Growth Expected in South Florida Office Market in 2004

SOUTH FLORIDA-The South Florida office market is “primed for growth in 2004,” according to a new report by Marcus & Millichap Real Estate Investment Brokerage Co., a national real estate investment brokerage firm.

The Office Research Report for the South Florida market, which includes Miami, Fort Lauderdale and West Palm Beach, states that the three key South Florida cities, included in the company’s national office index, climbed in their rankings. For next year, the report forecasts solid employment growth and limited new construction–two factors that helped the three markets move up in the ranks. Fort Lauderdale moved up the most slots of the three South Florida cities–nine–to No. 11. West Palm Beach jumped five spots and is ranked No. 12, and Miami rose four spots to No. 14.

“South Florida’s office market will benefit from a glowing employment forecast, which will stimulate absorption and push vacancies downward,” Gene A. Berman, senior vice president and regional manager of Marcus & Millichap’s Fort Lauderdale office, states in the report. “Investment activity will pick up as employment and vacancy show improvements and investors seek to capitalize on low interest rates and the prospect of improving property performance.”

Related to the South Florida office market, the report says:

•Employment in South Florida is expected to grow in the three cities, with the most growth in the professional and business services sector. Fort Lauderdale should gain 23,000 jobs next year, a 3.1% increase. An estimated 16,000 jobs will have been created this year there. Miami and West Palm Beach each are expected to add 16,000 new jobs next year.

•Low levels of construction will help the South Florida office market. Fort Lauderdale and Miami are predicted to see decreases in construction, while West Palm Beach is set to expand slightly.

•South Florida is expecting to experience vacancy declines across the board. Fort Lauderdale’s expanding office employment will cause vacancy to drop from 17.7% this year to 16.8% next year. Miami’s vacancy is expected to drop from 15.1% at the end of this year to 14.8% next year. Vacancy is expected to decline in West Palm Beach from approximately 15% at year-end to 14.5% next year.

•South Florida is expecting rising effective rents next year.

•Class B and class C properties continue to be the focus of South Florida sales activity. But after the middle of next year, the class A vacancy in Fort Lauderdale should subside, luring investors to class A properties.

Marcus & Millichap’s National Office Index ranks 38 office markets across the country based on several 12-month forward-looking supply and demand indicators. The index ranks markets according to their cumulative weighted-average scores for the different indicators, including forecast employment, rent growth, vacancy, construction and absorption