISORS LLC
seven major U.S. markets with expected office value gains
PANTZER PROPERTIES
through 2024 versus 2019 values. This is driven by an
BAYSHORE GLOBAL MANAGEMENT LLC
expectation of continued rental growth as the market has some of the healthiest demand gains in the country.
BERKSHIRE
IMC EQUITY GROUP
OUTLOOK
PENSAM
RAMON MIJARES
Population growth has returned to Miami-Dade County
XAVIER PEREZ
after two years of losses from 2020 through 2021. That said, the county has 37,000 fewer residents than in 2019.
RENTAL ASSET MANAGEMENT LLC $20M
$40M
$60M
$80M
$100M
$120M
$140M
$160M
$180M
SALES VOLUME - PAST 1 YEAR
A closure in international travel during the pandemic resulted in a drag to population growth in the area,
of 2023, high volume deals are likely to continue to slow. Additionally, higher interest rates have resulted in higher cap rates, with average transaction cap rates expanding to the mid-6% to 7% range, up from the mid-5% range in 2022. Going forward, national cap rates will expand
which has historically been driven by international net migration. Additionally, a rise in the cost of living, with inflation in South Florida doubling the national average, has driven net domestic out-migration as residents leave in search of a lower cost of living in central, northern Florida as well as in Georgia and Texas.
SUBMARKET SALES TRANSACTIONS PAST 12 MONTHS SUBMARKET
SALES VOLUME
TRANSACTIONS
TRANSACTED SF
AVERAGE SF
MARKET CAP RATE
MARKET SALE PRICE/SF
BRICKELL
$256,515,000
16
435,549
27,222
6.3%
$517
CORAL GABLES
$183,020,884
24
545,653
22,736
7.0%
$377
MIAMI AIRPORT
$142,838,405
32
736,592
23,019
7.1%
$276
DOWNTOWN MIAMI
$79,633,000
8
259,198
32,400
6.65%
$359
KENDALL
$69,213,871
39
259,742
6,660
7.0%
$312
NORTHEAST DADE
$66,498,750
25
249,184
9,967
7.0%
$293
MIAMI
$54,082,529
23
156,550
6,807
7.2%
$301
MIAMI LAKES
$41,893,000
13
179,657
13,820
7.3%
$247
WYNWOOD-DESIGN DISTRICT
$35,126,120
5
35,634
7,127
6.5%
$486
MIAMI BEACH
$17,725,000
5
28,084
5,617
6.5%
$441
CORAL WAY
$10,684,800
7
19,988
2,855
6.6%
$373
COCONUT GROVE
$8,752,500
4
8,503
2,126
6.8%
$431
BISCAYNE CORRIDOR
$8,675,000
3
17,486
5,829
6.9%
$319
WEST MIAMI
$7,748,000
10
20,729
2,073
7.1%
$325
HIALEAH
$6,750,000
4
8,968
2,242
7.1%
$276
AVENTURA
$6,025,900
9
47,458
5,273
6.8%
$436
SOUTH DADE
$4,655,000
3
16,342
5,447
6.9%
$268
OUTLYING MIAMI-DADE CNTY
$780,000
10
38,715
3,872
7.1%
$316
MIAMI GARDENS/OPA LOCKA
$710,000
1
4,502
4,502
7.0%
$266
SOURCE: COSTAR
ONE COMMERCIAL REAL ESTATE | OFFICE | Q4 2023
6
RECENT SIGNIFICANT SALES 801 BRICKELL AVENUE | 801 BRICKELL Brickell Submarket | Miami, FL 33131 SALE DATE
Oct 2023
SALE PRICE
$250M ($602/SF)
CAP RATE LEASED
BUYER
Monarch Alternative Capital (USA) + 1
6.8% (Actual)
SELLER
Nuveen (USA)
92%
BROKER
Colliers
SALE TYPE
Investment
HOLD PERIOD 20+ Years RBA
415,150 SF
YEAR BUILT
1985
355 ALHAMBRA CIRCLE Coral Gables Submarket | Coral Gables, FL 33134 SALE DATE
Sep 2023
SALE PRICE
$90M ($404/SF)
LEASED
84%
HOLD PERIOD 93 Months RBA YEAR BUILT
BUYER
Princeton International Properties (USA)
SELLER
PGIM Real Estate (USA)
BROKER
Cushman & Wakefield
222,884 SF
SALE TYPE
Investment
2001 (Reno 2017)
SALE COND
1031 Exchange
150 W FLAGLER STREET | MUSEUM TOWER Downtown Miami Submarket | Miami, FL 33130 SALE DATE
May 2023
BUYER
SALE PRICE
$73.8M ($302/SF)
BROKER
Colliers
CAP RATE
7.6% (Actual)
SELLER
Bridge Investment Group (USA)
LEASED
92%
BROKER
CBRE
SALE TYPE
Investment
HOLD PERIOD 43 Months RBA
