South Florida’s once-booming office market is slowing down, according to a recent report by JLL.
After numerous consecutive quarters of growth, net absorption went into the red in all three counties as supply surpassed demand in the second quarter.
Broward, Miami-Dade and Palm Beach counties also saw vacancy rates rise, signaling a slowdown in the market.
In Miami-Dade, net absorption was negative 153,700 square feet year-to-date in the second quarter of 2018, down from 167,200 square of positive net absorption in the second quarter of 2017. Vacancy rates rose 1.4 percentage points to 14.2 percent in the second quarter of 2018.
While the report highlighted some bright spots in the market, including delivering new office space at Three MiamiCentral and Canal Park Office, the slowdown was due to an “underperformance” in Class B office space as more tenants moved out of lower quality space in the most recent quarter.
Broward’s office market also cooled down with a year-to-date net absorption of negative 107,000 square feet in the second quarter of 2018, down from a positive 202,070 square feet absorbed in the second quarter of 2017.
Vacancy rates, however, declined in the most recent quarter to 12.7 percent from 13.4 percent in the second quarter of 2017. KEMET Corporation expanded by more than about 45,000 square feet in downtown Fort Lauderdale and Spaces leased 32,000 square feet in Las Olas Square also in downtown Fort Lauderdale.
In addition, rent growth in Broward increased to $31.95 per square foot from $29.52 per square foot. But rent prices are not projected to move higher, according to JLL, as asking rents have hit or surpassed the previous cycle’s peak.
Meanwhile, Palm Beach’s office market activity continued its slowdown due to a lack of Class A office space. No new major new office space is currently under construction, according to the report. Net absorption was negative 243,000 square feet in the second quarter, marking the biggest shift in the market since 2008.
Some of the negative absorption was due to the lack of large tenant move-ins, as well as smaller tenants leaving their buildings or downsizing. Two large move-outs included Shoes for Crews leaving 37,700 square feet at One Clearlake and NTT America moving out of a 56,000-square-foot office at Boca Raton Innovation Campus.