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South Florida Business Leaders 2022-2023 Economic Conditions Survey Results

We are pleased to present the results of our 2022/2023 Economic Conditions Survey.  We asked over 8500 firms to comment on the economic environment in 2022, and what they expect in 2023.  2022 was “excellent” for 35% of our respondents, but only 13% expect the same in 2023.  Our respondents gave insight on the biggest challenges facing their firms, whether they are requiring employees to be in the office full time, whether they will grow their employee headcount, the effects of rising interest rates, and other issues.

We appreciate the participation of those who answered our questions and we hope this survey gives you a valuable picture of what your peers are thinking and doing to be successful in 2023. 

 

Economic Conditions Survey 2022-2023

 

 

 

 

 

 

 

 

 

 

The majority (79%) of our respondents were either the CEO, President, or an owner

or partner, meaning the data was accurate at the highest level of decision-making.

 

 

 

 

 

 

 

 

 

                                                                                                      89% of respondents have been in business over 10 years, and 70% 20 years or more. 

 

Our respondents came from a wide range of industries, including law, health care,

accounting, banking, and others.

 

 

 

 

 

 

 

Most of the firms – over 70% – conduct business to business (B2B) transactions.  

 

The firms ranges in size from under 10 employees (29%) to over 500 employees (3%),

 with the majority having between 10 and 100 employees.

 

 

 

 

Most respondents noted that economic conditions in 2022 were good (50%) or excellent (35%). This is encouraging given that we were coming out of a pandemic, with recession looming and interest rates climbing.  But South Florida has been the beneficiary of extensive in-migration of people and businesses over the past few years, putting us “in a bubble” of optimism and growth not seen in many other areas of the country.

Our survey shows similar optimism for 2023, with 56% expecting “good” conditions,

and 13% expecting “excellent” conditions.  The same number as 2022 (7%) expects

poor conditions, while the number anticipating fair economic conditions is higher,

at 24%.  Much of this is likely due to predictions of a pending recession, although

 South Florida still shows optimism and anticipates a favorable year.

 

A slight majority of respondents (52%) say rising interest rates decreased their

 profitability, or made it harder to do business.  This is not surprising, as

everything from real estate loans to business capital costs have become

significantly more expensive over the past year. Combine that with inflation

and rising wages, and downward pressure on profitability is to be expected.

 However, a large portion of firms (42%) indicated that rising

 interest rates had no effect on their business.

 

The relationship between employer and employee has been the focus of much

Discussion this year. Where employees will work, rising wages, difficulty in

hiring – these have all been topics of discussion in the media and in

boardrooms.  The first question is whether South Florida firms are hiring

and growing.  Nearly half indicated that their employee count will stay the

same in 2023.  But notably, 40% will be growing their headcount. Again, South

Florida is, fortunately, in a unique position to grow given the influx of new

residents and companies.

 

 

The question many employers struggle with is whether to require employees to work in

the office, or allow them to work from home (or elsewhere outside the office). 

Kastle.com reports that office occupancy is up to 48.6% as of 2/13/2023, based on the

markets they survey.  But where your peers in South Florida on the issue?  Our survey

shows that similar to the Kastle data, 48% of responding firms are requiring all or most

employees to be in the office full-time.  Only 3% have gone fully virtual.  49% of

respondents are somewhere in between, with some employees required to be in office

full-time, while others are not or they rotate on a schedule.

 

What challenges are your peers facing, doing business in South Florida?  The largest

problem (33%) is hiring qualified employees. This seems to be a problem nationwide. 

The second most prevalent issue (26%) is the rising wages, salaries, and cost of benefits. 

Following these were the cost/availability of commercial property (12%), and employees

not wanting to work in the office (10%).  Additional challenges are listed in the chart.

 

 

We hope this data is helpful in assessing your own experiences doing business in South Florida. The overriding messages we take from the survey are the optimism for positive conditions going into 2023, and that most employers are facing challenges with employees – from hiring, getting them to work in-office, to wages and benefits.  We are always available to discuss how you can reconfigure your offices to conform to changes in usage and demand for space.  Thank you for those who participated in the survey, and best of luck to everyone for a successful year in 2023!

 

Part 1. A Question for Business Owners: Should You Hire a Commercial Real Estate Broker for Your Property Search?

If you are a business owner or manager searching for an office or warehouse, you should ask yourself an important question: “Will I save money if I do this myself, without using a commercial real estate broker?”  Let me clarify that this article is directed to the “Corporate Occupant” – the business owner looking for space where the employees will be working each day, such as a law office, medical office, or distribution warehouse. This is not a discussion of investment real estate. 

First, let’s address the direct cost – the brokerage fee.  The buyer or tenant does not typically pay their own broker. The seller or landlord normally pays all of the brokers in a transaction.  But does the landlord or seller charge you more if they have to pay your broker?  Typically not.  The asking price for the property is the same, whether you come to the table with a broker or without a broker.  How far down can you, as buyer or tenant, negotiate your costs?  Do you even know what all the costs are?   If the seller or landlord has a broker, don’t count on them to help you – they do not represent you.  If you are not an expert in commercial real estate costs and negotiations, you’re better off hiring an expert broker to be your fiduciary agent and negotiate for you. 

There are many deal points when the Corporate Occupant is negotiating to lease or buy commercial property.  There are economic terms, and non-economic terms.  A good commercial real estate broker will point out and negotiate all of those deal points, give you choices and advice, and help you make sound decisions.  Your broker will save you money and time and protect you far better than you would on your own.  Below, I explain these deal points, and give examples of how I’ve helped clients to negotiate them. 

The Process Involves Many Complex Decisions, All of Which Affect Your Economics

The lease rate or purchase price is the most obvious focus of negotiations.  A landlord or seller will seek the highest price they can achieve, and you will seek the lowest.  Without a commercial property professional representing you, the other side will assume you are uneducated on market pricing, and may try to take advantage.  And unless you do in fact know what lease rates or sale pricing should be for that particular property in that particular submarket, you are negotiating from a position of weakness here.  A good broker will have market comps and experience negotiating on similar properties, and will negotiate a fair market price, or even better. 

The analysis doesn’t end there.  You must consider much more than the lease rate or sale price.  For example, when leasing, what will be the annual increase in your rental rate?  I recently represented a medical doctor in renewing his lease.  Although his lease rate when he negotiated initially (without a broker) was somewhat reasonable, his rate had skyrocketed over 7 years because he agreed to above-market, compounding annual increases in his rate (we all know the power of compounding!).  I let the landlord know that the rate was out of line, and we needed to bring the rate back to a reasonable level with lower future annual increases if the tenant was to remain.  I negotiated a 31% reduction in his rental rate – saving the client $240,000 over the new term – as well as reasonable annual increases to avoid a repeat of the unreasonable run-up in rate. 

Other areas where I see unrepresented tenants lose money is on the cost to build out their space, and the cost to repair, replace, and maintain equipment in the space over the lease term.  Renovating the space before you move in, or building out the “Tenant Improvements,” can be a huge cost.  The cost to build out a 10,000 s.f. office, at just above most landlords’ “standard” finish level, can be well over $600,000 today.  In most instances, I am able to negotiate that the landlord performs the construction work, that the landlord pays for most or all of it, and that the tenant won’t start paying rent until they can move in.  Think about the cost savings if you don’t pay for much of the $600,000, and if you don’t have to start paying rent until the landlord finishes construction, even if they finish late.  Shifting cost and risk is critical.

Further, I see many tenants stuck with the cost of replacing air conditioning units or plumbing systems (even having to dig up the concrete floor slab to do repair work).  This is a negotiable responsibility that I’ve shifted fully or partially to the landlord for many of my clients.  I recently negotiated a right for one of my clients to pay a fraction of HVAC replacement, depending on how many years are left in their lease term.  Would you want to fully replace an HVAC unit when you have six months left on your seven-year term?  No, of course not. Would you think to negotiate a way to deal with that before signing your lease?  Probably not, but your broker would. 

Renewal, expansion, contraction (or termination), and relocation rights are other terms that I negotiate prior to lease signing to ensure that my clients’ interests are protected and their costs are minimized.  There are several others – too many to discuss in detail here.

In a purchase contract, there are similar issues other than price that can help or hurt you monetarily, such as protecting your deposit, dividing costs for closing, surveys, title work, time to inspect, what allows you to cancel and get your deposit back, cost of documentary stamps/recording fees, and credits for repairs and improvements, among many others.  These and other items should be negotiated long before the contract is signed, as they can cost you dearly if you don’t address them, or if you allow the seller to dictate terms. 

In Part 2 of this post, I’ll discuss the non-economic aspects where a broker can help you, and they can be just as compelling as the “hard dollar” items!

Part 2. A Question for Business Owners: Should You Hire a Commercial Real Estate Broker for Your Property Search?

In Part 1 of this post, I reviewed some of the factors that business owners should consider when deciding whether to hire a commercial real estate broker for their property search and negotiations.  When you are leasing or purchasing an office or warehouse for your workspace – the area where your employees will work, where you’ll see your clients and store product and supplies, etc.  In this scenario, your business is referred to as a “Corporate Occupant.” 

The focus of Part 1 was the various economic considerations that drive your lease or purchase decision – rental rate or purchase price, annual increases on rent, cost to build out the space (Tenant Improvements), who pays to replace HVAC units – all the items that are measurable in dollars. 

But there are other, intangible factors that can be just as important.  Any of these factors alone can have significant repercussions if not handled properly.  If you don’t understand them all, or can’t identify them,  that’s one more reason to hire a commercial real estate broker to guide you.  In this 2nd part of the series, I’ll address some of those non-economic factors.

Besides Economic Terms, What Else can a Broker do to Assist?

A great broker does so much more than negotiate the economics of your transaction.  It’s critical that you locate the right property and eliminate the properties that won’t work for you.  Can you do that yourself?  Do you have the market knowledge to identify every submarket you should consider?  Do you know which landlords or buildings have hidden problems – such as call centers over-using parking, roof leaks, poor elevator service? Which buildings are inefficient (have a high common area loss percentage), or which buildings may soon be in foreclosure?  If your broker tracks the market, you’ll have the benefit of that information and avoid buying or leasing a “lemon” that you can’t get out of for years.  There is no lemon law for commercial real estate!

Even if you think you can do all of these things yourself, should you? What is your time worth?  What is your opportunity cost to go out and learn the commercial real estate market – the various submarkets, the going lease rate, the right purchase price based on sale comps, fair market concessions (free rent, tenant improvement allowance) that you should expect?  Will it take you thirty hours?  Sixty hours? Probably more.  If you want a good result, hire a professional who already possesses this knowledge, and use that to your advantage.  Even with 20 years of experience representing Corporate Occupiers and extensive market knowledge, I still spend hours searching for the right properties, sending detailed questions to landlords and sellers, confirming the information that’s listed online and diving deeper for other important facts.  I have a thorough process of vetting properties before sending them to my clients for consideration and before touring so I don’t waste their time or mine! 

Brokers perform other functions that are so helpful in the process:

  • Leveling the playing field!  The landlord or seller either has their own broker or has probably been in the commercial real estate industry much longer than you.  Having a broker on your side evens up the market knowledge and brings a pro into your corner.
  • Keeping expectations reasonable.  Some tenant or buyers are unreasonable, saying things like “My neighbor told me he leased an office for two years and received ten months of free rent!  I want that same deal.”  I’ve had landlords tell me that they prefer that tenants have a broker, to explain what is reasonable (and what’s unreasonable!) to ask, and to help keep negotiations moving in a timely manner.  I’ve had a landlord broker tell me that a tenant is so unreasonable, that they won’t work with them unless they have a tenant’s broker!
  • Conducting a lease vs. buy analysis to tell you which is more favorable for you (both in terms of economics and intangibles).
  • Preparing financial projections to show what your lease or property ownership will cost over several years, and comparing all of your choices using these financial projections.
  • Connecting you with reliable professionals such as architects, lenders, general contractors, who you’ll need along the way.
  • Providing a space program – an estimate of how much space you’ll need to occupy now, and over the next several years, so you don’t outgrow your space and have to relocate early.  These graphic illustrations not only inform the Corporate Occupier, but can be shared with landlords to speed up the negotiation process by providing a clear, concise estimate of the Corporate Occupier’s needs.
  • Considering zoning so you don’t end up in a property that you can’t use (I’ve heard of tenants leasing spaces with the wrong zoning, and then being stuck paying rent for unusable spaces).

While these factors, and others, cannot be measured in dollars, they can be measured in saved time and effective results.  They take the element of surprise out of the equation.  Put these issues together with the economic considerations in Part 1, and it is clear that the process of finding commercial space for the Corporate Occupant is much more complex than it appears.  This is not something to do without expert guidance.  An experienced commercial real estate broker will have the process down pat, and be able to help you move through it smoothly to minimize problems. 

To Hire a Broker or Not to Hire a Broker: that is the question.  The answer is yes, you should hire a broker.  Small mistakes or missed negotiating points can cost you quite a lot either up front, or even several years down the road.  The cost can be money, time, limited flexibility, or all of the above.  It can also result in your firm being stuck long-term in a bad property – not a good result for you, your employees, or the clients.  If hurts productivity and your ability to recruit.  Don’t let it happen to you. 

Hire an experienced commercial real estate broker to act as your fiduciary and guide you through the process.  You can’t afford not to!

Q2 2022 Market Reports – Palm Beach and Broward Counties

Berger Commercial Realty has analyzed the office and industrial markets in both Palm Beach and Broward Counties, to help you keep track of key data.  This information has proved valuable for our clients: tenants, investors, and landlords can all follow their respective markets to understand the leverage they have in negotiations, and whether their property is outperforming (or under-performing) the rest of the market.

Palm Beach County has had an influx of corporate relocations, driving up office demand. Vacancy rates have been dropping and rents have been rising as a result. Strong demand in the CBD should push average rates even higher in the coming quarters.

Michael Feuerman, Esq., SIOR, CCIM, Senior Vice President

Review the full Palm Beach Market Office Report by clicking here.

Although there was no new product delivered this quarter, net absorption was down and was actually negative. Yet rental rates are up by more than 5% – a significant increase for a single quarter – and vacancy rates increased only slightly. New construction coming to market should be successful as demand continues to be strong.

Michael Feuerman, Esq., SIOR, CCIM, Senior Vice President

Review the full Palm Beach Market Industrial Report by clicking here. 