243,825 SF
YEAR BUILT
1983
Moishe Mana (USA)
5505 BLUE LAGOON DR | 5505 WATERFORD Miami Airport Submarket | Miami, FL 33126 SALE DATE
Dec 2023
BUYER
Lennar (USA)
SALE PRICE
$68M ($319/SF)
SELLER
LEASED
100%
Franklin Street Properties Corporation (USA)
HOLD PERIOD 20+ Years
BROKER
CBRE Owner User Purchase By Tenant
RBA
213,182 SF
SALE TYPE
YEAR BUILT
2002 (Reno 2021)
SALE COND.
255 ALHAMBRA CIRCLE | 255 ALHAMBRA Coral Gables Submarket | Coral Gables, FL 33134 SALE DATE
Aug 2023
BUYER
LNDMRK Development (USA) + 2
SALE PRICE
$54.4M ($246/SF)
SELLER
DWS Group (DEU)
LEASED
85%
BROKER
JLL
SALE TYPE
Investment
HOLD PERIOD 205 Months RBA
221,335 SF
YEAR BUILT
1974 (Reno 1993) SOURCE: COSTAR
While lower income residents have been exiting the county, Miami-Dade has enjoyed an inflow of high-net-worth individuals, which brought in $6.4 billion in new wealth to the metro in 2021. Former residents of New York, New Jersey, Massachusetts, and California now make up 50% of adjusted gross income flowing into Miami-Dade, with recent license exchange data pointing to a continued inflow of new residents from these states. Office-using sectors have been a bright spot in Miami’s economic recovery, with employment remaining well above prepandemic levels in the professional and business services and financial activities sectors. Miami attracted a number of banks and securities firms during the pandemic, including Citadel, GMC Capital, Melvin Capital, and tech venture capital firm Andreessen Horowitz, to name a few. Overall, Miami’s office sector had job growth of 7.2% in 2022, though gains have slowed through the second half of 2023 to 5.0%. Oxford’s baseline forecast calls for average annual growth of 0.7% in office jobs from 2024 to 2028. Miami’s startup ecosystem, fueled by strong in-migration, a nation-leading higher education system and a competitive tax structure, will continue to be an important driver of job growth going forward. According to Startup Genome’s Global Startup Ecosystem ranking for 2023, Miami was ranked 23rd in the world, an eight-spot improvement from 2022. Dozens of venture capital funds have offices in the city, and Miami has added more than 20 venture capital funds in the pandemic era. With its riskfriendly, pro-business atmosphere, Miami’s is poised to continue its recent ascension as a fast-growing venture capital center going forward.
Broward County Q4 2023 | OFFICE REPORT BROWARD’S OFFICE MARKET CLOSES 2023 WITH SLOWER TRANSACTION VOLUME DESPITE ATTRACTIVE MARKERS
EXECUTIVE SUMMARY Fort Lauderdale office transaction volume has slowed over the past 12 months, totaling $457 million, below the five-year average of around $830 million. Despite a healthy start to the year, with over $312 million traded in the first two quarters of 2023, volume in the second half of the year fell to $169 million, some of the slowest transaction activity in the past five years. The number of transactions has also slowed with just
1 YEAR AGO
CURRENT
74,876,632
75,069,418
UNDER CONSTR SF
700,231
824,012
12 MO NET ABSORP SF
248,298
223,216
VACANCY RATE
9.93%
9.86%
MARKET RENT/SF
$34.71
$36.13
MARKET SALE PRICE/SF
$251
$246
MARKET CAP RATE
7.64%
7.96%
INVENTORY SF
CHANGE
SOURCE: COSTAR
over 217 transactions occurring in the 12-month
in 2023, down from 24 deals in 2021 and 16 deals in 2022,
period ending in the fourth quarter of 2023, 50%
still these larger deals compose 50% of volume for the year.
