Alex Zylberglait CCIM, SIOR and Ryan Shaw of Marcus & Millichap answer pressing questions on the state of the Miami office market. • What trends do you see presently in office development in your area? Office development is relatively slow at this time except for the projects that were already in the works prior to the market downturn, specifically projects in Downtown Miami as well as in Coral Gables and Doral. Given the current market conditions, it is unlikely that we will see any significant development for the next few years. In addition, most office assets today could be acquired at below replacement cost therefore stifling the development of new product. There are a few exceptions that include some medical office buildings and some buildings that are being built as “green” buildings, which is a trend likely to be around for a while as long as there is development. In fact, many government tenants are requiring that any space they lease be in a building that complies with the latest “green” standards. • Who are the active office developers in your area? Rilea Group is active in Downtown Miami as is MDM Development Group, which is working on Met2, and …
Southeast Market Reports
1. What trends do you see presently in industrial development in your area? There are no new developments breaking ground and few nearing completion. There has recently been drastic increases in industrial product vacancy rates which, inherently, has compressed lease rates. I do not expect to see any new projects breaking ground until the current vacancies are absorbed and lease rates stabilize. 2. What type of industrial product is doing well in your area? Large warehouse/distribution buildings with 24-foot+ clear height continue to outperform the market vacancy rates but are still subject to lease rate compression as business revenues continue to decline. 3. Who are the active industrial developers in your area? Prologis Butters Construction REMS Group 4. Please name one or two significant industrial developments in your area. What impact will these projects have on the market? The 595 Park of Commerce, located directly off I-595 halfway between Downtown Fort Lauderdale and Weston, has recently completed its first of three phases. Upon completion, the 595 Park of Commerce will consist of 18 office, retail and warehouse buildings. The developers, REMS Group, have been able to adapt to the challenging conditions of today’s market by offering tenants an array of …
As with the rest of the nation, Central Florida is adapting to drastic changes to our financial system. The local retail market has been adversely affected by the severe downturn in construction and housing-related industries — those segments were large components the local economy. Although the area currently ranks eighth nationally for foreclosures and the median home price has stabilized at the 2002 level of $130,000, residential sales volume increased 51 percent year over year. Unemployment for the region peaked in March at 10.1 percent, but is now down to 9.7 percent. Fortunately, Central Florida continues to make progress in diversifying its workforce with significant growth in the defense, high-tech and medical fields. Burnham Institute, University of Central Florida Medical School, Nemours Hospital and Florida Hospital are all growing. Additionally, government-funded projects in infrastructure and community venues in Orlando should build momentum in the recovery. As it is occurring nationally, we are witnessing a stratification of retailers locally as well – a separation between the Good, the Bad and the Ugly. The Good retailers are focusing on marketing, remerchandising, remodeling, expanding, recruiting and taking advantage of deflated costs and weakened competition. Some are seeing increases in sales of 25 percent. …
Retail properties in Miami-Dade County recorded negative net absorption in the first quarter as accumulating job losses stymied retail spending and forced merchants to vacate the market. Additional increases in vacancy are expected through the end of 2009 as more tenants close and others reduce planned store openings. Higher vacancy will induce a further decline in rents, which dropped for the second successive quarter in the first 3 months of this year, and a slowdown in new store openings will undermine support for marketwide rent growth in the months ahead. In addition, tenants seem to be gaining the upper hand in negotiations on lease extensions or renewals. As a result, concessions will rise over the remainder of the year as owners attempt to retain traffic-generating merchants. While the demand side is decidedly weaker than it has been recently, a decrease in construction will mitigate the extent of the projected rise in vacancy and set the stage for a steady recovery in property fundamentals. A look at the numbers indicates that employment in Dade County will decrease by 43,000 jobs (4.2 percent) in 2009, compared with a loss of 36,400 positions last year. Due to the decline in employment, retail spending …
These haven’t been the easiest times to maintain optimism or even a somewhat sunny outlook, which is a crucial characteristic for those of us who lease office properties in Atlanta or anywhere else in the United States. Everywhere we turn, we’re constantly pounded with negative economic news as the pillars of American industry teeter and equity markets gyrate. But unlike the frozen credit markets, at least the reeling equity markets aren’t completely stagnant. We’re starting to see signs of life, and the main question on everybody’s mind is have we hit bottom? Let’s hope so. There are a few early indicators pointing up, and long-term prospects suggest that metro Atlanta can maintain the growth that transformed the city during the past 30 years. First, Jones Lang LaSalle research has found that metro Atlanta’s office markets, including sublease space, absorbed 182,432 square feet in the first quarter of this year. That would’ve been a bad quarter in 2006, but coming off a year where the office market had negative net absorption of more than 850,000 square feet, we’ll take it. Unfortunately, the urban markets — Buckhead, Midtown and Downtown — posted negative net absorption of 47,640 square feet in the first …