The office market in Broward County continues its slow, steady recovery, with vacancy rates remaining under 10%, and very little new construction in the pipeline. The market appears to be in a good state of equilibrium with landlords and tenants having equal bargaining power in many cases.

Lloyd C. Berger, President

Review the full Broward Market Office Report by clicking here.

Vacancy rates in the Broward County industrial market are at the lowest level we’ve seen since Costar started tracking in 1999. We’ve seen this level only once before, in late 2017. If you need space, you have to act quickly.

Lloyd C. Berger, President

Review the full Broward Market Industrial Report by clicking here.

Q1 2022 Market Reports – Palm Beach and Broward Counties

Berger Commercial Realty has analyzed the office and industrial markets in both Palm Beach and Broward Counties, to help you keep track of key data.  This information has proved valuable for our clients: tenants, investors, and landlords can all follow their respective markets to understand the leverage they have in negotiations, and whether their property is outperforming (or under-performing) the rest of the market.

Tenants and investors continue to flock to Palm Beach
County. Vacancy rates have held at or below 10% for the past
several years. Rental rates are climbing. And the recent sale
of the three Boca Center office properties for $171.5 million
(over $454 per s.f.) demonstrates the strong confidence that
investors have in our office market.

Michael Feuerman, Esq., SIOR, CCIM, Senior Vice President

Review the full Palm Beach Market Office Report by clicking here.

New industrial construction is being rapidly absorbed
in Palm Beach County, keeping the vacancy rate
between 3 – 4% for the past several years, and
sustaining quarter-over-quarter rent growth. We don’t
see this letting up any time soon.

Michael Feuerman, Esq., SIOR, CCIM, Senior Vice President

Review the full Palm Beach Market Industrial Report by clicking here. 

Leases were executed for over 1.2 million s.f. this quarter
in Broward’s office market – nearly 2% of the total office
space in the county, yet vacancy rates decreased by only
0.3%. There may be some “musical chairs” going on in the
market as new construction attracts tenants.

Lloyd C. Berger, President

Review the full Broward Market Office Report by clicking here.

Three new properties (more than 350,000 s.f.) were
delivered this quarter alone, with another 964,000
s.f. under construction. Demand is keeping up with
new supply, and rental rates are rising, justifying the
new investment and construction in Broward’s
industrial market.

Lloyd C. Berger, President

Review the full Broward Market Industrial Report by clicking here.

Q4 2021 Market Reports – Palm Beach and Broward Counties

Berger Commercial Realty has analyzed the office and industrial markets in both Palm Beach and Broward Counties, to help you keep track of key data.  This information has proved valuable for our clients: tenants, investors, and landlords can all follow their respective markets to understand the leverage they have in negotiations, and whether their property is outperforming (or under-performing) the rest of the market.

The Palm Beach County office market saw healthy lease activity, occupancy growth, and rental rate growth. The office market continues to see strong demand from out-of-state companies migrating to Palm Beach County, helping to maintain a strong vacancy rate at just 8.3%, the lowest level since Q1 2007.

Michael Feuerman, Esq., SIOR, CCIM, Senior Vice President

Review the full Palm Beach Market Office Report by clicking here.

Vacancy rates in the Palm Beach County Industrial market are at the lowest level since early 2019, and rental rates are at the highest level since Costar.com started tracking the market. With just 3.1% vacancy, and no new buildings delivered in the quarter, demand is
overtaking supply and driving up rents. Owners are capitalizing on market conditions and taking profits, with several industrial portfolio sales closed this quarter.

Michael Feuerman, Esq., SIOR, CCIM, Senior Vice President

Review the full Palm Beach Market Industrial Report by clicking here. 

Rental rates and occupancy increased this quarter, but at a slower pace than previous quarters. Vacancy was down just 10 basis points to 10.4%, and rents increased by less than 1%, compared to 2.3% growth in the prior quarter. Landlords continue to lease space – more than 860,00 s.f. this quarter – the outlook is strong as we put Omnicron in the rearview.

Lloyd C. Berger, President

Review the full Broward Market Office Report by clicking here.

Broward County’s industrial market continues to exhibit very strong
growth. Rents are up more than 5% from Q3. Absorption is up more
than 2%, and vacancy is down 120 basis points to 4.4%. The increase of online commerce will continue to fuel high demand for
industrial properties.

Lloyd C. Berger, President

Review the full Broward Market Industrial Report by clicking here.

Q3 2021 Market Reports – Palm Beach and Broward Counties

Berger Commercial Realty has analyzed the office and industrial markets in both Palm Beach and Broward Counties, to help you keep track of key data.  This information has proved valuable for our clients: tenants, investors, and landlords can all follow their respective markets to understand the leverage they have in negotiations, and whether their property is outperforming (or under-performing) the rest of the market.

Over 1.3 million s.f. of leases were signed this quarter in the Palm Beach County office market, driving rental rates higher and pushing vacancy rates to the lowest level since early 2019. Tenants continue to move to Florida from out of state, and activity remains strong going into 4Q.

Michael Feuerman, Esq., SIOR, CCIM, Senior Vice President

Review the full Palm Beach Market Office Report by clicking here.

The Palm Beach County Industrial market is in a very strong, stable state, with low vacancy, high rents, and very little change to inventory. Still, parties inked over 689,000 s.f. of leases this quarter alone.

Michael Feuerman, Esq., SIOR, CCIM, Senior Vice President

Review the full Palm Beach Market Industrial Report by clicking here. 

Office leasing in Broward County was strong this quarter. Tenants leased over 868,000 s.f. and rental rates spiked nearly $0.90/sf. No new buildings were delivered and vacancy dropped for the first time in 2 years.

Lloyd C. Berger, President

Review the full Broward Market Office Report by clicking here.

The Broward Industrial Market is as more active than we’ve seen in
years. Over 3.1 million s.f. of space was leased this quarter, and
vacancy was down more than a full percentage point. Rents also
increased as activity remains hot. The coming quarter will see at least 450,000 of new inventory.

Lloyd C. Berger, President

Review the full Broward Market Industrial Report by clicking here.

The Law Firm Practice Podcast Episode #75- Michael Feuerman returns to the Practice Podcast to Review a Client’s Closed Office Lease Transaction

https://www.bastamron.com/81-from-trial-lawyer-to-tenant-rep/9

Michael Feuerman joins Brett Amron, Esq., and Jeff Bast, Esq. to discuss their recently-negotiated office lease, and to discuss current topics in the South Florida office markets. Michael is honored to be their first, second-time guest!

Q2 2021 Market Reports – Palm Beach and Broward Counties

Berger Commercial Realty has analyzed the office and industrial markets in both Palm Beach and Broward Counties, to help you keep track of key data.  This information has proved valuable for our clients: tenants, investors, and landlords can all follow their respective markets to understand the leverage they have in negotiations, and whether their property is outperforming (or under-performing) the rest of the market.

Palm Beach County office leasing activity was brisk this quarter, with an influx of new companies leaving California, New York and other states and setting up shop in Palm Beach County. Nearly 1 million s.f. of space was leased for the 2nd consecutive quarter. COVID has pushed tenants to this area.

Michael Feuerman, Esq., SIOR, CCIM, Senior Vice President

Review the full Palm Beach Market Office Report by clicking here.

Industrial demand is not letting up. Net absorption of space this quarter was more than 20 times the volume in the 1st quarter of the year, even with the delivery of over 1.4 million s.f. of new buildings. We expect rental rates to continue rising.

Michael Feuerman, Esq., SIOR, CCIM, Senior Vice President

Review the full Palm Beach Market Industrial Report by clicking here. 

Leasing activity was strong this quarter in Broward County, with 1.2 million s.f. of direct leases and subleases. But rents dropped as vacancy increased, and net absorption went deeper into the red. Broward is not yet seeing the influx of new tenants that are going to Miami-Dade and Palm Beach Counties.

Lloyd C. Berger, President

Review the full Broward Market Office Report by clicking here.

Demand for industrial space in Broward County remains strong, with over 2.2 million sf of direct leases and subleases signed this quarter alone. This is keeping net absorption positive and keeping rates high, at just under $10.00/s.f. NNN, on average.

Lloyd C. Berger, President

Review the full Broward Market Industrial Report by clicking here.

Q1 2021 Market Reports – Palm Beach and Broward Counties

Berger Commercial Realty has analyzed the office and industrial markets in both Palm Beach and Broward Counties, to help you keep track of key data.  This information has proved valuable for our clients: tenants, investors, and landlords can all follow their respective markets to understand the leverage they have in negotiations, and whether their property is outperforming (or under-performing) the rest of the market.

Palm Beach County’s office market was buoyed by an influx of tenants from outside the state, seeking lower taxes, better weather, and fewer restrictions. There were eight office leases signed in the 1st quarter alone that were over 20,000 s.f. This helped push up lease rates and absorption.

Michael Feuerman, Esq., SIOR, CCIM, Senior Vice President

Review the full Palm Beach Market Office Report by clicking here.

Palm Beach County continued to stay red hot in the industrial market, with rental rates pushing to a new high average at $10.27/s.f. NNN. With leasing activity slightly lower than previous quarter, and space delivery higher than the previous quarter, the county saw negative net absorption of space.

Michael Feuerman, Esq., SIOR, CCIM, Senior Vice President

Review the full Palm Beach Market Industrial Report by clicking here. 

Rental rates are holding and although absorption is in the negatives again this quarter it is trending upwards. As we go back to the office absorption should turn positive.

Lloyd C. Berger, President

Review the full Broward Market Office Report by clicking here.

Absorption of over 1.1 million s.f. in the Palm Beach industrial
market is a reflection of the fast. pace of growth, as online sales
continue to drive demand for warehouse and distribution space.
Rental rates are back on an upward trend in response to the strong
demand.

Lloyd C. Berger, President

Review the full Broward Market Industrial Report by clicking here.

Q4 2020 Market Reports – Palm Beach and Broward Counties

Berger Commercial Realty has analyzed the office and industrial markets in both Palm Beach and Broward Counties, to help you keep track of key data.  This information has proved valuable for our clients: tenants, investors, and landlords can all follow their respective markets to understand the leverage they have in negotiations, and whether their property is outperforming (or under-performing) the rest of the market.

During this fourth quarter all markets have shown an increase in vacancy rates excluding the Palm Beach Industrial market where vacancy has decreased 60 basis points from the previous quarter.  Rental rates have also increased in all markets other than the Broward Industrial market – which decreased only slightly, by $0.04 per s.f.  All markets experienced negative net absorption of space, except Palm Beach Industrial, which had over 250,000 s.f. positive net absorption for the 2nd straight quarter.  Read on to see how the Palm Beach and Broward County markets performed during the fourth quarter.

The Palm Beach County office market

Has seen an increase in vacancy of 20 basis points from the previous quarter to 10.3%. Rental rates have increased for the 19th straight quarter despite COVID. Among the largest office lease signings in the fourth quarter were Baptist Health’s 37,982 sf lease at Boca Raton Innovation Campus, 4950 Communication Ave.; and InCapital Holdings, LLC ‘s 18,066 sf  lease at 25 SE 4th Ave, Delray Beach. Among the largest sales in the Palm Beach office market this quarter were SF Partners’ sale of the Concept Towers, a two-building office complex totaling 96,674 sf.  The properties sold to Allen Chelminsky for $10,900,000 and were 82% occupied at the time of sale. In addition, Ansca sold the 49,708 square foot medical office building located at 7593 West Boynton Beach Boulevard in Boynton Beach, FL to Woodside Health for $13.4 million.  Review the full Palm Beach Market Office Report by clicking here.

The Palm Beach County industrial market

Vacancy rate decreased by 60 basis point from the previous quarter, down to 3.7%. Net absorption has increased from the previous quarter, now at 270,093 sf. Among the largest industrial lease signings in the fourth quarter were Florida Microelectronics, LLC’s 70,554 sf lease at 1601 Hill Ave., West Palm Beach, and Tire Hub’s 40,500 sf lease at 305 Haverhill Rd., Lake Worth. Among the largest sales this quarter were TPA Group, LLC’s sale of the 220,000 sf warehouse property built in 2020 at 15335 Park Of Commerce Blvd, Jupiter, to MDH Partners for $27,160,000 and, Dalfen Industrial’s sale to Goldman Sachs of an 80% partial interest in the 208,000 sf building at 3774 Interstate Park Road N. in Riviera Beach to for $14,760,000.  Review the full Palm Beach Market Industrial Report by clicking here. 

The Broward County office market

Has shown an increase in rental rates, up $1.27/s.f. to $33.85, even while vacancy rates continue to go up.  Office vacancy rates in the county ended the quarter at 10.30%, up 60 basis points from Q3. Net absorption was negative at -67,773 sf.  More sublease space has hit the market, with the supply at 398,555 sf at the end of the quarter, an increase of more than 50,000 sf from Q3. Among the largest office lease signings in the fourth quarter were Baker Concrete Construction, Inc’s 11,721 sf lease at 5555 Anglers Ave in Fort Lauderdale; and Better NOI’s 9,902 sf lease renewal at 2900 Monarch Lakes Blvd in Miramar. Among the largest sales in the Broward office market this quarter were Starwood Capital Group’s sale of the 4-building Crossroads Business Park, with the first of the four buildings located at 8151 Peters Rd., Plantation. The 4 buildings totaled 294,729 sf, and sold to C-III Capital Partners for $78,418,000. Cypress Corporate Center, LLC purchased the office tower at 1901 W. Cypress Creek Rd., in Ft. Lauderdale. The building, built in 1987, was sold by ICM Asset Management for $17,500,000 and was 86% leased. Review the full Broward Market Office Report by clicking here.

The Broward County industrial market

Vacancy has gone up 20 basis point from the previous quarter to 7.8%. Net absorption was negative at -7,469 sf. Leasing activity was the strongest since Q1 2015 with over 2.4 million sf leased this quarter. Among the largest industrial lease signings were Amazon’s leases for 147,690 sf at 1201 NW 64th Street, 88,266 sf at 3200 E 33rd Ave., and 139,320 sf at 6320 NW 12th Ave. in Pompano Beach; as well as JC White’s 85,000 sf short-term sale-leaseback at 3501 Commerce Pkwy, Miramar. Among the largest sales in the fourth quarter were Elion Partners’ acquisition of a 180,000 sf last-mile logistics center, sold by Q-Med for $31,500,000; and JC White’s sale (and short-term leaseback) of its 85,000 sf showroom/distribution facility at 3501 Commerce Pkwy.,Miramar for $13,650,000.  Review the full Broward Market Industrial Report by clicking here.