below levels seen through the first quarter of 2022,
The largest deal in 2023 has involved Pebb Capital, Intalex
which totaled over 430 transactions. Despite this
Capital, and CDS International Holdings Inc., which acquired
near-term slowdown, the Fort Lauderdale market
100 and 110 E Broward Blvd. in Downtown Fort Lauderdale
remains attractive on a relative basis, as vacancy
for $43 million, or over $125/SF, from Stockbridge Capital in
rates that remain well below the national average
May. Stockbridge had bought the asset back in 2018 for just
suggest that Fort Lauderdale may be somewhat
over $41 million, or over $119/SF. The property was around
insulated from future economic uncertainty when
50% occupied at the time of sale, and the buyers now plan
compared to its high-growth peer markets.
to do renovations on the exterior of the property, elevator
Over 80% of activity in 2023 has been concentrated in the Plantation, Downtown Fort
lobbies, bathrooms, and building amenities to improve the overall tenant experience.
Lauderdale, Fort Lauderdale, Southwest Broward,
Two other major deals, for assets in Plantation and
and Pompano Beach submarkets. Activity in
Southwest Broward, drove volume in 2023. The largest
Cypress Creek and Sawgrass Park has been
deal involved the sale of two medical office buildings
slower over the past few years, although over a
by Healthcare Realty Trust to Boyd Watterson Asset
longer time horizon, these submarkets have also
Management for over $93 million in January. Both properties
seen a significant share of transactions. These
are 3 Star assets, one located in Tampa and the other in
submarkets tend to see the bulk of activity, as
Sunrise. The Sunrise asset sold for over $38 million, or over
they represent a combined 80% of the total office
$356/SF, well above the average market sale price of around
inventory in the Fort Lauderdale market.
$263/SF as of the first quarter of 2023.
Only 10 deals above $10 million have occurred
The second deal, which occurred in March, involved the sale
9
ONE COMMERCIAL REAL ESTATE | OFFICE | Q4 2023
MARKET REPORT
ONE COMMERCIAL REAL ESTATE | OFFICE | Q4 2023 10
SALES VOLUME & MARKET SALE PRICE PER SF of the 4 Star Cornerstone One building, located at
$400M
$360
FORECAST
$340
$350M
$320
$300M
$300
$250M
$280
$200M
$260
$150M
$240
$100M
$220
$50M
1200 S Pine Island Road in Plantation. The property, transacted for over $37 million, or over $222/SF. The property previously traded for $32.8 million, or just SALES VOLUME
MARKET SALE PRICE/SF
built in 1991, was 80% leased at the time of sale and
over $193/SF, at an 8% cap rate back in 2000. High-volume deals, which drove investment activity in the past couple of years, are likely to remain muted as economic headwinds, coupled with elevated
$0
$200
21
22
23
SALES VOLUME
24
25
26
transaction pricing for Fort Lauderdale office remains 20% above 2019 levels, the average transaction price/
PRICE/SF UNITED STATES
PRICE/SF
interest rates, impact pricing. In fact, although average
SF over the past 12 months has fallen around 18% from year-ago levels. Going forward, elevated interest
MARKET CAP RATE
rates will continue to weigh on transaction activity,
9.5% FORECAST
while cap rates continue to trend higher from lows in the mid-5% range in 2022 to over 6.5% today.
