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With tourism down, Florida's economy and real estate
market feel the recession
Florida's usually robust economy has been socked hard by the national
recession. And its commercial real estate economy has been among the most
serious casualties. Optimism still reigns for the future, however, even if
experts predict that the state will boom a little slower in the 1990s than
it did in the 1980s.
Miami was socked hardest by the recession, with the demise of two airlines
and several large banks pushing unemployment up to a historic midwinter
"The jobs loss in the Miami area was over 38,000 jobs out of a total of
953,530," says Gregory W. Kessel, senior vice president with CB Commercial
"Simultaneously, however, " he says, "with a deep trade link southward,
Miami is becoming the headquarters of choice for companies eager to crack
the long dormant South American market. Miami is not attracting as much
international investment as it is becoming an international administrative
and managerial hub for people."
But Miami needs time to recover. Office vacancies on Brickell Avenue and in
the CBD are at 35%, Kessel says. And last year saw a negative absorption of
880,000 sq. ft. Downtown rates at $19 to $25 for Class-A space.
Coral Gables has a vacancy rate of 18%, at $14 to $20 per sq. ft. The
airport area has a 13.9% vacancy rate, also at $15 to $20 per sq. ft. Kessel
expects little speculative office space construction in the near future.
"Miami's retail marketplace is healthy," Kessel says. "Retail sales actually
increased during the most recent recession. The retail market is a
reflection of our multi-ethnic population, with ethnic retail areas of
Miami, including Little Havana, Little Haiti and the Caribbean
"Rental rates are from $25 to $60 per sq. ft. in the high-end market."
Miami's downtown is especially healthy, he says, with shops luring South
American - particularly Brazilian - shoppers.
"The suburban markets are experiencing the overbuilding and vacant space
similar to the rest of the country," he says. Rental rates there are $12 to
Miami suburbs are overbuilt
Dade's old condo glut, which saw more than 10,000 new, never-sold units on
the market in the early 1980s, is for the most part gone. In Dade, new condo
sales for the first 11 months of 1991 were 3,077, down 19.8% from the first
11 months of 1990. But average prices were up 12.6% to $166,231, according
to a report by real estate analyst Mike Cannon.
Used condo sales were unchanged at about 8,800, with price up 4.6% to
$78,440, Cannon says.
Miami's hottest condo market was near the water. Lincoln Property Co.
recently completed Lincoln Pointe, a 285-unit luxury high-rise condo tower
that is 78% leased with rents over $1.08 per sq. ft.
Unlike the rest of Florida, Dade hotel occupancy was up by 1.9% to 72.6%,
for the first 10 months of 1991, despite the recession and the Gulf War.
Rates were also up by .7%, to $82.72 per room per night.
Dade was the only Florida county to report an increase in tourism - by 4%.
entirely accounted for by international tourists chasing the weak dollar.
Little new hotel construction is expected in 1992, although the boom in
rehabbing old Art Deco hotels in Miami Beach continues. City officials
continue to seek investors to build a high-rise headquarters hotel for Miami
Beach's newly renovated Convention Center.
"The industrial marketplace has a vacancy rate of 8.2%, " Kessel says,
"based on a total marketplace of over 136 million sq. ft. The majority of
additional space entering the market in the first half of 1991 is previously
Coral Ridge Properties Inc., founder and major developer of the city of
Coral Springs has made its largest land sale since the sale of 100 acres for
the Coral Square regional mall. Florida National Properties Inc., Coral
Ridge Properties' land holding corporation, has sole 37.5 acres at
University Drive and Atlantic Boulevard to K mart Development Corp., Troy,
Mich. K mart will build a 310,000 sq. ft. retail complex at the site to
include two K mart subsidiaries, Builders Square and Pace discount club, as
Broward's office glut worsened
Broward County's office glut worsened in 1991. The downtown office vacancy
rate rose from 20.2% to 24.6% in 1991, CB Commercial says. Suburban vacancy
rates rose from 23.8% to 27.3%.