Q3 2020 Market Reports – Palm Beach and Broward Counties

Berger Commercial Realty has analyzed the office and industrial markets in both Palm Beach and Broward Counties, to help you keep track of key data.  This information has proved valuable for our clients: tenants, investors, and landlords can all follow their respective markets to understand the leverage they have in negotiations, and whether their property is outperforming (or under-performing) the rest of the market.

There were some significant changes this quarter: both the Palm Beach and Broward County office markets saw an increase in both available sublease space and overall vacancy rates. Still, rental rates continued to grow. Leasing activity in the Palm Beach and Broward County industrial markets remained strong and both saw an increase in positive net absorption. Read on to see how the Broward and Palm Beach County markets performed this quarter.

The Palm Beach County office market

Has seen an increase in sublease inventory with nearly 100,000 s.f. of new sublease space coming to market, as well as an increase in vacancy by 50 basis points (now at 9.9%) over the previous quarter. Among the largest office lease signings this quarter were South University’s 40,000 s.f. lease at 9801 N Belvedere Rd, West Palm Beach and JFK Medical Center’s 15,000 s.f. renewal at 4685 Congress Ave, Palm Springs. Among the largest sales in the Palm Beach office market were Gardens Corporate Center, LLC’s sale of both 3835  PGA Blvd, Palm Beach Gardens, a 109,286s.f. multi-tenant office building and 3825 PGA Blvd, an 111,972s.f. multitenant office building. Review the full Palm Beach Market Office Report by clicking here.

The Palm Beach County industrial market

Has seen rental rates and absorption improving over the last quarter, with absorption now at positive 229,357 s.f. Vacancy decreased 10 basis point from the previous quarter to 3.9%. Among the largest industrial lease signings in this quarter were IM Management’s 23,613s.f. lease at 15188 Park of Commerce Blvd. S. Jupiter. Among the largest sales this quarter were Serta Simmons Bedding’s sale-leaseback of their 208,000 s.f. industrial warehouse at 3774 N Interstate Park Rd North in Riviera Beach. In addition, Easton & Associates sold an 86,400 square foot industrial warehouse at 501 103rd Avenue in Royal Palm Beach to Cabot Properties Inc. Review the full Palm Beach Market Industrial Report by clicking here. 

The Broward County office market

Has seen rental rates rising even with vacancy going up to 9.3%, and with nearly double the negative absorption of last quarter (-326,326 s.f. for the quarter). Among the largest office signings in the third quarter were Greenspoon Marder’s 65,922 s.f. lease renewal/expansion at 200 E Broward Blvd, Fort Lauderdale as well as the GSA’s 64,582 s.f. lease at 1248 N. University Drive, Plantation. Among the largest sales in the Broward office market this quarter were Bridge Investment Group’s sale of 413,426 s.f. Bayview Corporate Tower at 6451 N Federal Highway, Fort Lauderdale to a venture between Somerset Properties and Ten Capital Management for $82.5 million. Review the full Broward Market Office Report by clicking here.

The Broward County industrial market

Has seen vacancy rise 60 basis points from the previous quarter. Leasing activity remained strong, with over 1.3 million s.f. leased this quarter, while net absorption is positive (+83,823 s.f.) for the first time in 2020. Among the largest industrial lease signings in the third quarter were Vital Pharmaceuticals, Inc’s 270,767 s.f. at 20311 Sheridan Street, Pembroke Pines; and US Cabinet Depot’s 103,356 s.f. lease signed at 6301 Lyons Rd, Coconut Creek. Among the largest sales in the third quarter were Elion Partners portfolio sale off 88,000 s.f. industrial building at 2121 NW 15th Ave, Pompano Beach for $15.2 million and the 36,420 s.f. industrial building at 1800 N Commerce Pkwy., Weston for $12.7 million. Review the full Broward Market Industrial Report by clicking here.

Q2 2020 Market Reports – Palm Beach and Broward Counties

Berger Commercial Realty has analyzed the office and industrial markets in both Broward and Palm Beach Counties, to help you keep track of key data.  This information has proved valuable for our clients: tenants, investors, and landlords can all follow their respective markets to understand the leverage they have in negotiations, and whether their property is outperforming (or under-performing) the rest of the market.

During the 2nd quarter all sectors other than the Palm Beach Industrial experienced negative absorption and increasing vacancy. Rental rates have continued to grow in all markets though, due mainly to the short term nature of leases, which normally command rent premiums.

Read on to see how the Broward and Palm Beach County markets performed during the 2nd quarter of 2020.

The Palm Beach County office market

Was less affected by COVID-19 than Broward. Rental rates increased by $0.72 per s.f. and vacancy increased only 10 basis points from the previous quarter, now at 9.3%. Net absorption was near zero despite the delivery of 100,000 s.f. of new space. Among the largest office lease signings in this quarter were 4Oceans’ 51,096 s.f. lease at Innovation Center, Boca Raton, and International Materials’ 19,529 s.f. at lease at 4th&5th Delray, Delray Beach. Among the largest sales in the Palm Beach office market this quarter were Alliance Partners HSP’s sale of the 243,000 s.f. Golden Bear office park in Palm Beach Gardens to a joint venture between Waterfall Asset Management and MH Commercial Real Estate Fund, for $49.75 million ($205 per s.f., which reflected the fact that the property was on a ground lease).  Review the full Palm Beach Market Office Report by clicking here.

The Palm Beach County industrial market

Was the strongest performer in the region this quarter. Vacancy remained at 3.6%, rental rates increased by $0.20 per s.f., and absorption was positive at +36,460 s.f. Among the largest industrial lease signings this quarter were Cavastone’s 17,835 s.f. lease at 1377 Clint Moore Rd, Boca Raton.   Among the largest sales this quarter were Stateside Capital Group’s sale of the 151,008 s.f. industrial building located at 1177 West Blue Heron Blvd in Riviera Beach to Dalfen Industrial for $18.35 million.  Review the full Palm Beach Market Industrial Report by clicking here. 

Net absorption improved slightly in the Broward County office market, ending the 2nd quarter at negative 247,146 s.f., while vacancy rates went up 30 basis points to 8.7%, yet rental rates rose by $0.83 per s.f.! Among the largest office lease signings in the second quarter were Northwest Medical Center’s 29.938 s.f. lease renewal at Northwest Family Health Center, Margate, and KCI Technologies 23,725 s.f. lease at Crown Center, in the Cypress Creek/Uptown Fort Lauderdale submarket. Among the largest sales in the Broward County office market this quarter were OKO Group’s assemblage and purchase of properties totaling +/- 6.7 acres, including 27 separate parcels east of Federal Highway and south of Las Olas Blvd, for $63,000,000 ($9.4 million per acre!), purchased in part by a loan from Michael Dell’s MSD Partners.   Review the full Broward Market Office Report by clicking here.

The Broward County industrial market

Had a modest increase of $0.04 per s.f. to bring the average asking rental rate up to $9.27 per s.f., even with vacancy rates going up by 60 basis points to 6.3%, 500,000 s.f. of new space delivered, and negative absorption of 176,272 s.f.  Among the largest industrial lease signings in the second quarter were KeHE Distributors’ 201,849 SF lease renewal at Meridian Business Campus, Weston, and Brandy Melville’s 112,318 SF lease at the Miramar Park of Commerce. Among the largest sales this quarter were Cusano’s Bakery’s purchase of a 274,000 SF warehouse in Coral Springs for $13.6 million ($49.60 per s.f.).  Review the full Broward Market Industrial Report by clicking here.

Q1 2020 Market Reports – Broward and Palm Beach Counties

Berger Commercial Realty has analyzed the office and industrial markets in both Broward and Palm Beach Counties, to help you keep track of key data.  This information has proved valuable for our clients: tenants, investors, and landlords can all follow their respective markets to understand the leverage they have in negotiations, and whether their property is outperforming (or under-performing) the rest of the market.

In March of this year, we were just beginning to see the effects of the COVID-19 pandemic.  We anticipate significant changes in the office markets in the coming months, but as of March 31, 2020, the close date for our Q1 report, the market indicators were not showing significant impacts. Read on to see how the Broward and Palm Beach County markets performed so far in 2020.

Asking rents in the Broward County office market continued to climb despite the increase in vacancy (+50 basis points from Q4 2019) as well as an increase in negative absorption (negative 237,219 sf for the quarter). Among the largest office lease signings in the first quarter was New York Life Insurance Company’s 25,662 sf renewal at 1801 NW 66th Ave, Plantation. Among the largest sales this quarter was Aztec Group Inc’s sale of the 132,092 sf office building in Miramar to Bankers Healthcare Group for $29 million ($220/sf).  Review the full Broward Market Office Report by clicking here.

The Broward County industrial market

Vacancy increased 50 basis points to reach 5.75%, but rents continued to climb, now as $9.25/sf  Among the largest industrial lease signings in the first quarter was Bang Energy’s 249,005 sf lease at Florida Distribution Center in Fort Lauderdale.  Among the largest sales this quarter was Core5 Industrial Partners’ sale of a 249,005 sf industrial building in Fort Lauderdale to Vital Pharmaceuticals for $40.377 million, or $162/sf.  Review the full Broward Market Industrial Report by clicking here.

The Palm Beach County office market

Experienced increased absorption, which helped to keep vacancy rates low – down 10 basis points from the previous quarter to 8.9%. Among the largest office lease signings in the first quarter was the IRS’s 32,503 sf lease at 1700 Palm Beach Lakes Blvd.  Among the largest sales was The Greenfield Group’s sale of the 75,690 sf medical office building at 1601 Clint Moore Rd., Boca Raton, to AW Real Estate Management LLC for $34 million, or $449/sf Review the full Palm Beach Market Office Report by clicking here.

The Palm Beach County industrial market

Had a 50 basis point increase in vacancy, now up to 3.4%.  Asking rates were down $0.16 per sf to $9.13/sf after two straight quarters of negative absorption. Among the largest industrial lease signings in the first quarter was Niagara Bottling’s 114,536 sf lease at Palm Beach Park of Commerce in Jupiter; and Home Depot’s 77,760 sf lease at Prologis Airport Center in West Palm Beach. Among the largest sales this quarter was Leder Realty and Management’s sale of a 175,625 sf flex building in Boca Raton to Brookfield Asset Management for $31.4 million, or $179/sf.   Review the full Palm Beach Market Industrial Report by clicking here. 

Q4 2019 Market Reports – Broward & Palm Beach Counties

Berger Commercial Realty has analyzed the office and industrial markets in both Broward and Palm Beach Counties, to help you keep track of key data.  This information has proved valuable for our clients: tenants, investors, and landlords can all follow their respective markets to understand the leverage they have in negotiations, and whether their property is outperforming (or under-performing) the rest of the market.

All markets have shown negative absorption during this quarter and increasing vacancy. Nonetheless, rental rates have continued to climb in both counties and across both property types.  Does this foreshadow an eventual slowdown, or is it just a blip in the continued red-hot growth in our markets?  Time will tell, and for now, read on to see how the Broward and Palm Beach County markets performed during the fourth quarter.

The Palm Beach County office market

Has seen slightly negative absorption this quarter (-10,696 SF), but not significant enough to indicate a slowdown. Rental rates and vacancy have both increased slightly. Among the largest office lease signings in this quarter were Mill Creek Residential Trust’s 27,079 SF lease at 4855 Technology Way, Boca Raton; and Jupiter Medical Center’s 22,500 SF at 1701 Military Trail, Jupiter, FL.  Among the largest sales were C-III Capital Partners sale of 143,966 SF office building located at 1601 Forum Place in West Palm Beach to Suffolk Advisors LLC for $32.5 million.  In addition, L&B Realty Advisors, LLP sold 98,300 SF Glades Twin Plaza and 98,300 SF Glades Plaza to Sterling Organization together with Glades Plaza retail center as part of a portfolio sale for approximately $120,000,000, or $729.40/SF! Review the full Palm Beach Market Office Report by clicking here.

The Palm Beach County industrial market

Has seen substantial negative absorption (-104,043 SF) despite only 20,000 SF of new construction. Among the largest industrial lease signings in the fourth quarter were Amazon’s 18,433 SF lease and FIW Solutions 15,297 SF lease, both at the Turnpike Crossing Industrial Park, 6729 Belvedere Rd, West Palm Beach.  Among the largest sales this quarter were South Florida Real Estate Advisors I LLC sale of the 40,000 SF warehouse located at 7700 High Ridge Rd, Boynton Beach for $6,500,000 or $162.50/sf, as well as the sale of the 47,892 SF at 6600 High Ridge Road, Boynton Beach for $5,325,000 or $111.19/SF, sold by JS Eade Family Limited Partnership. Both properties were purchased by High Ridge Road Investors, LLC. Review the full Palm Beach Market Industrial Report by clicking here. 

Net absorption decreased in the Broward County office market during the fourth quarter ending at -124,347 SF, despite less than 20,000 SF of new inventory added to the market. Among the largest office lease signings this quarter were Hayes Medical Staffing’s 72,517 SF leased at 5900 N Andrews Ave., Fort Lauderdale, and US Health’s 25,907 SF lease at 500 E Broward Blvd., Fort Lauderdale.  Among the largest sales in the Broward County office market this quarter were M-M Properties’ sale of the 348,891 SF buildings at 1550, 1551, 1560 and 1601 Sawgrass Corporate Parkway, Sunrise to the Brookdale Group for $80.25 million or $230/SF, and DWS Group sold two office buildings totaling 112,456 SF to MG3 REIT LLC for $32.65 million, or $290/SF. Review the full Broward Market Office Report by clicking here.

The Broward County industrial market

Is still strong, with asking rental rates increasing by $0.24/SF this quarter – it has also seen negative net absorptions (-155,790 SF). Among the largest industrial lease signings in the quarter were PODS Enterprises’ 92,165 SF lease at Bridge Point FLL Logistic Center, 3233 SW 12th St., Fort Lauderdale and Velocity Aerospace Group’s 51,000 sf lease at Bridge Point Powerline Road, 1981 N Powerline Rd, Pompano Beach. Among the largest sales this quarter were TIAA/Nuveen’s sale of the 224,650 SF industrial/manufacturing building at 2965 West Corporate Lakes Boulevard, Weston, FL. to Black Creek Group for $32.415 million, or $144/SF. Bridge Development Partners sold three industrial properties totaling 467,832 SF to Morgan Stanley & Co. LLC for $68,950,726, or or $147/SF. Review the full Broward Market Industrial Report by clicking here.

