Slowdown continues in Broward Co. office

The Broward County office market continued to experience a slowdown in activity as stagnant economic conditions further impacted the local economy in 3Q 2009.

Florida’s unemployment is at a 26-year high and nearing 11%, which inevitably translates into reduced demand for available office space. Until the labor market truly firms up, negative pressure on commercial real estate demand will remain. This is reflected in the vacancy rate, leasing activity and absorption statistics year-to-date.

Total vacancy increased by 2.9% from first quarter 2009 and is anticipated to rise throughout the remainder of 2009, while lease rates are expected to continue their decline. Sublease space is on the rise, with 867,026sf of sublease space now being reported as available for third quarter 2009. During this same time period last year, 433,283sf of sublease space was listed as available.

The average asking direct lease rate declined by 7.4% from the $18.13 psf NNN rate recorded during third quarter 2008.

Overall leasing activity, including renewals, totaled approximately 350,639sf for third quarter 2009, down from third quarter 2008’s total of 544,209sf. Larger lease transactions in the market include a 15,645sf lease signed by Krupnick, Campbell, Malone at Courthouse Place, a 20,368sf lease by Centurian Partners at One Financial Plaza and a 24,300sf renewal by the Social Security Administration at New River Center.

All transactions were located within the CBD/Downtown Fort Lauderdale submarket. AutoNation also relocated to its new headquarters at 200 Las Olas Circle after signing a 102,850sf lease during fourth quarter 2008. Transactions in other submarkets include a 33,260sf lease signed by Broward Multispecialty Group at Riverbend Corporate Park in the Fort Lauderdale submarket.

For the third consecutive quarter, negative net absorption was recorded as supply continued to outpace demand. During this same time period last year, overall net absorption was positive 45,329sf.

Due to economic uncertainty, sales activity decreased from the 706,800sf reported as of third quarter 2008 to currently 72,140sf of office product sold year-to-date 2009.

New development remains scarce within Broward County. Promenade at Lyon’s D, a 50,000sf project located within the Northwest Broward submarket, received its certificate of occupancy, delivering to the market more than 50% leased.