“An improved business environment has created greater tenant commitments than last year and tenant confidence is evidenced by stronger leasing activity and positive overall absorption figures during the first half of 2012.” So summarizes Cushman & Wakefield in its second quarter report on the local market. Reis’ data on both its sectors of coverage bear out the observation.
Net absorption of 180,000 square feet in the warehouse/distribution sector during the first half of 2012 followed the 200,000 achieved in all of 2011. The total for second quarter alone, though, was only 1,000. July followed with 1,000 more. Vacancy ended the quarter at 10.8%, down 80 basis points since year-end. At $5.82 psf and $5.32 psf, the second quarter mean asking and effective warehouse/distribution space lease rates were unchanged and up 0.6% since year-end following substantial losses suffered by both rates in 2011 and 2010. No product of this type was under construction per the date of this report. One, however—an 18,200-square-foot facility for Jack Scalisi Wholesale Fruit—is scheduled to break ground in December in West Palm Beach. Reis cites a May 2013 completion date.
The county’s substantial high-tech business core, including a promising Bioscience sector anchored by the Scripps Research Institute and Max Planck Society facilities, has made for a large Flex/R&D sector relative to the industrial market as a whole. Net absorption turned positive in this sector in 2012: the total for the first half of the year, including just 1,000 square feet in second quarter, was 57,000 square feet. July added no additional absorption. Vacancy crossed the mid-year mark at 18.5%, down 60 basis points since year-end, up 30 year-over-year. At $9.78 psf and $8.68 psf, the second quarter mean asking and effective rents were up
0.1% and 0.3% for the period and were up 0.6% and 1.0% year-to-date following losses of 2.1% and 1.2% all told in 2011. Rents held steady in July but should show additional gains by year-end.
“The Max Planck Society has begun moving into its permanent Jupiter campus as the nonprofit aims to become part of a major research hub in northern Palm Beach County,” the South Florida Business Journal reported in late June. Reis reports the completion at Florida Atlantic University in Jupiter that month of a 100,000-square-foot facility for the society. The Planck biomedical research facility, as described by the Journal, was developed with the aid of $190 million in state and local funding. See Special Real Estate Factors for related commentary.
“As economic conditions continue to slowly strengthen,” comments Cushman & Wakefield, “overall market conditions should improve further throughout the metro area.” Reis expects positive net absorption, declining vacancy and ongoing modest rent growth over the remainder of the year for both sectors of coverage. Bioscience should remain a factor of interest.