9.0%
8.5%
MARKET ACTIVITY 8.0%
Office construction activity in Fort Lauderdale has remained largely muted since 2019, with around
7.5%
432,000 SF in starts in 2023. Around 200,000 SF 7.0%
delivered in 2023, with supply additions expected to remain limited over the forecast period. Since 2018,
6.5%
net delivery of new supply has remained below the 6.0%
21
22 3 STAR FORT LAUDERDALE
23
24
25 FORT LAUDERDALE
4-5 STAR FORT LAUDERDALE
26 UNITED STATES
long-term historical average of around 750,000 SF annually. Over 78% of supply additions since 2010 have been
MARKET RENT PER SF
composed of 4 & 5 Star assets, with around 78%
$48 FORECAST
concentrated in the Southwest Broward, Plantation,
$46
Sawgrass Park, Downtown Fort Lauderdale, and
$44
Pompano Beach submarkets. Existing assets built
$42
since 2010 as well as properties underway are more
$40
than 90% leased, with more than 70% of available
$38
space concentrated in assets built since 2020 or
$36
currently underway. Over 70% of space available in
$34
these properties is concentrated in four properties,
$32
with around 50% in the T3 Fat Village East and West, which total over 380,000 SF. Fat Village is part of a
$30
development by Hines, in partnership with Urban $28
21
22
3 STAR FORT LAUDERDALE
11
23
4-5 STAR FORT LAUDERDALE
ONE COMMERCIAL REAL ESTATE | OFFICE | Q4 2023
24
25
FORT LAUDERDALE
26
UNITED STATES
Street Development, Cresset Real Estate and Las
OFFICE | BROWARD
TOP BUYERS PAST 12 MONTHS
OUTLOOK
THE BROOKDALE GROUP
Office-using sectors have been a bright spot in
KEISER UNIVERSITY
Fort Lauderdale’s economic recovery. Office-using
VERA REALTY
employment is 13% above pre-pandemic levels,
STOCKBRIDGE CAPITAL GROUP, LLC
equating to over 30,000 more jobs, though gains are
BROWARD COUNTY GOVERNMENT
beginning to slow. Despite a near-term economic
HAMMES PARTNERS
slowdown impacting interest rate sensitive sectors
DOUGLAS ANTHONY PERERA, JR.
such as construction, finance, and information, Fort
CDS INTERNATIONAL HOLDINGS INC.
Lauderdale’s strong workforce, business friendly environment, international presence, and quality of life
INTALEX CAPITAL
will likely continue to draw corporate relocations.
PEBB LIVING $10M
$15M
$20M
$25M
$30M
$35M
$40M
$45M
$50M
An influx of retirees along with strong employment
SALES VOLUME - PAST 1 YEAR
gains drove an outperformance in population growth Americas, totaling 835,000 SF of office, retail, and
from 2010 through 2018, though this has slowed in the
residential mixed-use in Flagler Village.
past few years as affordability concerns have driven
The muted supply pipeline should help buoy office fundamentals in the market, though a continued flight to quality will likely result in weaker performance for 1 to 3 Star product in the next few years. That said, Fort Lauderdale vacancy and rent growth trends are expected to outperform the U.S. average as the supply/
residents towards lower cost Central Florida markets. Still, a strong recovery in net international migration through the first half of 2022 has helped buoy total population, which grew by over 11,000 residents from July 2021 to July 2022 in Broward County, well above the over 3,000 resident growth in Miami-Dade County.
demand balance remains healthier than in many
Strong household and income growth has resulted in
markets across the country.
real household buying power growth of over 41% for
SUBMARKET SALES TRANSACTIONS PAST 12 MONTHS SUBMARKET
SALES VOLUME
TRANSACTIONS
TRANSACTED SF
AVERAGE SF
MARKET CAP RATE
MARKET SALE PRICE/SF