The University of Alabama at Birmingham continues to be the most powerful and stable economic engine in North Central Alabama. The university offers the community high-paying jobs as both faculty and staff employees and an affordable and beneficial educational opportunity, while drawing patients and visitors to its world-class medical center from throughout the region, and in many instances, from all over the globe. Approximately 12 years ago, Alabama embarked on a program to entice automotive manufacturers to the state. That program paid off first with Mercedes, then with Honda and Hyundai, which are all located in central Alabama. Birmingham is at the center of this automotive triangle. With tens of thousands of jobs associated with the industry, Birmingham has been able to continue its manufacturing tradition with higher pay than the old iron and steel jobs of the city’s past. Despite the pressure on the automotive sector from the current economic downturn, Alabama-based manufacturers appear well-positioned to weather the storm and return to profitability. That bodes well for Birmingham, and that bodes well for Birmingham’s retail. On February 5, 2009, Birmingham-based Bruno’s Supermarkets declared Chapter 11 Bankruptcy. Locally, the move surprised no one, but it did bring finality to the …
Evan P. Kristol is senior vice president of Investments and Still Hunter, III, is first vice president of Investments for Marcus & Millichap Real Estate Investment Services in Fort Lauderdale, Florida. 1. What area is your expertise South Florida Apartments and Distressed Multifamily Properties (Broward County) 2. What trends do you see presently in multifamily development in your area? In recent years, strong population growth and an expanding job market drove demand for apartments in South Florida. Economic uncertainty involving the residential market has created an unstable situation for local developers causing them to become guardedly optimistic regarding their future construction plans. There is not much new development taking place. Unsold condos continue to compete with apartments. The positive aspect of supply-side fundamentals is an ongoing reduction in permit issuance. In Broward County 1,400 multifamily units were issued last year, an amount that is expected to fall to fewer than 1,000 units in 2009. 3. Who are the active multifamily developers in your area? Minto Group Inc, Altman Development Corporation, Gables Residential and ZOM are a few active developers in South Florida. 4. Please name one or two significant multifamily developments in your area. What impact will these projects have …
The Birmingham industrial market was much like the rest of the country in 2008. The recession reared its head in Birmingham, resulting in an overall decline in average rental rates and occupancy levels. The multi-tenant bulk distribution sector was the hardest hit, falling to 82.4 percent occupancy with a negative absorption of 206,000 square feet compared to the previous year’s 600,000 square feet of positive absorption. Surprisingly, the service center market showed positive absorption for the second year in a row, settling at 91.7 percent occupancy for the year end. There were no new developments completed in 2008, as landlords struggled to retain tenants and conserve cash. Other than the delivery of a 150,000-square-foot building currently under construction in Shelby County, we anticipate much of the same for 2009. Despite these challenges currently facing our market, several significant transactions completed in 2008 meant that the market was certainly not stagnant. Brookwood Pharmaceutical, a manufacturer and leading provider of surface modification and drug delivery technologies to the healthcare industry, acquired the former Saks corporate headquarters facility in the Lakeshore corridor. This 286,000-square-foot office and warehouse will receive an additional $30 million of capital investment. It is a prime example of Birmingham’s …
Kirk D. Olson and Drew Kristol are senior associates in Marcus & Millichap’s Miami office. What area is your expertise? • Miami-Dade County retail properties. What trends do you see presently in retail development in your area? • The only major retail developments in the area are those that were started prior to the market correction that occurred in fall 2008. There is an increase in vacancy rates — anywhere from 5 percent to 15 percent — in Miami-Dade County. Many shopping centers that have not had vacancy issues in the past 5 years are now experiencing vacancies for the first time. Owners are lowering their rents to keep current tenants and are not generating much interest from leasing signs and advertisements. What type of retail product is doing well in your area? • Centers in prime locations remain relatively well occupied compared to areas that have been harder hit by the softening economy. Even though the spending power of shoppers is less due to the economic downturn, Miami-Dade County is very dense and there are too many people shopping for there to be mass vacancies. Dollar stores are still in expansion mode, as are some restaurant chains, Applebee’s and …
Douglas K. Mandel is associate vice president investments director, National Office and Industrial Properties Group, in Marcus & Millichap’s Fort Lauderdale, Florida office. What area is your expertise? • South Florida (Miami, Fort Lauderdale, West Palm Beach) office properties What trends do you see presently in office development in your area? • The development pipeline for new office development has slowed dramatically, largely attributed to the lack of debt for new construction. There is demand for LEED-certified office development and some projects are underway or are about to be under construction. Who are the active office developers in your area? • Stiles Corporation, Proccaci Development Company and Butters Construction & Development are three active office developers in South Florida. Please name one or two significant office developments in your area. • A joint venture between Related Companies and Croker Partners has just completed CityPlace Tower, an 18-story Class A office building in downtown West Palm Beach. The building, which includes 300,000 square feet of office is located at the south entrance to CityPlace, a 72-acre mixed-use complex with retail, restaurants and entertainment venues. Stiles Corporation has just completed 200 Las Olas Circle, a 17-story Class A office building in downtown …