Video: “How Much Does it Cost to Hire a Broker?”

The cost to hire a broker varies from market to market. Generally speaking in South Florida, the cost to hire a broker is paid by the landlord or the seller of the property. For sale properties, it’s generally five to six percent of the full sale price. For lease properties, it’s generally four to eight percent of the full lease value over the term. That, again, is paid by the landlord or the seller. It’s not paid by the tenant or the buyer. There’s no cost to a tenant or buyer.

A lot of tenants or buyers will tell me, Isn’t there a hidden cost? If I come in with a broker, won’t they charge me more? The truth is, they won’t. I’ve spoken with many landlords, many sellers and they appreciate having a good professional broker in the transaction that will help keep the buyer or tenant reasonable. Let them know what the market is and it makes the transaction go more smoothly. More where they don’t have two asking prices, there’s not an asking price for people who come in with a broker and then a lower price for people who come in without a broker.

Everyone is starting at the same level. How far below that you, as a buyer or tenant, can get that or how far above, you as a landlord or seller can get it depends on how good your broker and your team is to push that one way or the other for you.

The Law Firm Practice Podcast- An Expert’s Insight: Do I downsize, re-negotiate, or lease new office space?

Michael Feuerman joins Brett Amron, Esq., and Jeff Bast, Esq. to discuss the issues affecting office tenants, and law firms in particular, when choosing and designing offices in the COVID era.

Q1 2019 Market Reports – Broward & Palm Beach Counties

Berger Commercial Realty has analyzed the office and industrial markets in both Broward and Palm Beach Counties, to help you keep track of key data.  This information has proved valuable for our clients: investors, landlords, and tenants can all follow their respective markets to understand the leverage they have in negotiations, and whether their property is outperforming (or under-performing) the rest of the market.

There were some significant changes this quarter: three of the four markets we cover saw negative absorption of at least 200,000 s.f. and increasing vacancy. Still, rents continued to grow. Was this a sign of a market turnaround, or just an aberration? One quarter will not tell us, but it’s something to watch for the rest of the year. Read on to see how the Broward and Palm Beach County markets performed so far in 2019.

The Palm Beach County office market

Has seen strong rent growth and high absorption (positive 239,106 s.f.), as well as a decrease in the vacancy rate – now down to 9.30%.  Among the largest office lease signings in the first quarter were FlexShopper, LLC’s lease of 21,622 s.f. at 901 Yamato Rd., Boca Raton; and Saxena White PA’s 12,798 s.f. lease at 7777 Glades Rd, Boca Raton. Among the largest sale between joint venture Mainstream Capital Partners and CarVal Investors of two office buildings totaling 352,043 located in Boca Raton, FL to a joint venture between Mainstreet Capital Partners and Partners Group AG for $68.35 million.
Review the full Palm Beach Market Office Report by clicking here.

The Palm Beach County industrial market

Had a slight increase in vacancy (now up to 3%), 50 basis points higher than the previous quarter.  Rent is higher this quarter at $8.85/s.f., but absorption is down significantly, at  negative 213,030 SF. Among the largest industrial lease signings in the first quarter were Quantachrome Instruments’ 52,505 s.f. warehouse lease renewal at 1900-1920 Corporate Dr., Boynton Beach; and PLOT Freight Services 51,296 s.f. lease of warehouse space at 401 N Cleary Rd., West Palm Beach.
Review the full Palm Beach Market Industrial Report by clicking here. 

Asking rents in the Broward County office market continue to climb, up $.85/SF from the previous quarter.  The vacancy rate is at 8.2%, 30 basis points higher than the previous quarter, and there was a significant decrease in the net absorption at negative 215,196 s.f.  Among the largest office lease signings in the first quarter were Universal Property & Casualty Insurance Company’s 45,778 s.f. lease at 5341 NW 33RD Ave, Fort Lauderdale; and Infinity Behavior Health’s 28,608 s.f. lease at 4620 N State Road 7, Lauderdale Lakes.
Review the full Broward Market Office Report by clicking here.

The Broward County industrial market

Is still very strong, with asking rental rates increasing by $0.32/SF this quarter, up to $8.76/s.f.  But vacancy rates are up 90 basis points to 3.80%, and net absorption was negative 304,904 s.f., both probably due to the 751,421 s.f. of new construction in the first quarter.  Among the largest industrial lease signings in the first quarter were Blue Dog Chemical’s 121,978 s.f. lease at 1971 N. Powerline Rd. Pompano Beach; and Propulsion Technologies 124,280 s.f. lease at 15301 SW 29th St., Miramar. Review the full Broward Market Industrial Report by clicking here.

Business Briefing – Hosted by Jessica Del Vecchio

Michael Feuerman, Sr. VP of Berger Commercial Realty discusses how COVID-19 will affect the South Florida commercial real estate markets, along with Ken Krasnow of Colliers International and Jessica Del Vecchio (moderator), Economic Development Manager with the City of Boca Raton.

A Look Ahead at the “New Normal” for CRE Transactions

Many businesses have had to adjust in light of the COVID-19 pandemic. This panel looked at the “new normal” for commercial real estate transactions, with insights from commercial real estate brokers (Michael Feuerman, Sr. VP and Lloyd Berger, President of Berger Commercial Realty), attorneys, lenders, and developers. The panel explored the outlook for the CRE industry over the following 3-12 months including what it will take to get transactions to closing; as well as how can the industry adapt to the restrictions imposed in response to the pandemic.

Wharton Club of South Florida – Profits with Purpose Event

The event was held at the West Palm Beach Brightline Station

On Tuesday April 9, 2019 Michael Feuerman, Esq., SIOR, CCIM, Senior Vice President and Managing Director with Berger Commercial Realty – moderated the Wharton Club of South Florida Profits and Purpose Event – a discussion on Opportunity Zones and Qualified Opportunity Funds.

The panel included Robert Gilbane, Chairman and founder of Gilbane Development Company and a subsidiary of Gilbane, Inc one of the largest privately held construction and real estate companies in our industry; Clarence Williams, Senior Government Relations Consultant at Becker & Poliakoff and Eric Green, CPA and Director of Tax Services for Real Estate at Berkowitz Pollak Brant.



South Florida Law Firm/Courthouse District Office Market Report – Spring 2019

Click here to review the Market Report

For law firms, office location is critical.  Several factors determine where a firm will lease or purchase an office – building image, surrounding amenities, and traffic and commute time for employees.  Many other considerations come into play, but for firms with a significant litigation practice, close proximity to the county circuit court can be critical.When “time is money,” litigators, court reporters, forensic accountants, and all of their supporting vendors need to get to and from the courthouse quickly and easily. 

With that in mind, Berger Commercial Realty has created a Courthouse District Office Market Report, focusing on office buildings (existing, under construction, and under renovation) within a one-mile radius from each of the three county circuit courthouses –  Broward, Miami-Dade and Palm Beach.  Our report gives an overall indication of market conditions.  Are we in a landlord-friendly market?  A tenant-friendly market?  A turning point between the two?  There are many other variables to consider and we could not cover them all.  But this overview can get you started with your analysis.  If you’re considering a new office, renewal, expansion, or contraction, it’s always best to consult with a commercial real estate broker with local market knowledge and a track record of successfully representing office tenants. 

Vacancy rates are rising across the board, but rents are still rising.  If vacancy rates continue to climb, expect rents to fall.  Currently, Broward County’s Courthouse District is seeing rising vacancy rates, mainly due to new construction of 357,000 s.f. of Class A office space. Before that broke ground, the overall rate was 12.7%, but quickly rose to 16.5%.  Class A vacancy is at 21.2% and gives tenants an advantage until the new space is absorbed; while Class B (4.4%) and Class C (10.5%) stay in healthy, landlord-friendly territory.  The Miami-Dade Courthouse District is slightly less favorable for tenants with overall vacancy at 15.3%, also reflecting new construction of 552,000 s.f.  Class A space is at 18.8% vacancy, Class B at 13.7%, and Class C at a shockingly low 1.1%.  Palm Beach County’s Courthouse District has the lowest overall vacancy at 14.7% (no new construction), slightly in the tenants’ favor.  Class A space in the Palm Beach district is at 12.7%, Class B and C are each at 17.3% – there are excellent deals to be had for good-credit tenants in Class B and C properties. 

Note that some buildings within an asset class or county may be outperforming or underperforming the rest of the market, and buildings (and portfolios) must be reviewed on a case-by-case basis when negotiating, to assess your bargaining power and obtain all that you should in your lease.  Why consider our help? Michael Feuerman, Esq., SIOR, CCIM is an office tenant representation specialist, with over 19 years in the brokerage business, over $272 million in completed transactions, six years of experience as a business litigation attorney before becoming a broker, and long-term relationships with area brokers and landlords.  Michael and his team can bring their knowledge and experience to your team.  We take the burden off of you in analyzing the market, save you time in locating the right property, and negotiating highly favorable terms for your lease or purchase.  Landlords pay our brokerage fee, so there is no cost to you.  Please call us with any questions regarding this report or your own requirement, and we’ll be happy to answer any questions you may have.

Click here to review the Market Report

Q4 2018 Market Reports – Broward & Palm Beach Counties

Berger Commercial Realty has analyzed the office and industrial markets in both Broward and Palm Beach Counties, to help you keep track of key data.  This information has proved valuable for our clients: investors, landlords, and tenants can all follow their respective markets to understand the leverage they have in negotiations, and whether their property is outperforming (or under-performing) the rest of the market.

The Palm Beach County office market is gaining speed, with over 70,000 SF of new office construction delivered in Q4.  We saw the highest net absorption of 2018, a slight increase in asking rates, and a slight decrease in the vacancy rate. With vacancy at 9.4%, the overall market is still healthy. Among the largest office leases signed this quarter was TherapeuticsMD’s lease of 55,164 SF at 951 Yamato Rd, Boca Raton.  Review the Palm Beach Market Office Report by clicking here.

The Palm Beach County industrial market seems to be in a good state of equilibrium. Supply has been keeping up with demand, with vacancy rates at 2.60%. However, for the first time in 2018, asking rates have dropped, now at $8.84/SF NNN, just one penny higher than the asking rate in Q1.  Among the largest industrial sales this quarter was McCraney Property Company’s portfolio sale of three properties totaling 172,811 SF for $25.8 million ($149.00/SF).  Review the Palm Beach Market Industrial Report by clicking here. 

The Broward County office vacancy rate remained at 8.2% and absorption has decreased substantially. Nonetheless, quoted asking rental rates increased by $1.87/SF over the previous quarter to $30.61/SF! Significant market activity included Ivy Realty Services LLC’s sale of the 351,705 SF office building located at 1 E Broward Blvd, Fort Lauderdale to joint venture NAI/Merin Hunter Codman, Inc / PCCP LLC for $108.5 million ($309/SF).  Review the Broward Market Office Report by clicking here.

The Broward Industrial market showed signs of stabilizing this quarter, with vacancy rates rising 20 basis points to 3.2%, and asking rents rising after two straight quarters of dropping rates.  Asking rates ended the year up $.04 at$8.34/SF NNN, still $.10/SF less than Q1. Net absorption remains strong, even with nearly 500,000 s.f. of new product delivered this quarter.   Among the largest industrial sales was Fortress Investment Group LLC’s sale of 778,816 SF at 1141 SW 12th Ave, Pompano Beach to CenterPoint Properties for $95 million ($122/SF). Review the Broward Market Industrial Report by clicking here.  

Q2 2018 Market Reports – Broward & Palm Beach Counties

Berger Commercial Realty has analyzed the office and industrial markets in both Broward and Palm Beach Counties, to help you keep track of key data.  This information has proved valuable for our clients: investors, landlords, and tenants can all follow their respective markets to understand the leverage they have in negotiations, and whether their property is outperforming (or under-performing) the rest of the market.

The Palm Beach County office market has reversed direction, with vacancy decreasing by 10 basis points and net absorption back in positive territory for the first time since Q3 2017.  Direct asking rental rates have increased by $0.26/SF to $29.52/SF. Among the largest office sales this quarter was RAIT Financial Trust’s sale of its 171,490 square foot office building at 1501 Yamato Road, Boca Raton, to a joint venture between Pebb Enterprises and Tortoise Properties for $42.05 million, or approximately $245/ SF. The property is 100% occupied by ADT, with a portion subleased to another tenant.  Review the Palm Beach Market Office Report by clicking here.

The Palm Beach County industrial market is getting even tighter, with vacancy rates dropping 30 basis point to 2.6%! This is being fueled by net absorption of more than 120,000 s.f., and no new construction deliveries this quarter, as well as increasing demand for distribution space related to online commerce.  Among the largest industrial sales this quarter was Exeter Property Group’s multi-state portfolio sale, which included 6400-6500 Park of Commerce Blvd., Boca Raton. The two-building property totals 148,426 SF and sold for $19.1 million ($128.68/SF).  Review the Palm Beach Market Industrial Report by clicking here. 

The Broward County office vacancy rate remained unchanged this quarter, sitting at 8.5%.  Despite the negative net absorption of nearly half a million square feet in the previous quarter, absorption was positive this quarter and rental rates are steadily increasing, jumping $.95/SF from Q1. Significant market activity included Aetna’s 78,605 s.f. lease at the newly renovated Plantation Walk Office, 300 NW 82nd Ave, Plantation; and Cigna’s 49,868 s.f. lease at 1571 Sawgrass Corporate Parkway in Sunrise.  Review the Broward Market Office Report by clicking here.

The Broward Industrial market showed a much different trend than its Palm Beach counterpart, with an increase in vacancy rates to 3.8% and a continued decrease in rental rates – now down to $8.39/SF NNN. This may indicate an equilibrium or peak in the Broward industrial market, at least for the short term. Among the largest sales this quarter were Supervalu Inc.’s sale of 1141 SW 12th Ave, Pompano.  The 21,948 SF distribution center sold for $66,410,000 or approximately $91.99 sf (a sale leaseback, and part of a larger $483 million portfolio sale of eight properties in multiple states). Review the Broward Market Industrial Report by clicking here.

South Florida Law Firm/Courthouse District Office Market Report – Summer 2018

Click here to review the Market Report

For law firms, office location is critical.  Several factors determine where a firm will lease or purchase an office, building image, surrounding amenities, and traffic and commute time for employees.  Many other considerations come into play, but for firms with a significant litigation practice, close proximity to the county circuit court can be critical.  When “time is money,” litigators, court reporters, forensic accountants, and all of their supporting vendors need to get to and from the courthouse quickly and easily.