PLANTATION
$95,406,608
24
523,070
21,795
8.1%
$241
FORT LAUDERDALE
$82,646,438
51
351,407
6,890
7.9%
$218
DOWNTOWN FORT LAUDERDALE
$76,655,000
24
432,565
18,024
7.7%
$318
SOUTHWEST BROWARD
$50,720,000
13
122,114
9,393
7.9%
$276
CYPRESS CREEK
$46,534,297
15
292,280
19,485
8.4%
$193
NW BROWARD/CORAL SPRINGS
$39,162,100
30
194,182
6,473
8.2%
$216
POMPANO BEACH
$34,780,000
16
152,164
9,510
8.0%
$211
HOLLYWOOD
$16,527,500
21
75,081
3,575
8.0%
$246
HALLANDALE
$16,473,000
13
27,984
2,153
7.5%
$326
COMMERCIAL BLVD
$2,650,000
1
24,180
24,180
8.0%
$171
SAWGRASS PARK
$675,000
1
2,800
2,800
7.6%
$249
SOURCE: COSTAR
ONE COMMERCIAL REAL ESTATE | OFFICE | Q4 2023 12
RECENT SIGNIFICANT SALES 110 E BROWARD BLVD | 110 EAST Downtown Fort Lauderdale Submarket | Fort Lauderdale, FL 33301 SALE DATE
May 2023
SALE PRICE
$38.8M ($127/SF)
LEASED
49%
HOLD PERIOD 64 Months RBA YEAR BUILT
BUYER
CDS International Holding (USA) +2
SELLER
Stockbridge Capital Group (USA)
BROKER
CBRE
305,440 SF
SALE TYPE
Investment
1981 (Reno 1999)
SALE COND
Ground Lease (Leasehold)
1200 S PINE ISLAND RD | CORNERSTONE ONE Plantation Submarket | Plantation, FL 33324 SALE DATE
Mar 2023
BUYER
The Brookdale Group (USA)
SALE PRICE
$37.9M ($207/SF)
SELLER
AFL-CIO Building Investment (USA)
LEASED
80%
BROKER
JLL
SALE TYPE
Investment
HOLD PERIOD 20+ Years RBA
182,994 SF
YEAR BUILT
1991
1640 SW 145TH AVENUE | KEISER UNIVERSITY S.W. Broward Submarket | Pembroke Pines, FL 33027 SALE DATE
Feb 2023
BUYER
Keiser University (USA)
SALE PRICE
$33M ($456/SF)
SELLER
Keenan Development Group (USA)
LEASED
100%
BROKER
Colliers
HOLD PERIOD 145 Months
SALE TYPE
Owner User
RBA
72,400 SF
SALE COND
YEAR BUILT
2011
Bulk/Portfolio Sale, Purchase by Tenant
4611 JOHNSON ROAD | LYONS TECH CENTER 5 BLDG. A Pompano Beach Submarket | Coconut Creek, FL 33073 SALE DATE
Sep 2023
BUYER
Stockbridge Capital Group (USA)
SALE PRICE
$21.7M ($956/SF)
SELLER
CAP RATE
4.7% (Actual)
Principal Real Estate Investors LLC (USA)
LEASED
100%
BROKER
JLL
SALE TYPE
Investment
HOLD PERIOD 185 Months RBA
22,644 SF
YEAR BUILT
2004
2000 W COMMERCIAL BLVD | CITY COLLEGE Cypress Creek Submarket | Fort Lauderdale, FL 33309 SALE DATE
Jan 2024
BUYER
Broward County Government (USA)
SALE PRICE
$18.5M ($139/SF)
SELLER
Allied Health Education (USA)
LEASED
100%
SALE TYPE
Investment
HOLD PERIOD 34 Months RBA
133,295 SF
YEAR BUILT
1971
SOURCE: COSTAR
Fort Lauderdale, versus 38% for the U.S. average from 2010 through 2021. Demographic growth along with the return of tourists has resulted in gross real retail sales gains in Broward County, growing by over 8.3% in the rolling 12-month period through October 2023 versus December 2019 levels. Despite still elevated sales, real retail sales growth has slowed in recent months from peak annual growth of over 19% seen in the first quarter of 2022, contracting 1.3% in October 2023, as inflation and higher interest rates weigh on consumer demand. Additionally, housing affordability will continue to present a drag on population growth as lower income households are increasingly priced out of the area. According to the Federal Housing Finance Agency’s purchase-only index, Fort Lauderdale home values have increased by over 65% since 2019, well above U.S. average growth of over 48%. Median home purchase values remain 18% below levels in Miami, presenting Fort Lauderdale as a more affordable option relative to its neighbor in the South, still the rapid rise in housing costs has deteriorated affordability and presents a headwind to future household growth.