Average Class-A rental rates rose from $18.93 to $23.93 downtown, but
slumped from $18.93 to $17.91 in the suburbs, a Cushman & Wakefield report
In the suburbs,vacancy rates were 18.5% in Hollywood; 23.7% in Dania; 16.7%
at the airport;24.4% in Plantation; 22.3% in Pompano Beach; and 33% in
Still, the Galbreath Co. announced the opening of SunBank Center, the newest
addition to the skyline. The 17-story, 211,000 sq. ft. building is 51%
And ITT Hartford Insurance Group opened the firs phase of Cornerstone, a
lakefront, 60-acre office park on Inter-state 595 in Plantation, with an
eight-story, 170,000 sq. ft. office building.
Broward's condo market, while never as glutted as Dade's, suffered in 1991,
with sales down by 26.5%, to 1.408, but average prices were up 19.4%, to
$93,847. Used condo sales were down by 2.5%, to 9,098, and average prices
were down by 3.1%, to $61,259.
Despite falling interest rates local real estate experts were expecting no
immediate turnaround in the market.
Tourism in Broward County slumped by 3% in 1991, and its hotels felt the
pinch. Hotel occupancy slumped by 2%, to 65.1% during the first 10 months of
1991, according to a Pannell Kerr Forster report. Room rates also were down
by 1.8%, to $78.82 per night.
Broward officials, like their Dade counterparts, are seeking investors to
build a headquarters hotel for their new county Convention Center.
Broward's overall retail vacancy rate at the end of 1991 was 15.5%,
according to a survey by CB Commercial.
Broward business and industrial facilities in the first quarter of 1992 had
8.2% vacancy for 50.8 million sq. ft. of space. By area, vacancies were 4.6%
downtown, 9.2% on Sunrise Boulevard; 6.5% in Hollywood, 5.6% in Dania; 6.9%
at the airport; 3% in Plantation; 12.1% in Pompano Beach; and 5.6% in
Palm Beach County still is suffering from the collapse of its dream of
becoming Silicon Valley South, with the pullout of several high-tech
industries. But not all is bleak.
"Activity in Palm Beach County has actually been picking up some since the
first of the year," says John Geisen of CB Commercial.
Still, the county's office vacancy rate edged up from 29% to 29.5% during
the 1991, according to a CB Commercial survey.
By area, Boca Raton has 6.1 million sq. ft. of office space 30% vacant;
Delray Beach has 1.4 million sq. ft. 49.4% vacant; Boynton/Lantana has
350,000 sq. ft. 32.5% vacant; Palm Springs/Lake Worth has 356,000 sq. ft.
20.3% vacant; West Palm Beach has 4.2 million sq. ft. 27.6% vacant; Palm
Beach has 542,000 sq. ft. 21.9% vacant; Riviera Beach has 2.3 million sq.
ft. 22.2% vacant; Jupiter South has 529,000 sq. ft. 23.3% vacant; and Royal
Palm Beach has 105,000 sq. ft. 13% vacant.
In Boca Raton, Claridge Properties South Florida is operating One Boca
Place, the largest office building in the city. The four-story building is
Palm Beach's condo market suffered badly in 1991. New condo sales dropped by
35.9%, to 1,633, with average new condo prices down .2% to $139,286,
according to a study by Mike Cannon . Used condo sales were down 3%, 5,125,
with average prices up 1.1%, to $110,430.
Palm Beach tourism fell slightly in 1991. And hotel occupancy rates slumped
by 3%, to 57.7% during the first 10 months of 1991, according to Pannell
Kerr Forster. Room rates dropped by 3.5%, to $93.98 per night.
"Palm Beach has had a lot of new hotel development - a Marriott, a Radisson,
some others, says Patrick D'Sa of Pannell Kerr Forster. "The market is going
to take a while before it stabilizes. Boca Raton is a little overbuilt at
this time. Some, like the Marriotts, do well; some others are struggling.
There's really no development on the books.
Palm Beach overall retail vacancy rates were 14.7% at the end of 1991,
according to survey of 207 properties by CB Commercial. Highest vacancy
rates were 26.5% in Delray Beach and 22.8% in Palm Springs and Lake Worth.
