While Downtown Fort Lauderdale is showing signs of recovery, the depth of market conditions will improve with the influx of new users to the marketplace, as opposed to lateral tenant moves within the CBD. Photo credit: Smith Aerial Photography, Ft. Lauderdale - Orlando - Atlanta

Broward County, Florida — and specifically Fort Lauderdale — is experiencing a tremendous amount of activity in all sectors. To bring you the latest news from this area, Southeast Real Estate Business asked executives from the office, industrial, retail and multifamily sectors to provide insight on their areas of expertise.

Office: A Light at the End of the Tunnel

Leasing and absorption activity are trending upward in what is considered the trendiest and one of the most active sectors of Broward County’s Class A competitive office market. With approximately 3.5 million square feet of prime space, Downtown Fort Lauderdale houses the county’s largest concentration of institutional quality office product. Similar to Miami’s central business district, tenant trends can be characterized as “trading places” with leasing activity largely marked by lateral moves within the CBD sector. While most of 2003 was relatively quiet, signs of recovery are emerging in the form of sublease absorption as well as commitments by law firms and title and insurance companies. Overall occupancy within the Class A sector of the market has inched up from 75.8 percent at year-end 2002 to the current 79.8 percent. Negative absorption characterized the CBD for much of 2002 and was inconsistent up to mid-year 2003; since then, this trend has reversed with increased leasing activity. The newest building in the market is now 52 percent leased, a significant improvement from when the building opened in mid-2002 with only 11 percent of its space leased.

Wachovia Center is one of a handful of buildings able to maintain relatively healthy occupancy levels and strong rental rates, while most CBD buildings have endured rising vacancies and waning prices due to down economic conditions.

Both office and multifamily development have increased significantly with investors continuing to show a strong appetite for this location, particularly along the Broward Boulevard and Las Olas corridors. The near completion of a tremendous amount of luxury residential development — more than 3,000 units — will bring an influx of new residents and potential office users/workers to the downtown core, offering new corporations upscale alternatives to live and work within a planned environment laden with accessible amenities.

Investor confidence for office assets has been equally impressive with the recent joint venture of Koger Equity and Investcorp to purchase the 325,000-square-foot Broward Financial Center located at 500 E. Broward Blvd. Morgan Stanley is another E. Broward Boulevard landlord, whose asset is the 21-story, 255,500-square-foot Wachovia Center. Both buildings report occupancies in the 86 to 89 percent range.

The Las Olas Boulevard corridor remains one of the most desirable business/retail centers of Broward County with its restaurants, boutique stores, green space and proximity to the New River. This unique location commands some of the highest premium rents. Choice office buildings on Las Olas and E. Broward boulevards quote rates that range between $24 and $29 per square foot.

The decline of sublease space availabilities, the rise in positive office absorption and an established high-end amenity and growing residential base bode well for market conditions in Fort Lauderdale’s CBD.

— Sandra Andersen, vice president, Jones Lang LaSalle

Broward County: A Target for Apartment Investors and Developers

Broward County is one of the most sought after apartment markets in the nation by both apartment developers and investors. The area boasts occupancy rates of near 96 percent and an average rental rate of nearly $950, and apartment developers have been rapidly developing what is left of the remaining tracts of land in Broward County. Apartment investors made 2003 a record year for apartment sales in Broward County by taking advantage of record low interest rates and focusing on the area’s strong long-term apartment fundamentals.

Villaggio Resort Rental Village in Miramar, Florida, was 100 percent occupied as of January.

Although most areas of Broward County are experiencing apartment development, Downtown Fort Lauderdale is expected to experience the most apartment deliveries in 2004 due to its revitalization. Infill mid- and high-rise apartment developments, such as Summit Las Olas by Summit Properties, Jefferson at Fort Lauderdale by JPI Development and Waverly at Fort Lauderdale by ZOM Communities, are expected to add more than 1,600 apartment units to Downtown Fort Lauderdale in 2004.

2003 apartment transactions were nearly double 2001 and 2002 levels. While leveraged private buyers have been responsible for the majority of the transactions in 2003, institutional investors such as advisors and REITs were able to purchase nearly 45 percent of the apartment transactions in Broward County. However, institutional investors were purchasers in less than 15 percent of the apartment transactions in Palm Beach and Miami-Dade County in 2003.

A large number of condominium conversions and an expected decline in 2005 apartment deliveries will mitigate 2004 apartment deliveries. Expected condominium conversions of Oceancrest Club in Hollywood, Heather Glen in Sunrise and The Kensington in Pompano Beach are expected to take more than 2,500 Broward County apartment units offline in 2004. Several other properties in the area are reported to have sales pending to condominium converters.

Look for Plantation, southern Fort Lauderdale and Hollywood to generate significant apartment investor and developer interest as these areas are revitalized. Investor and developer focus may also shift toward mid- and high-rise apartments as many of the higher-end communities are now being converted to condominiums. An additional influx of 115,000 residents in the next 5 years combined with a lack of developable land should help all Broward County apartment owners experience strong performance.