Palm Beach County Q4 2023 | OFFICE REPORT PALM BEACH OFFICE MAINTAINS INVESTOR INTEREST AMIDST ECONOMIC HEADWINDS, SEES SHIFT IN BUYER PROFILE
EXECUTIVE SUMMARY Investor interest in Palm Beach office has remained elevated, with annual transaction volume surpassing the five-year average of around $1.1 billion in both 2021 and 2022. Despite the recent slowdown in economic activity, 2023 saw around $600 million transacted, more in-line with prepandemic transaction volume. Over 80% of 2023 transaction activity was concentrated in the Boca Raton, West Palm Beach and North Palm Beach and Palm Beach Submarkets. With these same submarkets making up over 85% of transaction activity since 2020. Despite some of the same submarkets seeing a high share of activity, the type of buyer has shifted recently in the market. Private buyers have made up over 77% of trades over the last 12 months up from 66% over the past five years, as institutional and private equity players sit on the sidelines. Despite fewer institutional players resulting in smaller transaction sizes, two large deals for more than $80 million each have taken place this year. The largest deal in 2023, and over the past two years, has involved a joint venture between PEBB Enterprises and BH Group, which acquired 6600 N Military Trail for $104 million or $160/SF in April from Office Depot. The property had last traded in 2017 for $132 million or $203/SF and in 2011 for $171 million or $263/SF, highlighting the value contraction of some suburban office campuses. The buyers plan to implement a substantial capital improvements program to upgrade the property.
15
ONE COMMERCIAL REAL ESTATE | OFFICE | Q4 2023
1 YEAR AGO
CURRENT
60,128,224
60,112,985
UNDER CONSTR SF
883,789
963,001
12 MO NET ABSORP SF
1,064,709
-473,860
VACANCY RATE
7.25%
8.02%
MARKET RENT/SF
$43.27
$45.22
MARKET SALE PRICE/SF
$313
$315
MARKET CAP RATE
7.00%
7.27%
INVENTORY SF
CHANGE
SOURCE: COSTAR
Another large deal, which took place in July, involved the purchase of 125 Worth Avenue by Citadel from the Frisbie Group. The three star property, located in the exclusive Worth Avenue strip, represents a footprint expansion by Citadel which in 2022 purchased and now occupies 48,000 SF at the adjacent 151 Worth Ave. This latest purchase serves to highlight the run up in value that some well located office assets have attained in South Florida, in contrast to suburban office campuses. 125 Worth Ave. last traded in October of 2017 for just over $30 million at a 4.4% cap rate, the recent sale values the asset at $83 million at a 3% cap rate, representing 18% compound annual growth in value. Despite some value gains and lower cap rates in certain deals, higher rates are generally driving office cap rates higher in the market. Well leased office properties, with more than 80% of space occupied, have seen cap rates rise from the mid-five to mid-six percent range from 2021 and into 2022, while some of the latest cap rate readings have risen above 7%. Apart from higher cap rates, slower volume is expected to continue over the coming quarters. High volume deals, which drove investment activity in the past couple of years, have slowed, with only four deals above $20 million in 2023, down from 28 and 17 of these deals in 2021 and 2022 respectively.
MARKET REPORT
ONE COMMERCIAL REAL ESTATE | OFFICE | Q4 2023 16
SALES VOLUME & MARKET SALE PRICE PER SF $360
Despite a slowing economy and higher interest rates
$700M
FORECAST
$600M
$320
$500M
$300
$400M
$280
$300M
$260
$200M
$240
$100M
transaction activity, Palm Beach office is expected to outperform nationally. Palm Beach is one of nine major U.S. markets with expected office value gains through SALES VOLUME
MARKET SALE PRICE/SF
resulting in near-term pricing correction and lower $340
2024 relative to 2019 values. This is largely driven by an expectation of continued rental gains as the market continues to see some of the highest office rent gains in the country, along with Miami and Fort Lauderdale.
MARKET ACTIVITY $0
$220
21
22
23
SALES VOLUME
24
25
26
Office construction activity in Palm Beach remains
PRICE/SF UNITED STATES
PRICE/SF
elevated, totaling 960,000 SF relative to the 10-year historical average of 700,000 SF. Despite the elevated
MARKET CAP RATE
pipeline, construction starts have begun to slow, totaling over 127,000 SF in 2023, down from the over
9.5% FORECAST
590,000 SF that broke ground in 2022. Delivery of
9.0%
new product is expected to remain elevated through 8.5%
2024, but should then begin to wind down by 2025 as elevated interest rates and a softening market impact
8.0%
developer interest. Still, supply additions expected to
7.5%
peak in 2024, totaling over 825,000 SF. Since 2021, 7.0%
net delivery of new supply has remained well above the 10-year historical average of around 77,000 SF
6.5%
annually, with the exception of 2023 which saw no new
6.0%
net deliveries. 5.5%
21
22
3 STAR PALM BEACH
23
24
25
PALM BEACH
4-5 STAR PALM BEACH
26
UNITED STATES
Virtually all supply additions since 2010 have been composed of 4 & 5 Star assets, with around 77% concentrated in the North Palm Beach, West Palm
MARKET RENT PER SF
Beach, Delray Beach, and Boca Raton submarkets.