With that in mind, Berger Commercial Realty has created a Courthouse District Office Market Report, focusing on office buildings within a one-mile radius from each of the three county circuit courthouses –  Broward, Miami-Dade and Palm Beach.  Our report gives an overall indication of market conditions.  Are we in a landlord-friendly market?  A tenant-friendly market?  A turning point between the two?  There are many other variables to consider and we could not cover them all.  If you’re considering a new office, renewal, expansion, or contraction, it’s always best to consult with a commercial real estate broker with local market knowledge and a track record of successfully representing office tenants, but this overview can get you started with your analysis.

Currently, Broward County’s Courthouse District is the tightest, with 10.2% vacancy within one mile of the Broward County Circuit Court.  Class A is slightly higher at 11.7% vacancy, but Class B (3.6%) and Class C (1.2%) will present challenges for tenants, making a “plugged in” broker even more important to your search.  This is a healthy vacancy rate, with leverage slightly in landlords’ favor.  The Miami-Dade Courthouse District is a bit more favorable for tenants at this time, with overall vacancy at 14.3%.  Class A space is at 15.5% (a great time to negotiate favorable terms!), Class B at 11.6%, and Class C at 3.8%.  Palm Beach County’s Courthouse District is showing interesting statistics, with overall vacancy at 12.3%, a fair equilibrium of power for landlords and tenants.  Class A space in the Palm Beach district is at 12.8%, Class B at 9.7%, but Class C is at 15.3%, bucking the trend of Class C buildings outperforming the market in other counties.  For those needing low-cost space, this is an ideal time to negotiate in Palm Beach County.

Note that some buildings within an asset class or county may be outperforming or underperforming the rest of the market, and buildings (and portfolios) must be reviewed on a case-by-case basis when negotiating, to assess your bargaining power and obtain all that you should in your lease.  Please call us with any questions regarding this report or your own requirement, and I’ll be happy to answer any questions you may have.

 

Click here to review the Market Report

Q3 Market Reports – Broward & Palm Beach Counties

Berger Commercial Realty has analyzed the office and industrial markets in both Broward and Palm Beach Counties, to help you keep track of key data.  This information has proved valuable for our clients: investors, landlords, and tenants can all follow their respective markets to understand the leverage they have in negotiations, and whether their property is outperforming (or under-performing) the rest of the market.

The Palm Beach County office market is steady, with average direct asking rate unchanged from Q2 2018 at $29.49/SF. A very slight increase in vacancy rates, 10 basis points, has not been enough to lower asking rates. Among the largest office leases signed this quarter was Intech’s lease of 25,678 s.f at 250 S Australian Ave, West Palm Beach.  Review the Palm Beach Market Office Report by clicking here.

The Palm Beach County industrial market continues to be tight, with vacancy rates holding at 2.70%! With very little construction delivered in the past three quarters, asking rental rates keep climbing, now at $8.88/SF – up $.20 from the previous quarter.  Among the largest industrial sales this quarter was Baron Signs Manufacturing’s sale of the 35,829 SF manufacturing building at 900 W. 13th St., Riviera Beach. The property sold for $3.6 million ($100.48/SF).  Review the Palm Beach Market Industrial Report by clicking here. 

The Broward County office vacancy rate is at its highest in the past year, now at 8.6%. However, since this is still a very healthy vacancy rate (sub 10%), asking rates have continued to increase. Quoted asking rental rates increased $0.66/SF over the previous quarter to $28.74/SF. Significant market activity included CalSTRS/CBRE Global Investors’ sale of the 261,676 square foot multi-tenant office building at 2400 E. Commercial Blvd., Fort Lauderdale, to Cardinal Point Real Estate for $47.5 million, or approximately $174.28/s.f.  Review the Broward Market Office Report by clicking here.

The Broward Industrial market is trending against the rest of the South Florida market, with a continued decrease in asking rental rates, now down to $8.26/SF This is surprising given that net absorption is up and the vacancy rate is down from Q2.  This may indicate that this trend could reverse in the next quarter and prices will start to climb again. Among the largest industrial lease signings in the third quarter were USL Cargo Services’ 230,600 s.f. lease at Meridian Business Campus, 3245 Meridian Pky., Weston.  Review the Broward Market Industrial Report by clicking here.  

Q1 Market Reports – Broward and Palm Beach Counties

 

 

Berger Commercial Realty has analyzed the office and industrial markets in both Broward and Palm Beach Counties to help you keep track of significant stats and activity.  This information has proved valuable for our clients: investors, landlords, and tenants can all follow their respective markets to understand the leverage they have in negotiations, and whether their property is outperforming (or under-performing) the market as a whole.

The Palm Beach County office market leasing has been stable for the past 7 quarters, currently sitting at 10%, and partly due to very little construction delivered recently. Direct asking rental rate has increased by $0.16/SF from the previous quarter to $29.27/SF.   Review the Palm Beach Market Office Report by clicking here.

The Palm Beach County industrial market has remained hot, with vacancy rates staying under 3% for the past three quarters!   500,000 SF of new construction deliveries this year will only slightly affect the vacancy rate.  Consistent with the last quarter, asking rental rates have increased by $0.15/SF this quarter.  Net absorption was negative for the first time in 5 years, at -21,250 SF!  Review the Palm Beach Market Industrial Report by clicking here. 

The Broward County office market has seen its first increase in vacancy rates in 19 quarters, now sitting at 8.6%.  This, along with a highly negative net absorption, may lead to a short-term dip in rental rates. Significant market activity included CCRE SEF Sawgrass, LLC’s sale of 13450 W Sunrise Blvd, Sunrise, a 239,373 SF Class “A” suburban office building for $57,400,000.00, or $239.79/SF.  Review the Broward Market Office Report by clicking here.

The Broward Industrial market showed a similar trend to the office market, with an increase in vacancy rates ow at 3.5%. Unlike office, the rental rates have already started to drop slightly, currently at $8.43/SF. Feeding South Florida signed a lease at Seneca Industrial Park (22501 SW 32nd Terrace Pembroke Park) for a 72,199 SF space. Overall, we’ve seen a strong indication of a slow down in the industrial market. Review the Broward Market Industrial Report by clicking here.  

Broward and Palm Beach Counties, 4th Quarter 2017 Industrial and Office Market Performance

 

 

 

Berger Commercial Realty has once again analyzed the office and industrial markets in both Broward and Palm Beach Counties to help you keep track of significant stats and activity.  This information has proved valuable for our clients: investors, landlords, and tenants can all follow their respective markets to understand the leverage they have in negotiations, and whether their property is outperforming (or under-performing) the market as a whole.

The Palm Beach County office market leasing seems to be stabilizing, with vacancy rates holding at 10.4% for the second consecutive quarter, and average asking rents rising to $29.10/s.f. gross.  The investment sale market remains hot, though, with the 50,017 s.f. office building at 125 Worth Avenue on the Island of Palm Beach selling for $30.7 million, or $614 per s.f.!  Review the Palm Beach Market Office Report by clicking here.

The Palm Beach County industrial market is gaining momentum, with vacancy rates dropping to an astounding 2.5%!   Asking rental rates increasing by $0.15/s.f. in the final quarter.  One of the largest sales was 1101 Clint Moore Road, an 84,834 industrial property, which sold for $16 million, or $190/s.f.  Review the Palm Beach Market Industrial Report by clicking here. 

The Broward County office market remained strong, with vacancy rates holding at 8% since the third quarter.  Significant market activity included Sheridan Helathcare’s 88,716 s.f. lease in Plantation, the S. Florida Bible College’s 50,000 s.f. lease in Deerfield Beach, and TA Realty’s sale of 200 East Broward Blvd., a 225,761 s.f. Class A downtown office building, for $81.5 million, or $361/s.f.  Review the Broward Market Office Report by clicking here.

The Broward Industrial market tightened, with vacancy dropping 20 basis points to 3%.   Woodfield Distribution’s (represented by Michael Feuerman of Berger Commercial Realty) signed for over 80,000 s.f. in Prologis Centerport in Pompano Beach.  In addition, Principal Global Investors sold the 151,389 square foot Port 95 Industrial Center at 2800 SW 42nd Street, Fort Lauderdale, to TA Realty for $21 million, or approximately $139 per square foot. The reported cap rate was 4.7%!  The sale market is still favorable for sellers.  Review the Broward Market Industrial Report by clicking here.  

There are no signs of a downturn for these office and industrial markets, thanks to South Florida’s strong and growing economy.

2018-2019 Economic Conditions Survey Results Are In!

We are pleased to present the results of our 2018/2019 Economic Conditions Survey.  We asked over 2500 firms to comment on the economic environment in 2018, and what they expect in 2019.  2018 was “excellent” for over 1/3 of our respondents, but less than 1/4 expect the same in 2019.  Our respondents gave insight on the biggest challenges facing their firm, how severe the end of the economic cycle will be and when they expect that to happen, whether they are growing or downsizing (employees and facilities), whether investment back into the firm is increasing and what they are investing in, whether profits are up or down, and how they reach customers.  The responses were enlightening, to say the least, and a brief overview of the respondents’ collective background will be helpful in putting the data into perspective.

Who Were the Respondents?

  • All firms have offices in the U.S., with at least one office in South Florida.  15.9% of the firms had 3 or more locations in South Florida.
  • They operate in multiple industries, including brokerage, real estate development, law, medical, engineering, accounting, banking, insurance, logistics, media, telecom, and financial services, among others
  • Over 50% of those answering were equity owners in the firm, and over 74% were either equity owners or C-Level officers
  • Over 80% of the firms have been in business at least 10 years, and 60% for 20 years or more
  • 51% derive revenue from B2B (business to business), and 37% from B2C (business to consumer)
  • 27% of the firms had more than 50 employees, and 73% had under 50.  6.7% had over 500 employees.  9% of the firms had 100 or more employees located in South Florida.
  • 69.7% occupy office properties, and 27.6% occupy industrial properties

How was the Economy Last Year, and Where are we Headed in 2019? Most respondents believed that economic conditions for their company were either excellent (35%) or good (46%) in 2018.  Most are optimistic about 2019, but only 23% believe it will be excellent.  Only 1% believed the economy was poor in 2018 or will be poor in 2019.  The majority (64.3%) believe that an economic downturn or recession will come in 2020 or later, while 20.6% believe it has already begun.  58.6 believe that the next recession will be mild, while only 3.4% fear that it will be severe.

Did They Grow (People and Places)?
Our respondents did not report excessive growth in people or facilities last year, nor do they anticipate excessive growth in 2019. 80.4% reported no change in the size of their occupied real estate or number of locations in 2018, and 75.8% expect the same in 2019. Only 4.5% reported employee growth over 25%, while 48.2% reported no change last year. But surprisingly, nearly 38% anticipate employee growth to exceed 25% In 2019, and only 44.8% anticipate no change.

Did They Grow (Profits)?
56.2% of our respondents reported that their profitability increased in 2018 (either slightly or significantly), and the same percentage is expected it to increase in 2019. The difference was those who experienced significant growth (22.9% in 2018) and expect significant growth (13.7% in 2019).

We asked what the change in profitability was attributable to in 2018, and received some interesting answers, reflecting reasons for growth or contraction:
• Insurance reimbursement rates to physicians going down
• Restructuring of business relationships
• Working smarter
• Strong demand


Challenges
What headwinds did businesses face in 2018? When we asked our respondents to identify the biggest challenges facing their company, over 37% chose “Inability to hire qualified employees.” This is something I hear often from my clients and associates. Other responses are shown below.

Investment Back into the Company
Firms continue to invest back into the business. In 2018, 45.9% of respondents indicated that they invested more in 2018 than 2017, and 34.4% indicate that they will invest more in 2019 than 2018. Only 10.3% invested less in 2018 than the prior year, and only 17.3% will invest less in 2019 than 2018.
What are they investing in? We allowed respondents to choose more than one answer, as the choices were not mutually exclusive. Over half of the firms will be investing in technology upgrades. Over a third will focus on employee or management training. And over a third will be hiring additional employees. Over a quarter will invest in advertising, and nearly a third will be expanding or renovating their occupied real estate.

How They Reach Their Customers
Finally, we asked how these companies are effectively reaching customers to grow. The vast majority (86.2%) identified referrals/word of mouth as the best way. Social media posting was a far second, at 26.4%, while social media ads were third at 17.2%. Other responses are in the graph, below, and “sales people” and “brokers” were among the write-in responses.

Video: “What Is Free Rent In A Commercial Lease?”

Free rent in a commercial lease is a time when the tenant occupies the space but does not pay rent, also called abatement. It is a concession on the part of the landlord to attract new tenants. In a market where you have a lot of vacancy, landlords are more likely to give free rent to attract tenants to their property. In a tight market, its more difficult to get. Typically landlords do not offer to give you free rent, you have to know when to ask for it and how much is reasonable to ask for.

In a retail scenario, when a retail tenant goes into a property there is usually a period of time when the tenant has taken occupancy, but is not open for business because they are building out the space. So there is free rent during this period. However, in the case of office and industrial leases, the free rent is more of an incentive that will help offset the costs of moving and money that you might put into the space.

“A Berger Bite” is a series of FAQ videos in which Berger Commercial experts answer your pressing questions with a quick bite of information!

Which Metro is the Commercial Real Estate Heavyweight Champion of Florida?

The four major metro areas in Florida – South Florida, Jacksonville, Orlando, and Tampa Bay* – all have significant commercial real estate markets, sea ports, airports, and populations. But how do they stack up against one another?

Being a fierce competitor, you may want to know if your market is the biggest and the best. Or you may be planning an expansion or relocation from one metro to another and would like an overview. Which has the largest population? Which has the most cities serviced by their airports? Largest industrial market? Best-performing office market? What are their respective vacancy rates?

Based on the data reported in the South Florida Business Journal’s June 30, 2017 special report, “Growing Florida Business,” we have compared the markets for you. The charts, below, show how each metro stacks up on key variables. These are all factors that corporations should be aware of when considering opening an office or warehouse in a particular market.

South Florida leads the pack in total population (6.07 million people), and therefore not surprisingly also leads in cities serviced by airports (154 domestic + 170 international).

 

Interestingly, South Florida is the only major metro in the state with more international cities than domestic cities serviced by airports. This anamoly is concentrated in Miami-Dade County, with 107 international vs. 54 domestic, most likely driven by service to South and Central America, and the many Latin American headquarters based in South Florida.

