South Florida office market remains promising in a post-pandemic world – Trade Observer

With offices reopening and many employees returning to work, the South Florida office market remains promising given its performance in the first quarter of 2022.

The office market is supported by strong job growth and low unemployment. The region saw the creation of 154,900 new jobs and an unemployment rate of 3% in the first quarter of the year. Miami-Dade led the way with 81,700 jobs added to the workforce and an unemployment rate of 2.7%, followed by Broward County with 40,600 new jobs and an unemployment rate of 3.2% . Finally, Palm Beach County added 32,600 new jobs and had a 3% unemployment rate.

A popular pandemic trend that has spread in 2022 is the adoption of the hybrid work model, and therefore a more equal balance between time spent working in the office and at home. Although the number of employees returning to the office has increased throughout the first quarter of the year, employees are not visiting as often as before the pandemic. Office employment in South Florida rose in the first quarter, increasing by 43,000 jobs year-over-year, mostly in the professional and business services sector, indicating that the office as a framework remains strong in the region.

Vacancy is another important indicator of office market prospects. During the first quarter of 2022, the office vacancy rate in South Florida was 16.4%, a slight increase of 10 basis points from the same quarter in 2021. Palm Beach County has led the office recovery in recent quarters and remained popular with office tenants. ; as a result, its vacancy rate fell below pre-pandemic levels at 12.8% overall in the first three months of 2022 due to strong tenant demand for Class A space Miami-Dade’s vacancy rate edged up to 18.2% due to new construction deliveries, even though it was the only market in South Florida to see positive absorption. Broward County’s vacancy rate rose 40 basis points to 16.9% as new spaces were added in suburban submarkets, particularly in the Northeast and West Broward areas County.

In addition to employment trends and vacancy rates, the quality of office buildings is an important factor in the health of the South Florida office market. Class A captured much of the tenant demand in the first quarter, with about 1.1 million square feet leased, or 55% of all new demand. There was 325,700 square feet of positive absorption for this type of building in Miami-Dade. Broward County, while not meeting Miami-Dade’s level of absorption, had positive absorption of 69,600 square feet. Palm Beach was the only South Florida county to experience the opposite trend with 45,800 square feet of negative absorption, which was largely due to multiple tenant moves in West Palm Beach’s central business district and in suburban submarkets.

Rental rates also continued to climb in South Florida during the first quarter and averaged $42.60 per square foot for the region, up more than a dollar from the previous quarter. Miami-Dade asking rent has risen to $47 per square foot, representing a 7.5% increase over the past 12 months. The Palm Beach County asking rate of $41.42 per square foot was 7.1% higher year over year. Broward County asking rates surprisingly fell during the year to $36.14 per square foot, down 3.1%, as tenants moved to upscale spaces with higher rents .

South Florida’s economy is leading the nation out of pandemic-related recession and into the next economic expansion. There is a wave of new tenants on the market who see the dynamic region as the best place to attract talent and grow their businesses. The office market is benefiting from this migration with increased demand from tenants, creating optimism for new construction. Many new projects, as well as older existing products, also incorporate extensive sets of amenities for their common areas to attract and entice workers back to the office. For the rest of 2022, the region’s office sector should see its fundamentals improve.

Chris Owen is the Director of Florida Research for Cushman & Wakefield.

Jose C. Birney