$56
Existing assets built since 2010, as well as properties
FORECAST $54
underway, are over 96% leased, with more than 80%
$52
of available space concentrated in assets built since
$50
2020 or currently underway. The majority of available
$48
space in these newer properties is concentrated in two
$46
properties under construction, with over 100,000 SF
$44
available at both One Flagler and 300 Banyan Blvd.
$42
Both 4 Star properties are expected to deliver by 2024
$40
in the West Palm Beach Submarket.
$38 $36 $34
The near-term supply pipeline will likely expand 4 & 21
22
3 STAR PALM BEACH
17
23
24
4-5 STAR PALM BEACH
ONE COMMERCIAL REAL ESTATE | OFFICE | Q4 2023
25
PALM BEACH
26
UNITED STATES
5 Star vacancies as these projects lease-up over the
OFFICE | PALM BEACH
TOP BUYERS LAST 12 MONTHS area’s outsized concentration of financial activities and
CITADEL
professional and business services jobs helps drives
BH GROUP
higher median household income levels relative to its
PEBB ENTERPRISES
southern neighbors of Fort Lauderdale and Miami.
KEISER UNIVERSITY
Since 2010, total nonfarm employment in Palm Beach
ALLEN CHELMINSKY
has grown by over 35% versus 20% growth for the U.S.
OAK LANE PARTNERS
Growth has also outperformed in the post-pandemic era
CS VENTURES
with Palm Beach employment gains at over 5.5% versus
ANGLER PROPERTIES LLC
3.6% for the U.S. since December of 2019. Office-using
INVESTMENTS LIMITED
sectors have been a bright spot in the economic recovery
ACCESSO PARTNERS $10M
$20M
$30M
$40M
$50M
$60M
$70M
$80M
$90M
of Palm Beach. Employment is well above pre-pandemic levels in the professional and business services and
SALES VOLUME - PAST 1 YEAR
financial activities sectors, although growth for these next few years, with the continued flight to quality likely resulting in weaker performance for 1 to 3 Star product. That said, Palm Beach vacancy and rent growth trends are expected to outperform the U.S. average, as the supply/demand balance remains healthier here than in many markets across the country.
sectors slowed in 2023. The county also boasts the third-largest population in the state, after Miami-Dade and Broward County, with over 1.5 million residents. From April 2020 through July 2022 both international and domestic migration have driven population growth in the county, which has risen by over 26,000 residents over that time period, the tenth
OUTLOOK
largest increase across counties in Florida and higher
With the fourth-highest personal income in Florida, over 60% higher than the state average, Palm Beach is one of the wealthiest counties in the state and country. The
than Miami-Dade and Broward County. New residents to the South Florida region have brought
SUBMARKET SALES TRANSACTIONS PAST 12 MONTHS SUBMARKET
SALES VOLUME
TRANSACTIONS
TRANSACTED SF
AVERAGE SF
MARKET CAP RATE
MARKET SALE PRICE/SF
BOCA RATON NORTH
$162,900,000
11
985,946
89,631
7.7%
$280
PALM BEACH
$101,335,570
2
72,164
36,082
6.3%
$658
NORTH PALM BEACH
$73,809,999
29
286,215
9,869
7.3%
$289
WEST PALM BEACH
$54,242,000
21
163,160
7,770
7.4%
$257
BOCA RATON EAST
$49,928,767
30
163,692
5,456
7.4%
$314
DELRAY BEACH
$39,636,625
25
114,909
4,596
7.3%
$333
PALM BCH CTY OUTLYING
$19,925,000
12
134,540
11,212
7.3%
$314
BOCA RATON WEST
$19,675,000
4
59,889
14,972
7.2%
$326
ROYAL PALM BCH/WELLINGTON
$18,250,000
11
218,155
19,832
7.3%
$301
WEST PALM BEACH CBD
$13,524,500
9
39,343
4,371
6.5%
$411
JUPITER