South Florida also leads in total office square footage (200.1 million s.f.), and total industrial square footage (368.2 million s.f.). In addition, South Florida currently has the lowest overall office vacancy rate (10.6%) and industrial vacancy rate (4.1%). It’s little wonder that we are attracting investors from all over the world with our high-performing assets!

This is only the “tip of the iceberg” of what you need to know about a market before opening your office. Much more research and analysis goes into my process with each client to determine the best location to do business. For more information on the infrastructure or details of a particular city, county, or submarket, please call or email me.

*Other than Orlando, each major metro area consists of several smaller counties or submarkets. Tampa Bay has four (Tampa/St. Petersburg/Clearwater; North Port/Sarasota/Bradenton; Lakeland/Winter Haven; and Tampa Bay), South Florida has three (Miami-Dade, Broward, and Palm Beach Counties), and Jacksonville five (Baker, Clay, Duval, Nassau, and St. Johns Counties). All are serviced by 2 or 3 airports, except Jacksonville, which has only one. For South Florida, we show the tri-county area but also break out statistics for each county.  For the other areas, we’ve kept the numbers at the metro level only.

ACRES Luncheon with Guest Speaker Michael Feuerman-2017 CRE Forecast for S. Florida

DOWNLOAD PRESENTATION BY CLICKING HERE

On March 15, 2017, Michael Feuerman, ESQ., CCIM spoke at the ACRES  Luncheon held in Boca Raton at Pavilion Grille where he was joined by many of South Florida’s top producing bankers, investors, developers, lenders and brokers . The topic was the 2017 South Florida Commercial Real Estate Market Forecast. He reviewed trends predicted for this year, as well as changes already taking place in the first quarter.

Continue reading “ACRES Luncheon with Guest Speaker Michael Feuerman-2017 CRE Forecast for S. Florida”

2017 Forecast – South Florida & U.S. Commercial Real Estate Markets

Download Full PDF Report

We are pleased to provide you with this copy of Berger Commercial Realty Corp.’s 2017 forecast for the South Florida and U.S. commercial real estate markets. To help you prepare for your involvement with commercial real estate, we address several key areas: investments, new development, the economy, lending, and, of course, the major property sectors that we service, office, industrial, and retail. We rely on multiple sources for our forecast, all listed at the end of the report. We hope this information is informative and useful. If you have any questions, please contact our brokers and we will be happy to assist you.

 

Real Estate Investment
The investment market should continue to be robust in 2017, as foreign investors seek U.S. assets even as REIT’s are selling. Cap rates and yields should stay low in most sectors, and it will be difficult to find value add properties, or core investments, at a reasonable return. Strict lending practices and higher interest rates will slow investment somewhat. Given the low-yield, higher-interest rate environment that many predict, we believe you will see the following trends this year:
• Investors will turn to skilled property management and leasing firms to lower costs, and increase income from their properties.
• Both large (institutional, REIT) investors and small (individual, family funds) will have difficulty locating well priced properties to purchase, leading large investors to hold cash, and small investors to hold their existing portfolio longer than they’d like, unable to complete 1031
exchanges.
• Foreign investors will continue to invest in U.S. assets, slowed somewhat by the strengthening dollar. South American investors will shift their focus in South Florida from residential to commercial, in search of higher returns.
• Investors from the northeastern U.S. will sell assets in their home states and look for assets in South Florida, and elsewhere in the country, seeking higher returns. If the dollar weakens, which the new presidential administration has signaled they prefer, this will favor foreign investors.
• Primary markets and central business districts will fall out of favor with some investors, who will look to secondary and suburban markets for higher yield and value-add properties.
• Investors may seek higher returns in alternative sectors, such as student housing, senior living, and self-storage – areas where most investors are not yet very active.
• Investors who can make quick decisions, and close fast, will find more opportunities than others.

New Development

New development will vary by sector. It will be hampered to some extent as banks tighten up lending, particularly construction loans, where they fear potential over-building. Stricter federal lending standards will exacerbate the issue, preventing some projects from ever going beyond the planning
stages. We expect the following trends in 2017:
• New construction will slow down, as some fear we may be coming to the end of the current real estate cycle. In South Florida, this is mainly going to be felt in multifamily/rental apartments, where most of the construction activity has been.
• In the central business districts, there will be more of a focus on “live-work-play” development, as more employees choose to live close to work, and demand for amenities will increase.
• Expect to see smaller, more efficient office spaces, as technology changes the way we work. Firms will need less space now than they did in the past, and millennials will function better in “communal” workspace.
• The Internet of Things (IoT) will bring technological advances and increased efficiency to commercial properties, improving experiences for employees and building owners.
• Tightening lending standards will stifle new construction, keeping supply low and rents high.
• Retail spaces will be repurposed, as more big-box retailers close, leaving large vacancies in retail properties. Owners will need to find alternative uses or risk losing the properties. Think: Macy’s, K-Mart, and Sears, closing hundreds of locations.
• New industrial development will continue, with some constraints due to the lack of available development sites, as online retail sales grow and more distribution space will be needed to keep up with e-commerce.

The Economy

Are we headed for recession this year? It seems unlikely, unless there is some outside event that disrupts the economy. The four phases of the real estate cycle are 1) Recovery, 2) Expansion, 3) Oversupply, and 4) Recession. Regarding those phases, we make the following observations:
• We have been in the Recovery phase since coming out of the Great Recession, and in some sectors (multifamily and now industrial) we have been firmly in the Expansion phase and may be coming to Oversupply (multifamily).
• Other sectors, office in particular, remain in the recovery phase and we are not likely to see much oversupply in 2017.
• Tight lending standards, particularly construction lending, has forced discipline on most developers, preventing the rush to development and ensuing oversupply that we have seen in past cycles. This may allow for a “soft landing” when we do come to the end of this cycle.

• There is no doubt that this has been an unusually long real estate cycle, and what goes up must come down. We expect the cycle to reach Oversupply and Recession at some point, but it’s not likely to happen in all commercial sectors in 2017 given lessons learned from the past. Some
believe we may have another two years left in this cycle. Others have already begun putting cash aside, anticipating property values (and purchase prices) dropping once a recession hits.
• Job growth will continue, but there will be some uncertainty and delayed decision making with the incoming Trump administration’s new business agenda, as well as rising interest rates. If rates rise too quickly, that could speed up the next recession.
• Energy prices should remain low (barring a major war in the Middle East), and this will keep the cost of operating commercial real estate low. It also will keep more disposable income in the pockets of consumers, shoring up retail spending.

Lenders
The list of lenders who were either forced into bankruptcy or were acquired during the Great Recession is quite long. A big factor in these failures was poor lending practices, and banks (with some pressure from the U.S. government) are determined not to repeat the same mistakes.
• Stricter lending requirements will push LTV (loan to value) ratios lower, forcing investors to put up more cash to purchase investment properties.
• Tight federal regulations will make borrowing even more difficult, bringing some unwanted (but possibly necessary) discipline to the market, and keeping investors from creating another real estate “bubble.”

Office

In addition to the general trends we are forecasting, above, each sector of the commercial real estate market should see its own, unique set of circumstances that will affect performance in 2017. The office sector is changing. Tenant demand for more efficiency and flexibility in workspaces is forcing changes in how office space is configured. With little new construction, and demand catching up with supply, rents will continue to rise this year.
• Tenants have carried over money-saving habits from the Great Recession and will continue to design their spaces for greater efficiency – trying to fit more people into less square footage, straining building systems and parking.
• In some cases, corporate tenants will forego long term leases for the flexibility of “shared workspaces” such as WeWork. The flexibility in the number of seats leased and lease term will attract growing firms and accommodate the millennial workforce.
• Investment in office properties will slow – the capital required for re-leasing space (commissions, rent abatement, tenant improvements) and improving building common areas and systems takes too long to recover with a recession potentially around the corner in the next two years.     • We expect little or no speculative office construction this year. Lenders are shying away from construction lending, and demand has not risen enough to justify it. Properties can be purchased for below replacement cost, given the high cost of land in most locations.

Industrial

Industrial developers have been active this year, with new construction being absorbed almost immediately, keeping vacancy rates around 5%. Several factors in 2017 will keep this trend going.
• “Last mile” delivery will become increasingly important, as e-commerce sellers struggle to speed up the delivery process. For same-day delivery to become a reality, sellers such as Amazon will need multiple local properties for distribution. These can be served by existing or new construction industrial properties, or by non-traditional warehouse (e.g., repurposed office or retail properties) as deliveries will be done by van, box truck, or even by drone (maybe not this year, but soon). Whatever property type, location near population and business centers will be key.
• Investment will grow as a favored investment type. Re-tenanting is less costly than other property types (i.e., office), and demand is high. Rent growth will contribute to higher yields.
• In South Florida, new development seems to be taking place mostly in Broward County, and this should carry over through 2017.

Retail

Retailers are feeling the competition as online sales grow each year. Big box retailers and department stores are closing multiple locations across the U.S. Macy’s announced it will close 68 stores in the first half of 2017. Sears will be closing 150 Sears and Kmart locations in the first quarter. Retail landlords will have to find a way to backfill these spaces. We expect this to bring many changes to retail properties.
• Property owners (or tenants, if still under lease) will have to find creative uses for the soon-tobe vacant spaces if they cannot be released as retail. Conversion to office, “last mile” delivery distribution (see Industrial, above), or entertainment centers that will attract shoppers, are possible re-uses we may see this year.
• Retailers will provide online portals for internet shopping in the stores, bringing customers in and still capturing sales.
• Retailers and property owners will find ways to enhance the customer experience, in order to draw them to physical stores. Live music, more/better restaurant choices, and anything else that will make shoppers happy, should work.
• Online sales will increase, leading consumers to spend even less time in “brick and mortar” stores. But online retail will not completely do away with physical stores – not in 2017, and not ever.
• Investment in power centers (with big box anchors) and malls (with department store anchors) will slow, until investors feel that store closings are a thing of the past.

 

Conclusion

2017 should be a good year in commercial real estate, with more transactions, but no froth. Investors will find areas where yields have not been compressed by competition among buyers. New development and lending will both remain muted, helping to ease this real estate cycle to a
soft landing when it does come to an end. Investment in the office market should slow down among domestic buyers, but not foreign buyers, while office rents should continue to rise. In the industrial sector, demand will continue to grow among tenants and investors, as this sector should outperform the others. Retail properties are in for a bumpy road, as store closings and online sales bring long term change to the retail landscape.
Berger Commercial Realty Corp. is here to guide you through the year, whether you are an investment buyer or seller, a landlord or tenant. Our experienced advisors and property managers will help you make sense of the year to come and maximize the return on your investment in real
estate. We look forward to working with you this year. Thank you.

 

 

Sources:
Deloitte.com, Commercial Real Estate Outlook 2017, December 2017
TheRealDeal.com, Experts Forecast the Sate of Miami’s Real Estate market in 2017: Panels, November 17, 2016
Urban Land Institute and PWC, Emerging Trends in Real Estate 2017, October 2016

 

Download Full PDF Report

Podcast: Guest Speaker for The Private Practice Startup

Michael Feuerman was honored to be a guest podcast speaker regarding “10 Things to Know Before Signing Your Private Practice Office Lease,” on the Private Practice Startup’s podcast, where they advise psychologists and other mental health professionals on starting up their practices.

A couple of these items apply specifically to psychotherapists and their leases, but most apply to all tenants.

Please listen if you’re interested, and contact Michael with any questions. And if you are starting up a practice, reach out to Kate Campbell, PhD, LMFT and Katie Lemieux, LMFT, expert advisors on opening your own psychotherapy practice. You can visit their website here.

This podcast covers the following:

  1. Not all office buildings are created equal
  2. Fair Market Rent is a moving target
  3. Zoning is critical
  4. Your lease term will go by quickly, so plan ahead
  5. Soundproofing is expensive, and best done before you move in
  6. Some landlords should be avoided!
  7. Who pays for improvements to your office?
  8. Having an attorney review your lease is crucial
  9. It will not cost you more to have a broker represent you (it actually won’t cost you anything, and will save you money)
  10. If you deal with hardcore mental illness, expect some local public push-back and protest

Video: “How can a broker help me if I am looking for space to buy?”

 

If you’re in the market to buy commercial property, having a broker is very important. A broker will serve several functions and bring you several advantages. First, they know the inventory in the market. They know what buildings are for sale. They know what buildings are off market, but might be for sale. You could approach them unofficially and make an offer. They know the quality of the building.

A broker will tell you if a building is good for your purposes, if the tenants in the building are good, if the construction is well done or not, if a building might be functionally obsolete, and another property might serve your purpose better.

A good broker will also tell you what the value is, what you ought to be paying for a property. They’ll run market comps. They’ll adjust those comps where necessary and tell you what a particular building is really worth and what you ought to pay.

A broker will then work with your lawyer, or with you directly and help you come up with contract terms before it goes to a lawyer and help you put everything into 1 document, 1 offer document, 1 contract document, make sure everything’s done to protect you.

Finally, and this is something most people don’t think of, a broker will help you think about your exit strategy before you buy. What are you going to do with this property in 3 years, 5 years, 10 years? How much should you expect to get for it? Will your mortgage be paid off at that time? Will you have a balloon, certain things that you won’t think of ahead of time, but it’s very important to go into a purchase with an exit strategy.

 

Video: What are CAM charges?

CAM charges are the cost that a landlord pays to operate and run a commercial property. It stands for common area maintenance and is usually interchangeable with the term operating expenses. This would include the common area maintenance, charges for cleaning up common areas, security for the property, property taxes, property insurance, repairs and maintenance. These items are all paid by the landlord and are sometimes passed through to a tenant.

When it becomes important for tenants is to negotiate whether you can cap those common area charges, whether you can take advantage of decreases in common area charges and get refunds if the costs go down, and whether you can protect yourself against increases in common area charges that normally a landlord wants to pass through. Also, you can negotiate what’s included in common area charges and what’s not. We might tell a landlord that we’re not going to pay for particular items if you have enough leverage or if your broker knows where to spot those areas that can be negotiated.