The lowest rates were 1.4% in Palm Beach and 9% in West Palm Beach.
Palm Beach Country business and industrial parks have 42.7 million sq. ft.
of space 13% vacant, a CB Commercial report says.
In West Palm Beach the Stiles Corp. has Northpoint Corporate Park, a 92-acre
mixed-use suburban business campus with 500,000 sq. ft. completed and 88%
occupancy. Stiles eventually plans 1.4 million sq. ft.
Orlando shows promise
"The most exciting thing about Orlando," says Larry Richey or Cushman &
Wakefield, "is the fact that it continues to get high ratings in virtually
every economic or real estate poll about the future - including anticipated
employment growth, relocations and new industrial development.
"Orlando is fast becoming a distribution center for the state of Florida.
And it just finished spending $1 billion to expand its airport. Orlando is
becoming a big cargo destination - competing with Miami for that. Orlando
has a geographical advantage if you want to distribute throughout the
In Orlando the downtown office vacancy rate dropped slightly from 17% to
16.9% during 1991, CB Commercial says. In the suburbs it edged up from 18.1%
"Overall the office market performed well enough in the fourth quarter of
1991 to boost net absorption for the year to approximately 153,000 sq. ft.
and decrease the vacancy rate to 17.4%," says a report by Cushman &
"As occupancy levels gradually increase in 1992, Cushman & Wakefield
anticipates an overall slight increase in effective rental rates," the
By area, C&W reports a negative absorption of 14,400 sq. ft. in the CBD in
the fourth quarter, positive absorption of 5,635 in Maitland Center and
positive absorption in Altamonte Springs.
"Retail vacancy rates in Orlando malls are at 16.4%, based on 25.1 million
sq. ft. in the metropolitan area," says J.D. Payne of CB Commercial. That's
up slightly from a year ago, he says. "The vacancies are mainly in
neighborhood and community shopping centers that have an overabundance of
New construction, which for years has averaged 2 million sq. ft. per year,
will probably be half that for the near future, Payne says. He doesn't
expect a new center for at least three years.
Orlando's tourism was off in 1991, but hotel construction continues.
"We have 80,000 hotel rooms, more than any other city in the world," says
Richey. "There are estimates that it will exceed 100,000 rooms in this
decade. Disney alone has plans to add substantial hotel rooms on site."
"A full 100,000 rooms may be a little steep," counter D'Sa of Pannell Kerr
Forster. "Disney has several large hotels under construction but most hotel
development is Disney. Outside of that there is very little actual
construction. There is a 550-room Ritz Carlton proposed in Orlando. And
Hyatt is nearing completion of 430 rooms at the airport."
"There has been a substantial positive (industrial) absorption in Orlando,"
says Richey. "One million sq. ft. was delivered into the industrial market
in 1991. The impact was increased vacancies in some submarkets, but it
wasn't much. A great deal was absorbed."
"Orlando has the same kind of bulk warehousing market as Tampa, but it's
slightly healthier," says Nancy Thaneuf of Childress Klein Management
Services. "There's a less empty space, more users coming in. Prices are down
50 cents or so from a year ago."
Tampa settled at bottom
"In my view the Tampa area is still scraping along the bottom with some good
and bad signs." says Jim Patterson, president of Childress Klein Management
"For all indices except West Shore, the vacancy index increased in the first
quarter of 1992," says a CB Commercial report. "Downtown increased from
20.49% to 21.06%. West Shore decreased from 14.23% to 13.7%. All suburban
properties rose from 20.59% to 21.03%. Hillsborough County rose from 21.57%
to 22.13%. Pinellas County rose from 27.82% to 29.07%."
"Downtown Tampa is in a real big mess right now," says Patterson."Three
virtually brand new buildings have been completed or are near completion -
high-rise towers, with huge amounts of vacancy. They're sending rental rates
down. There's a virtual war going on, a fight to pull tenants out of older
buildings, with not much net absorption."