$11,719,000
15
126,473
8,432
7.6%
$280
BOYNTON/LANTANA
$7,264,320
11
40,939
3,722
7.3%
$296
PALM SPRINGS/LAKE WORTH
$6,050,000
7
29,890
4,270
7.3%
$316
SOURCE: COSTAR GROUP
ONE COMMERCIAL REAL ESTATE | OFFICE | Q4 2023 18
RECENT SIGNIFICANT SALES 6600 N MILITARY TRAIL Boca Raton North Submarket | Boca Raton, FL 33496 SALE DATE
Apr 2023
BUYER
BH Group (USA) + 1
SALE PRICE
$104M ($160/SF)
BROKER
Butters Realty & Management
LEASED
100%
SELLER
The ODP Corporation (USA)
BROKER
Butters Realty & Management
SALE TYPE
Investment
HOLD PERIOD 68 Months RBA
650,000 SF
YEAR BUILT
2008
125 WORTH AVENUE | 125 WORTH Palm Beach Submarket | Palm Beach, FL 33480 SALE DATE
Jul 2023
BUYER
Citadel (USA)
SALE PRICE
$83M ($1.7K/SF)
SELLER
Dreyfuss Management (USA) + 1
CAP RATE
3.0% (Actual)
SALE TYPE
Investment
LEASED
86%
HOLD PERIOD 69 Months RBA
50,000 SF
YEAR BUILT
1974 (Reno 2017)
6111 BROKEN SOUND PKY NW Boca Raton North Submarket | Boca Raton, FL 33487 SALE DATE
Dec 2023
BUYER
Accesso Partners (USA) + 1
SALE PRICE
$25M ($250/SF)
SELLER
LEASED
75%
Alchemy ABR Investment Partners (USA) + 1
SALE TYPE
Investment
HOLD PERIOD 61 Months RBA
100,000 SF
YEAR BUILT
1986 (Reno 2007)
791 PARK OF COMMERCE BLVD Boca Raton North Submarket | Boca Raton, FL 33487 SALE DATE
Feb 2023
BUYER
Oak Lane Partners (USA)
SALE PRICE
$20M ($127/SF)
SELLER
LEASED
93%
Commercial Financial Management (USA)
HOLD PERIOD 213 Months
SALE TYPE
Investment
RBA
156,898 SF
SALE COND
Debt Assumption
YEAR BUILT
1994 (Reno 2000)
375 S COUNTY ROAD | THREE SEVENTY FIVE BLDG Palm Beach Submarket | Palm Beach, FL 33480 SALE DATE
Jul 2023
BUYER
CS Ventures (USA)
SALE PRICE
$18.3M ($827/SF)
BROKER
Stanwich Group LLC
LEASED
50%
SELLER
M Development, LLC (USA)
HOLD PERIOD 28 Months
SALE TYPE
Investment
RBA
22,164 SF
SALE COND
YEAR BUILT
1984
Deferred Maintenance, High Vacancy Property
SOURCE: COSTAR
in an estimated $23 billion in adjusted household gross with Palm Beach County seeing the most gains, with over $14 billion in household income growth since 2019. Strong household and income growth, has resulted in real household buying power growth of over 67% for Palm Beach, versus 38% for the U.S. average from 2010 through 2021. This growth has resulted in gross real retail sales gains in Palm Beach County of over 18% in the rolling 12-month period through October 2023 versus December 2019 levels. Despite still elevated sales, real retail sales growth has slowed in recent months. That said, new company moves into the area including Goldman Sachs and Elliot Management have earned West Palm Beach a new moniker as the “Wall Street of the South.” The newly built 360 Rosemary office building, in downtown West Palm Beach, houses these and other financial services firms which have recently moved to the area. The building sits within The Square, a new neighborhood development by the Related companies which includes apartments, retail and mixed-use space. Several New York restaurants have also opened up new locations in the area including Milos, Felice and Harry’s. According to a recent report by Henley & Partners, West Palm Beach is the 4th fastest growing in the world for millionaires over the past ten years, with 90% more millionaires today than a decade ago. This influx of wealth has attracted developers and businesses to the area, a trend that will likely continue over the next few years.
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