Sale of Warehouse in the Path of Road Widening Construction

parkson-logo

 

 

 

CHALLENGE

Parkson Corporation is a global engineering, design, and equipment supplier to the water treatment industry.  Parkson changed its manufacturing process and no longer needed a 46,300 s.f. manufacturing warehouse facility in Pompano Beach, Florida.  They vacated the building and decided to sell it.  The sale was difficult due to a well-publicized construction project to widen Andrews Avenue, where the building was located.  This road widening could possibly require that the State of Florida take (by eminent domain) Parkson’s building within 10 years, and destroy part or all of the property.  It had not yet been determined whether they would have to take the building, but it was a possibility, complicating the sale.  Parkson hired Michael Feuerman, who had represented them on a previous brokerage transaction, to market and sell the property.

Parkson Corporation's Manufacturing Plant, Pompano Beach, FL
The property to be sold was vacant, and perfect for an owner-user who understood the possible eminent domain “taking” issues.

ACTION

Mr. Feuerman and his team examined the timing and likelihood of eminent domain.  They then reviewed the physical characteristics of the property (ceiling height, bay sizes, loading facilities, parking, fixtures and equipment, etc.) and the zoning code’s list of permitted uses, to determine which firms could use the property.  In most cases when selling a vacant property, a sale to a firm that will occupy the building (an owner-user) is more difficult to achieve but brings a higher price than a sale to an investor.  Mr. Feuerman focused on owner-user sales to maximize Parkson’s sale price.  The marketing materials disclosed the eminent domain issue, eliminating any firms that could not accept that possibility.  After marketing, touring and negotiating with multiple parties, Mr. Feuerman found a buyer and negotiated excellent sale terms in 7 months.

RESULTS

  • The sale was a win-win for Parkson Corporation and the purchaser.
  • The short time to sell and the high sale price both exceeded Parkson’s expectations.
  • The purchaser occupied the building for close to 10 years, at a net cost that was likely below what it would have cost them to lease.
  • The purchaser had eminent domain rights to force the state to pay fair market value when the building was ultimately taken to widen the road.

TESTIMONIAL

Michael is an effective knowledgeable leader who is able to act and deliver on a corporation’ requirements and strategies during all negotiation phases. Michael understands all facets of the commercial real estate business and was instrumental in the successful negotiations and final sale of Parkson Corporation’s Pompano manufacturing facilities. Oti Wooster, Head of Human Resources and Administration Operations

Vacant land site ready for road work.
After the eminent domain taking, the site was razed and the new road was built across the property. Mr. Feuerman achieved Parkson’s target sale price and timing, and the buyer had 10 years of occupancy followed by an eminent domain payment – a true win-win for all parties.

Video: Michael Feuerman answers, “What is a Due Diligence Period?”

A contractual ‘due diligence’ period is also known as an inspection period. As the name suggests, it the time granted to a buyer under a real estate purchase/sale contract, to inspect the building and land, review tenant leases (if any), get a bank loan commitment, and do anything else necessary for the buyer to decide whether they will go forward with the purchase.

The due diligence period also determines when a buyer can get their deposit back and when they cannot.  This video explains the concepts in more detail, and why it’s important to work quickly and have professionals guide you through due diligence.

Presentation to Florida Institute of CPAs: Tenant and Buyer Commercial Real Estate Decision Making

 

 

 

PrintOn August 16, 2016, I was fortunate to be able to present a 1 hour continuing education seminar to accountants who are members of the Florida Institute of CPAs. I provided the members with an overview of the office and industrial markets in Palm Beach County. We then engaged in a detailed discussion of how tenants and owner-occupants (buyers) of office and industrial properties locate, analyze, and value their real estate.

A copy of the presentation can be downloaded by clicking here: Commercial Real Estate Presentation 8-16-16 FICPA 

If you have any questions about the material, please contact me at 954-471-4320 or at mfeuerman@bergercommercial.com.

Video: If I am a Tenant, Why do I Need a Commercial Real Estate Broker?

Video: If I am a tenant, why do I need a commercial real estate broker?

 

 

Why does a Tenant Need a Commercial Real Estate Broker?

 

 

 

 

 

 

 

 

 

Click here to watch the video: If I am a Tenant, Why do I Need a Commercial Real Estate Broker?

Video: What is a “Full Service” Lease?

As a former practicing trial lawyer, I read all of the documents very carefully for my clients and advise them on what the rate really is.

 

 

Video: What is a Full Service Lease?

 

Click here to watch the video: What is a Full Service Lease

Transcript: “What we typically refer to as a full service lease is a lease where the rate includes all of your costs. It includes your base rent, your operating expenses, your electric, your janitorial. It typically does not include sales tax in a state like Florida that has sales tax, and it does not include your phone, it does not include your internet. It includes all of your other costs. The issue when it comes to full services leases is that you may call a landlord and they might say, Yes, the lease is full service, but they may be referring to something different. Lots of landlords call leases different things: triple net gross, full service, modified gross, passover base year. It’s important to have an advisor who will ask the questions and understand the difference between these lease rates, will actually read the lease and the proposal for you carefully, and advise you on exactly what you are paying and what’s not included and what to expect. You don’t want surprises. As a former practicing trial lawyer, I read all of the documents very carefully for my clients and advise them on what the rate really is.”

 

 

Why Office Rents are Likely to Rise

Office rents continue to rise in South Florida, and there are two good reasons why this will continue for the foreseeable future.

 

 

Office rents continue to rise in South Florida, and there are two good reasons why this will continue for the foreseeable future.  First, supply is constricted. Second, the sale of office buildings at record prices forces new owners to charge higher rates.

As companies continue to expand in South Florida, the existing supply of office space is being leased.  Our first quarter market reports for Broward and Palm Beach Counties showed positive net absorption (more space is being leased than is coming on the market) for 4 straight quarters.  In addition, vacancy rates went down over that same 12-month period.  With no significant new construction, and space being absorbed, the laws of supply and demand dictate that pricing for office space will rise.  Our market reports showed that, as well.  Rates increased over $0.50/s.f. in both counties in the past year.

Broward County Office Market, 1st Quarter 2016
Broward County Office Market, 1st Quarter 2016

 

 

 

Palm Beach County Office Market, 1st Quarter 2016
Palm Beach County Office Market, 1st Quarter 2016

 

 

 

 

 

 

 

 

We do not expect any new office properties to be built in the near future, as long as apartment developers continue to outbid office developers for land.  But there are signs that the apartment boom won’t last forever.   The Daily Business Review, on May 26, 2016, reported, If there’s any doubt that South Florida’s real estate boom is slowing, take a look at the region’s latest construction data showing construction activity plunged in April. Nonresidential starts dropped to $117 million last month “ a dramatic 71 percent decline from April 2015.  Residential starts amounted to $321 million, or 35 percent less than a year before.  Once apartment developers stop their furious pace of construction, there will hopefully be sites left for new office development, and if demand is high enough, they will be built.

The second basis for increasing rates is the froth in the market for the purchase of investment properties. With the Federal Reserve holding interest rates down at artificially low levels, it is easy for investors to borrow and purchase commercial real estate.  In addition, because returns on other investments are also at such low levels, investment funds continue to flow into commercial real estate at a fast pace, in search of higher returns.

The iconic Miami Tower, pictured with blue and green lighting.
The iconic Miami Tower, pictured on the left with blue and green lighting.

Sumitomo Corp. of Americas purchased the office building and air rights to the Miami Tower, 100 SE 2nd Street, Miami, for $220 million, or $357 per s.f., according to the Daily Business Review, May 24, 2016. In the same DBR edition, it was reported that Renaissance Aventura, LLC, paid more than $417 per s.f. for the Aventura Corporate Center, a three building office park close to the Aventura Mall, at 20801 “ 20807 Biscayne Boulevard.  With investors purchasing at such high prices, they will have to raise rents in order to achieve reasonable returns.  In addition, sellers are raising rents prior to putting their properties on the market, in order to maximize their sale price.  This cycle will continue to drive rents up.

It would be best to lock in a long term lease, at the lowest possible rate now, rather than take your chances in a year or two or when your lease is closer to expiration.  If you or your broker had the foresight and leverage to lock your renewal rate in at a fixed increase over the last year, or at a discount to market rents, then you could be better protected from rising rates.  If not, contact your broker to discuss a new strategy to keep your rates down.

Tenant Renewal Rights – Exercise Them EXACTLY as Required in the Lease!

 

 

 

When my clients exercise renewal rights in their leases, two things are crucial: exercising the option in a timely manner, and exercising the option precisely as required by the lease.

First, make sure you have the date to renew on your calendar. And on someone else’s calendar, as well. Don’t miss it or there will most likely be no forgiveness, especially in a market like this where there is not enough space, and soon tenants will be fighting over spaces and bidding up rents. Double check the deadline you’ve calculated – check it with your tenant rep broker or your attorney.

Second, give notice in the exact manner required by the lease! If your lease says you must give written notice, don’t give notice verbally.  You must also read the notice requirements, which often say that notice must be sent in writing, by certified mail or nationally recognized overnight delivery service (such as FedEx, UPS, US Postal service). If overnight delivery is required, don’t email your renewal notice.  It doesn’t matter what your landlord says, what matters is what’s written in the lease.  

Send notices exactly as required in your lease, or the notice may be invalid!
Send notices exactly as required in your lease, or the notice may be invalid!

 

 

 

 

 

 

 

 

Clients often ask me something along these lines: “Do I really have to send a renewal notice by certified mail? The landlord said my email was good enough.” Being a former commercial litigation lawyer, I counsel my clients not to leave any room for interpretation when renewing. Landlords do not like giving renewal rights to begin with. We often have to fight to get them.  When you do have renewal rights, follow the lease instructions to the letter (no pun intended)!  If you don’t, you could have a big problem. Seek advice from your broker or lawyer if you are unsure on how to comply with the lease.

A recent article regarding a coffee shop in Downtown Miami that allegedly sent their renewal notice by email highlights the dangers.  http://therealdeal.com/miami/2016/05/13/eternity-coffee-brews-legal-battle-with-downtown-miami-landlord/ The landlord in this case alleges that the tenant did not properly give notice to renew. The tenant believes that they have another 10 years of renewal term and that the landlord wants them out so they can redevelop the property. “The landlord…claimed that [the tenant’s emailed notice of] renewal in October, which read ‘We are planning to stay,’ was ‘very vague and not clear cut,’ the suit reads.” The parties are now tied up in litigation, which will almost certainly be extremely costly, and moreso for a tenant than a landlord.

Don’t fall into that trap! Pay attention to deadlines and required methods to give notice and seek guidance if you are unsure.

BankAtlantic Corporate Headquarters Relocation

BankAtlantic-Logo

CHALLENGE

In 2000, BankAtlantic (a Florida-based bank founded in 1952, with branches from St. Lucie County down to Miami-Dade County) decided to relocate their corporate headquarters from East Sunrise Boulevard to a location closer to I-95 in Broward County. In late 2000, Mr. Feuerman and his partner, both with a global, top 5 commercial brokerage firm at that time, won the assignment to lead the search for the bank. The new location had to have enough land or existing building to accommodate at least 100,000 s.f. of office space, sufficient parking for all employees, room for growth, and superior exposure for corporate identity, and it had to be a Class A property or one that could be upgraded to Class A. The bank was open to purchasing or leasing.

ACTION

By early 2001, Mr. Feuerman had identified over 10 properties that met the bank’s criteria and took the bank through each viable option. One of those sites was a +/- 188,000 s.f., Class C office/manufacturing facility, available only for lease. Mr. Feuerman envisioned that site as one which could be converted to 100% office, and upgraded to Class A.

Mr. Feuerman, having a prior relationship with the property owners, contacted them and convinced them to review an unsolicited offer to purchase the building, as well as an additional, adjacent +/- 11 acre parcel of vacant land that they also owned. The bank agreed that the site would make an excellent location for their new headquarters, and Mr. Feuerman’s team assisted the bank and its attorneys in negotiating the terms of the purchase and sale of the building and the adjacent land.

After the purchase, the property was converted to a Class A, single tenant headquarters building which stands today as an iconic property on West Cypress Creek Road.

RESULTS

  • Exhaustive market search by Mr. Feuerman resulted in 11 possible locations for new bank corporate headquarters within the first month after being retained
  • Detailed presentation of lease and sale comparables for both existing buildings and land, allowed the client to determine the appropriate purchase price
  • The bank was able to purchase a 188,000 s.f. property for an excellent price, as well as an additional 11 acres for excess parking and for future expansion of the building
  • The property was converted to a Class A corporate headquarters, where the bank operated until being purchased by BB&T in 2012

The new headquarters property, before purchase and renovation
The new headquarters property, before purchase and renovation

After renovations, a Class "A" single tenant headquarters building in the heart of Broward County
After renovations, a Class “A” single tenant headquarters building in the heart of Broward County

Office Building Sale, Relocation of Law Firm, Fort Lauderdale, FL

Fulmer LeRoy Albee, PLLC, a law firm with three offices in Florida, occupied a portion of a 15,000 s.f. office building in Fort Lauderdale……

Fulmer LeRoy logo r

 

 

CHALLENGE

Fulmer LeRoy Albee, PLLC, a law firm with three offices in Florida, occupied a portion of a 15,000 s.f. office building in Fort Lauderdale, which was owned by one of the firm’s partners.  They wanted to sell the building and relocate the firm after the sale.  There were very specific parameters that had to be met: the sale price had to meet the goals of the firm partner who owned the building; the eventual purchaser had to be willing to give the law firm at least a 6-month leaseback after sale while they searched for and secured new space; and the relocation space had to fit the firm’s layout, location and budget requirements.

ACTION

The firm retained Michael Feuerman, Esq., CCIM as their exclusive broker for the sale and relocation.  Michael immediately marketed the property for sale to owner-users and investors, and advertised within the brokerage community.  Simultaneously, Michael tracked office space in the firm’s immediate vicinity, keeping a current inventory of available relocation space so the firm could move quickly when the building sold.  Calling on his training as a licensed Florida attorney, Michael worked with the seller’s attorney to negotiate purchase and sale contracts.  Once the property was under contract, Michael guided the owner through the due diligence process, helped the firm negotiate the 6-month leaseback from the purchaser, and worked with all parties to ensure that the sale closed in a timely fashion.  During the due diligence process, Michael helped the firm locate a great office for relocation, and negotiated favorable terms for a new, long term lease.