"Rates vary," Patterson says, "But mostly they're in the high teens to the
very low 20s."
Two Mack Centre, one of the new high rises, has been vacant for a year with
negotiations going on with the country about possible public purchase, he
"Tampa's bright spot is West Shore," Patterson says. "It's one of the
strongest suburban markets in Florida, and maybe in the southeast United
States. Absorption there has been several hundred thousand square feet in
the past few years. It is projected that by the end of 1992 the vacancy rate
will be down to 10% or 11% . It's good that there has been no construction
there probably two or three years. It's because rental rates and discounts
given to attract tenants force effective rates so slow as to make new
"West Shore is healthier than it's ever been," agrees Richey. "Rents are
rising, vacancies are declining."
Tampa tourism was off in 1991, and hotel construction slowed.
"The city and Grubb & Ellis are very actively seeking a new convention hotel
to complement the new convention center," D'Sa says. "And they have approval
for a new aquarium. Other than that, there's not much new hotel
construction. Even in West Shore nothing's going on. The only area with
potential is the 1-75 corridor in northeast Tampa, near the university. It's
the high-tech corridor."
"Tampa's industrial sector was the first market to experience a reduction in
activity with the recession," Richey says.
But the CB Commercial report notes there seems to have been a pickup in
activity since the beginning of 1992, and the firm anticipates Tampa's
industrial real estate will improve during 1992.
Tampa area retail centers are having a mixed year.
"Well-anchored centers with a grocery store and a drug store may be at 90%
to 95%, if they're not in an area that is overbuilt," says George Barlett of
"Unanchored strips may be lucky if they're doing 50% or 60%." Almost no new
construction is going on, he says.
Tampa area rental apartments are running about 9% vacant in Hillsborough
County and 8% vacant in Pinellas County. Rental rates in Hillsborough are
$407 per month for a one-bedroom, one-bath unit and $530 for a two-bedroom,
two-bath unit. Rates in Pinellas County are $426 for one-bedroom, one-bath
units and $555 for two-bedroom, two-bath units. "Little new construction is
going on," says Shan Thomas of CB Commercial.
Jacksonville faring relatively well
"Jacksonville probably fared better than some other areas in the recession,"
says Tucker King of Cushman & Wakefield. "There were major relocations from
outside the city. American Express Travel Related Services came in, AT&T's
Universal Card headquarters moved here, Merrill Lunch bought land and is
building a regional headquarters.
"On balance, while some markets are not as good as they once were,
Jacksonville is healthier than a lot of markets," King says. "Jacksonville's
economy tends to fare better in recessions because it's based on banking,
insurance and the military. but we are feeling the pinch."
When Jacksonville-based First Union bought Florida National Bank, many
thought the move would gobble up empty downtown office space.
Not so, says King. "They consolidated operations. There was a net negative
absorption. It also hurt overall banking employment. It has been tough on
downtown. On the other hand, we do have large blocks of Calss-A space
downtown. If we get a major corporate relocation, we have the space to
During 1991 the downtown office vacancy rate rose from 16.6% to 19.4%, CB
Commercial says. The suburban rate dropped from 18.5% to 17.2%.
"Declining office rental rates have greatly impacted property values during
much of 1991," says Michael Harrell of CB Commercial. "The resulting average
value per square foot for office buildings has decreased by as much as 50%
in some instances."
"The industrial market is pretty strong, but it also has suffered some,"
says King. "With a base of 65 million or 70 million sq. ft., we went from 3%
to 8% vacancy in the past year. That's not too bad. But we do have some
product on the market."
The industrial market is helped by new corporate arrivals, King says.
"American Tourister relocated a major facility. Cheeseborough Ponds
relocated here. The biggest problem is the lact of available financing for
new construction," he adds.
Jacsonville's apartment occupancy rate grew from 90% to nearly 93% during
1991. "Apartment occupancy should continue to increase in every submarket of
Jacksonville," says Bart Walchle of CB Commercial.
In the 19.4 million sq. ft. retail market, there is an 18% vacancy rate due
to the recent closing of several stores.
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