— Avery Klann, vice president, Apartment Realty Advisors

Broward Industrial Market Gains Strength in 2004

The industrial market in Broward County is showing positive signs of improvement, and the outlook for 2004 is for continued growth. This reflects the significant uptick in the national real estate market. Countywide, the direct vacancy rate decreased 4 percent from the third quarter of 2003 to year’s end, and the vacant sublease space has decreased from 285,699 to 125,242 square feet. Inventory increased at year’s end, which indicates a renewed interest in building, and the overall vacancy rate went from 7.2 percent in the third quarter of 2003 to 6.5 percent by year’s end.

South Florida is one of the fastest growing segments in the country. There is an ongoing regional popularity of condo-warehouses. Current low interest rates are helping to fuel the growth of that niche market. In addition, the demand for small-bay warehouses continues to grow. There is a lack of owner/user buildings for sale in the Broward market. As institutional investors buy any available land, this trend is expected to continue. Therefore, smaller owner/users are looking to condo-warehouses as an alternative investment to impact their bottom lines. To meet users’ needs, condo-warehouses are getting larger — often 5,000 to 7,500 square feet, as opposed to the previously typical 1,200-square-foot bays.

There is heavy competition among the major development players in Broward’s industrial market, particularly because land is scarce. The smaller 3- to 7-acre parcels that would have sold for $4 to $5 per square foot 2 years ago are now listed at $10 per square foot.

Pompano Beach, Florida, which experiences competition amongst Premier Commercial Realty, IDI and Codina Group, continues to be one of the area’s most desirable locations for industrial space. Premier’s Atlantic Business Center, containing 148,000 square feet, and IDI’s Copans Business Park, comprising more than 25,000 square feet, are being developed in phases and are growing quickly. Miramar Park of Commerce, a Sunbeam project in southwest Broward County, is another popular location that pulls tenants and owners from Miami-Dade County due to its proximity to Miami and access to major roadways.

As Broward’s industrial market continues to flourish, it will become an increasingly dangerous competitor to its neighbors to the north and south.

— Leon Banks, senior associate, Codina Realty Services Inc. ONCOR International

Retail is Strong in South Florida

Retail is still red-hot in South Florida. Transactions are closing at record low cap rates, vacancy rates are low and rents are rising. Grocery-anchored properties remain the hottest commodity in this seller’s market. Fort Lauderdale and Broward County have benefited from population and income growth from the more than 250,000 people who move to Florida each year. Specifically, western Broward County, from Pembroke Pines to Weston, the Sawgrass area, Coral Springs and Parkland have experienced steady growth for the past several years.

Look for stronger South Florida retail next year due to increased domestic tourism. Other good news for retailers includes Florida’s unemployment rate checking in at 4.8 percent, the lowest since July 2001. Retail changes on the horizon in Fort Lauderdale/Broward County include Burdines and Macy’s merging operations and renaming the stores Burdines-Macy’s. Speculation continues about whether Kohl’s or home furnishings giant IKEA will venture into South Florida.

Multi-level retail, a drawback in some markets, is very popular and well established in this market, as evidenced by Publix recently opening a two-story location in Downtown Fort Lauderdale. Infill development is booming in order to deal with a scarcity of properly zoned land and skyrocketing prices for available land. Public/private partnerships with local governments allow developers to acquire land and take it through the approval process quickly.

New projects opening in 2004 include Shoppes on the Green, located on Weston Road at Bonaventure Boulevard. Newbon Land Partners and Ireland Companies are developing the retail project, which will include Walgreens, The Italian Market & Deli and other local tenants. Weston Commons shopping center is also expected to open in 2004. The 20-acre site west of Weston Road and south of Emerald Park Circle will be anchored by Publix. Other tenants include Starbucks, Bonefish Grill and Cold Stone Creamery. Chili’s and two bank branches will be housed in three freestanding buildings on the property. The revival of the Federal Highway corridor, from Sunrise to Commercial boulevards, has attracted national retailers including Best Buy, Bed Bath & Beyond, Barnes & Noble and CompUSA.

Not all has gone as planned in the Fort Lauderdale/Broward County retail market. Although it was hoped that The Millennium Hollywood’s City Place discount mall would help Hollywood revive its western corridor, the upscale discount outlet is reportedly encountering problems. Millennium Development Enterprises is struggling to attract shoppers and retain tenants due to an initial lack of advertising and signage and no food court. Plans have also fallen through for a home design center at the Fashion Mall at Plantation. Ashkenazy Investment Company, which bought the mall last year for $21 million, was unable to acquire the empty Lord & Taylor space that would have housed the Design World Center. However, other restaurants and retailers recently opened at the 287,000-square-foot mall, and interior and exterior improvements are currently underway. Other good news for the mall is the planned Villages of Plantation, currently in the final approval stages. Developer WestCity Partners LLC of Boca Raton plans to break ground this year on the $50 million residential and retail project, located just north of the mall.

— Lynn Leonard, vice president-marketing, NewBridge Retail Advisors


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