RESULTS

  • Property under contract within 5 months to a cash buyer, closing less than 30 days later
  • Six-month post-closing leaseback fully negotiated within one week of contract being signed
  • New, relocation space terms fully negotiated less than two weeks from contract being signed, and lease signed within one month of sale (despite Christmas and New Year’s holiday scheduling delays!)
  • Relocation space met the firm’s criteria, and more:
    • located 1.5 miles from their prior office
    • rent below budget
    • the new space was already fully furnished and the building had extensive amenities (on-site gym, cafe, security guard)
    • all improvements done by the landlord with additional concessions.

coastal tower lobby coastal tower 1

 

 

 

 

TESTIMONIAL

We have been relying on Michael Feuerman as our commercial real estate broker since 2003. He has provided expert guidance and has gone above and beyond what most brokers would do to solve our real estate issues and exceed our goals for over a decade. His help through this tricky sale/relocation process was invaluable. We highly recommend Michael as a commercial real estate broker to add tremendous value to any firm that occupies office space.

– C. Richard Fulmer, Esq.

coastal tower entrance coastal tower entrance2

From One Facility to Two, No Downtime

Bayview Center for Mental Health (“Bayview”) was a not-for-profit organization providing mental health care and social services to indigent….

Bayview logo3

CHALLENGE

Bayview Center for Mental Health (Bayview) was a not-for-profit organization providing mental health care and social services to indigent and low-income patients throughout Broward and Miami-Dade Counties.  In the summer of 2009, Bayview decided to relocate their corporate headquarters and their medical clinic from one facility in Miami Gardens to two facilities in Fort Lauderdale (office) and North Dade (clinic). Bayview could have no downtime of their clinical facilities during the move, as patients depended on their services.  Bayview hired Michael Feuerman as their exclusive tenant broker to represent them in their search and negotiations.

Bayview Center for Mental Health North Dade Office
North Dade clinic location.

 

ACTION

Mr. Feuerman had represented Bayview since 2004, and was very familiar with their requirements and operations.  He conducted a thorough review of their then-current configuration, and helped them to determine what functions would be required in the new facilities.  By September 2009, Mr. Feuerman had toured Bayview through multiple options for each requirement, in both counties.  He directed the negotiation process with several building owners until fully acceptable terms were presented for multiple facilities, providing Bayview with several choices.  He ensured that terms were in place so that the clinic would be delivered on time, with no delays. Bayview ultimately chose a 14,000 s.f. office location (5 year lease term) in Downtown Fort Lauderdale, and a 15,530 s.f. clinic location (10 year lease term) in North Miami Beach.  Mr. Feuerman (a licensed but non-practicing attorney) worked closely with Bayview’s attorneys to ensure that the final lease documents reflected all negotiated business terms, and to overcome government and neighborhood concerns over a mental health clinic being established in the North Miami Beach location.

RESULTS

  • Assisted the client in finding a clinic location that was accessible to patients, where zoning allowed for mental health treatment, and with certain on-time delivery of the space
  • Guided the client in choosing an excellent corporate headquarters location, suitable for meetings with donor organizations and government funding-agencies
  • Negotiated rent at under-market and under-budget rates
  • Negotiated above-market build-out allowance and free rent
  • Negotiated sufficient parking for all employees

TESTIMONIAL

In all transactions, Mr. Feuerman was professional and knowledgeable, providing an optimum level of skill and expertise, working diligently to assure Bayview Center continued operations without interruption of services.  He provided a full range of real estate services, and guidance through all processes and far exceeded our expectations.

Charles B. Huiss, Chief Administrative Officer

Bayview Center for Mental Health Broward Office
Broward headquarters location

Bayview Center for Mental Health Broward Office Interior
Broward office interior

 

 

 

 

 

 

Click here for a downloadable pdf copy of this page: Case Study Bayview Center Corporate Office and Clinic M Feuerman

How do you choose a Location? Determine your needs, then your wants.

Several factors should go into the decision making process when business owners choose office space, either to lease or purchase. 

Several factors should go into the decision making process when business owners choose office space, either to lease or purchase.  Before you decide what you want, you have to determine what you need.

As a commercial real estate broker specializing in office and industrial tenant representation since 1999, I have learned to help my clients determine what office features are a true need (space for current employees and room for future growth, enough parking to satisfy the zoning requirements, redundant internet providers, for example) vs. what are features that they would like to have in an office but in reality, could do without.  With these guidelines set, it becomes far easier to choose which properties to tour and which to pursue for lease proposals.

But how do business owners differentiate between needs and wants?  Open and thorough discussions with the broker, key employees, and to some extent with clients, will help the business owner identify the true needs.  Some needs are easy, the total square footage you need now and in the future, the amount of internet bandwidth you’ll use, the number of offices vs. open work area, for example.  Others are harder.  Which building out of the 8 that we toured should we focus on?  Where should the office be located? Should I choose Class A or B?

The old saying in real estate is relevant to cost: location, location, location. For example, office rents in the downtown core normally far surpasses a similar building in a suburban market.  Moreover, downtown traffic brings more stress and longer commutes for your employees.  If your clients are not located downtown, your clients don’t regularly visit your office, and your key employees are not living there, then there is probably no reason to be there.  You will save a significant amount by locating your office in a suburban submarket, which, by the way, often have offices that are just as nice as anything you will find downtown.

Similarly, the class of building will be a large factor in cost.  Comparing newer, Class A buildings with older, Class B and C properties, you can see a difference of $10.000 to $15.00 per s.f. or more in annual rent in South Florida.  If you don’t have to impress clients or recruits, most see Class A rents as a needless luxury and will bypass those buildings.

A "call center" requires higher-than-normal parking rights, and most buildings cannot provide that. Choose carefully!
A “call center” requires higher-than-normal parking rights, and most buildings cannot provide that. Choose carefully!

 

 

 

 

 

And so on with other features of office buildings which can push up rents: newer construction, storm-impact windows, the amount of parking spaces available, concierge or security in the lobby, etc.  Once we are done with this analysis, my clients are normally able to tune out the noise, rule out buildings that don’t meet their needs, and easily identify the top two or three locations.  From there, let the negotiations begin!

New Office Construction in Downtown Fort Lauderdale

No other developer has taken that plunge, until now. Blackhawk Properties & Investments has announced that they will be breaking …

Downtown Fort Lauderdale has been littered with cranes and construction over the past several years, but most or all of that was for multi-family developments. The recession brought new office construction to a grinding halt in 2008, and rental apartments have been the product of choice for developers for the last several years.

1 West Las Olas, completed in 2015, is now fully leased.
1 West Las Olas, completed in 2015, is now fully leased

Since that time, only one office building over 30,000 s.f. has been built downtown: 1 West Las Olas. The lead developer of the project is also the managing partner of a law firm that occupies much of the building.  I represented that attorney in finding the site where 1 West Las Olas sits. The building was planned as a home for his law firm, and as a premier property for tenants seeking downtown office space.  The building is now full, and the owner’s risk-taking in erecting a new building during down market is to be admired

 

No other developer has taken that plunge, until now.  Blackhawk Properties & Investments has announced that they will be breaking ground this summer on a 70,000 s.f. office building, less than one block from the Broward County Circuit Courthouse, on SE 6th Street & Andrews Avenue. The building will have a parking garage, and possibly retail on the first floor, with space for professional offices on the upper floors. This will most likely attract attorneys, given the proximity to the courthouse. But more importantly, it’s a strong sign of a recovery in the downtown office market.

Blackhawk Properties & Investments' new 70,000 s.f. office building, 550 South Andrews, is set to break ground Summer 2016
Blackhawk Properties & Investments’ new 70,000 s.f. office building, 550 South Andrews, is set to break ground Summer 2016

 

 

 

 

 

 

 

Market fundamentals support this development.  Vacancy rates in Downtown Fort Lauderdale have been steadily dropping since the 2nd quarter of 2012, and rents steadily rising since the 1st quarter of 2014.

Vacancy rates have steadily dropped in Downtown Fort Lauderdale for the last several years
Vacancy rates have steadily dropped in Downtown Fort Lauderdale for the last several years

For the past several years, multifamily developers have been paying exorbitant prices for land to develop apartments. But with development in that sector slowing, more land sites will be available to office developers.

I expect (and hope!) to see more office development downtown in the near future. With shrinking supply, and a strengthening economy pushing demand, developers will have to answer the call and put shovels into the ground.

What is “CAM”?

When I’m discussing office rental rates, I sometimes find that tenants are confused by the term “CAM.” What is it, and why does it matter to you?

When I’m discussing office rental rates, I sometimes find that tenants are confused by the term CAM. What is it, and why does it matter to you? CAM is an acronym that stands for common area maintenance. This is the amount it costs to operate and repair the common areas of a property, those areas that are shared by all tenants, such as the lobby, elevators, stairwells, parking areas, landscaping, and corridors. All building tenants use these areas, and all should pay their share of the expense to maintain these areas.

CAM is one cost that a building owner typically will pass through to tenants in their monthly rent, along with real estate taxes, property insurance, and other operating expenses. It should be addressed in your lease, and you should be paying your proportionate share of the total expense. For example, if your firm occupies 15,000 s.f. in a 100,000 s.f. building, then you would pay 15% (15,000 divided by 100,000) of the total CAM cost for the year, divided into 12 monthly payments.

Stairwells are part of “common areas” that all tenants pay for.

How is CAM determined? The amount is estimated by your landlord at the beginning of each calendar year, and then reconciled the following year. This has to be an estimate, as the expenses are not known until they are incurred. The estimate is normally based on the last several years of cost history, with any known increases or savings factored in. After the year is over, the landlord reconciles the actual CAM payments. If they were lower than what was estimated, you will get a credit back (usually a rent credit), and if they were higher than what was estimated, you will get a bill.

CAM is one part of the overall Additional Rents, which is usually a defined term in a lease, including anything other than your base rent, that you will pay to the landlord. If you don’t take CAM and all other Additional Rents into account when you are estimating your future lease payments, or when you are negotiating a lease, you could be in for a very unpleasant surprise when you receive your first lease invoice. It’s important to know and understand all costs that you will pay as part of your rent.

CAM should be a pass-through for your landlord, not a profit center. Some elements of CAM and additional rents can be capped if negotiated up front. Some landlords will attempt to include some non-customary costs in the CAM or Additional Rents. A good tenant representation broker and a good lawyer will guide you and help you predict and negotiate your costs, protecting you from unforeseen or inappropriate items that you might otherwise agree to pay for if you are unaware.

South Florida Condo Market Slows Down – Will This Help the Office Market?

Multiple news sources are reporting a slowdown in residential condo development in Miami, and elsewhere in South Florida. This could have a positive impact on the office markets..

Multiple news sources are reporting a slowdown in residential condo development in Miami, and elsewhere in South Florida. This could have a positive impact on the office markets in the area.  I’ll explain how and why.

First, consider The Wall Street Journal’s recent report on March 29, 2016, “Another Condo Bust Looms in Miami.” The WSJ reported, “Developers have started canceling projects, slashing prices and offering incentives such as private-jet access to spur sales, an ominous echo of the housing crash that pounded South Florida especially hard….In the fourth quarter of 2015, the number of Miami Beach condo transactions declined nearly 20% from a year earlier, while inventory jumped by nearly a third, according to a report from appraisal firm Miller Samuel Inc. The median sales price slipped 6.6%, according to the report.”

Why is this happening at this time?  It seems that several factors are converging to lower demand in the residential condo market, not just in South Florida, but around the US.  The WSJ noted, “A strong U.S. dollar and weakening local currencies, dropping oil prices and global economic turbulence have crimped the buying power of foreign investors….At the same time, stock-market turbulence has made wealthy locals hesitant to undertake big purchases. Luxury-home prices in 10 global cities analyzed by broker Knight Frank LLP are expected to increase by 1.7% this year, down from 3% growth in 2015….Carlos Rosso, president of condominium development at Related Group, Miami’s largest condo developer, said he sells about 20 units a week in the Miami-Fort Lauderdale area, versus about 100 a week last year.”

Cranes in the South Florida skylines have been predominantly for residential development for the last several years.
Cranes in the South Florida skylines have been predominantly for residential development for the last several years.

While this doesn’t have a direct impact on office markets, it should have an indirect impact, allowing for more new office development. Office developers, for several years during the residential construction boom, have been unable to afford land in the central business districts. Residential developers outbid them, thanks to higher condo prices and higher apartment rents.  With a slowdown in the residential sector, and new projects being put on hold or canceled, several of these land sites will drop to more affordable levels, allowing office developers to move forward on new projects.

How will this affect tenants?  It will bring more product, more choices, and hopefully lower or stable rental rates.  This may be a couple of years away, but it has the potential to help us avoid a sharp turn into a heavily landlord-friendly market. This would be a welcome turn of events for my clients.

1st Quarter 2016 Office Market Report for Palm Beach County, from Berger Commercial Realty

Quoted asking rental rates increased $0.06 from the previous quarter to $27.23/SF. This is the 4th consecutive quarter in which quoted rates have increased.

 

 

 

Berger Commercial Realty is pleased to present you with our 1st quarter 2016 Broward County Office Market Report.  We have compiled information that we believe will help you better analyze the market and your current real estate interests.  For the full report, click here: Berger Commercial Realty Market Report Palm Beach Office – 1Q 2016

 

1st Quarter 2016 Office Market Report for Broward County, from Berger Commercial Realty

Quoted asking rental rates increased $0.32 per s.f. from the previous quarter to $25.10 per s.f. . Rental Rates continue on an upward trend,

 

 

Berger Commercial Realty is pleased to present you with our 1st quarter 2016 Broward County Office Market Report.  We have compiled information that we believe will help you better analyze the market and your current real estate interests. For the full report, click here: Berger Commercial Realty Market Report Broward Office -1Q 2016

1st Quarter 2016 Industrial Market Report for Broward County, from Berger Commercial Realty

The largest lease signings were Aviation Inflatables, Inc. occupying 128,144 SF of space at 1655 NW 136TH Ave in Sunrise, and the 93,700 SF…

 

 

Berger Commercial Realty is pleased to present you with our 1st quarter 2016 Broward County Industrial Market Report.  We have compiled information that we believe will help you better analyze the market and your current real estate interests. For the full report, click here: Berger Commercial Realty Market Report Broward Industrial -1Q 2016

1st Quarter 2016 Industrial Market Report for Palm Beach County, from Berger Commercial Realty

Berger Commercial Realty is pleased to present you with our 1st quarter 2016 Palm Beach County Industrial Market Report.

 

 

Berger Commercial Realty is pleased to present you with our 1st quarter 2016 Palm Beach County Industrial Market Report.  We have compiled information that we believe will help you better analyze the market and your current real estate interests. For the full report, click here: Berger Commercial Realty Market Report Palm Beach Industrial -1Q 2016

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