Lee & Associates South Florida Q3 Report: Office Market Demonstrates Resilience Amid National Slowdown
Office
The tri-county area of South Florida closed the third quarter of 2024 with an 8.2% office vacancy rate, slightly down from 8.4% a year earlier. The average asking rent climbed year-over-year from $36.16 per square foot triple-net (NNN) to $37.58 per square foot.
“South Florida is still benefiting from its reputation as an office mecca earned during the boom,” Lee & Associates South Florida Senior Vice President Matthew Katzen said. "Vacancy rates stayed steady at 8.2% where they’ve been for the last several quarters. 701 Brickell just closed for $43 Million. Acquired by Nuveen Real Estate in 2002, the building sold to hedge fund Elliott Management. Brickell is currently the top performing office market in the US in terms of occupancy and rent growth. Overall Office sales are down compared to the past several years. Average price per sf and high occupancy have remained strong despite investment sales slowing with high interest rates, Owners looking to refinance and acquire assets welcome the news of lower interest rates to come"
Multifamily
South Florida’s multifamily sector recorded a year-over-year rise in vacancies in Q3 of 2024, from 5.6% to 6.3%. Asking rents increased year-over-year from $2,169/month to $2,203/month.
"South Florida’s multifamily sector continues to show signs of a slowdown as we enter the final quarter of 2024, but remains strong relative to other asset classes and markets," said Lee & Associates South Florida Principal, Todd Cohen. "Net absorption has softened relative to net deliveries but still outpaces the previous two years after only three quarters, as renting remains the only viable option for most would-be homeowners. Vacancy rates are inching up slowly, but remain substantially lower than the national average. Rental growth is strong, though slightly less than previous quarters, and while sales per door are down, cap rates are lower due to recent interest rate cuts. Affordable housing is in high demand, with municipalities and developers pushing to meet this growing need."
Industrial
South Florida’s industrial vacancies jumped significantly in the third quarter, from 2.8% to 4.5%. The average asking rent climbed from $16.93 per square foot NNN to $17.18 in the same span.
"The South Florida industrial market is experiencing heightened sales activity, as reflected in the strong net absorption figures for Q3. Net absorption increased to 2.82 million sf, up from 1.56 million in Q2, signaling robust demand," said Lee & Associates South Florida Principal, Sebastian Misiewicz. "However, the leasing market is slowing, with vacancy rates climbing from 4.1% to 4.5%. This rise is likely due to an influx of new supply and slower lease activity. Rents have also plateaued, with average NNN asking rates declining slightly from $17.27 to $17.18. Despite strong sales, the leasing market is stabilizing in response to increased vacancies and new inventory. Overall, the market demonstrated positive demand growth, but rising vacancies and slight rent declines point to a more balanced market landscape."
Retail
Retail vacancies inched up year-over-year from 3.0% to 3.1% in Q3. Average asking rents also increased year-over-year, from $36.05 per square foot NNN to $37.06.
“As South Florida’s retail markets advance, rent growth will moderate as softer demand from slowing consumption meets limited inventory,” Lee & Associates South Florida Principal Stephen DeMeo said. "Despite this, the market’s attractiveness and lack of available space should drive an outperformance in values compared to the national average. Vacancies are forecast to expand slightly through the end of 2024, resulting in slower yet healthy absorption levels, maintaining historically low vacancy rates near 3%. Tenant move-outs remain below the five-year average, and with limited new supply, space availability will stay tight, well below the U.S. average. Major leases this year have been signed by home goods, entertainment, clothing, and fitness tenants, including Floor & Decor, Burlington, Crunch Fitness, Nordstrom, and Altitude Trampoline Park"
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