Palm Beach County Office
MarketView
Q1 2014
VACANCY
23.6%
ASKING RATE
$17.03
NET ABSORPTION
(23 K) sq. ft.
CBRE Global Research and Consulting
CONSTRUCTION
0
COMPLETIONS
0
UNEMPLOYMENT
6.4%
*Arrows indicate change from previous year.
CONTINUED JOB GROWTH WILL HELP AID THE INCREASE IN
OCCUPANCY AND RENT PRICING LEVELS
Hot Topics
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1
Palm Beach County is one of the
top five metro areas in Florida
for non-agricultural growth,
gaining 14,000 jobs from
February 2013.
Local government agencies are
collectively working to provide
incentives and assistance to local
and non-local businesses in an
effort to grow, expand and
create new jobs.
With the changing landscape in
which companies are currently
operating, requirements call for
more efficiency in less space.

Asking lease rates held steady
while concessions in Class A
buildings from landlords have
seen some contraction in Q1
2014.

Downtown East Boca Raton
approved projects include six
multifamily locations totaling
1,661 units and three hotels
totaling 457 rooms, creating
vitality in the downtown area
which will drive the commercial
sector.
Figure 1: Total Vacancy -vs- Average Direct Asking Lease Rate (NNN)
Total Vacancy
Average Direct Asking Lease Rate
23.6%
$17.03
Asking
Lease Rate
% Vacancy
30%
$19
25%
20%
$18
15%
10%
$17
5%
0%
2009
2010
2011
2012
2013
2014 YTD
$16
Source: CBRE Research, Q1 2014.
Leasing Activity
The Palm Beach County office market
witnessed a decrease in total vacancy
by 130 basis points (bps) between Q1
2013 and Q1 2014, for a current
vacancy rate of 23.6%. Class A
properties experienced the largest
decline in vacancy, dropping 150 bps
from the 21.6% rate quoted in Q1
2013 to the current rate of 20.1%,
while Class B properties witnessed a
decrease of 60 bps compared to this
time last year, for a current rate of
28.0%. Class C space witnessed a
decrease of 10 bps compared to this
time last year, for a current vacancy
rate of 15%.
The office market recorded 22,677 sq.
ft. of negative absorption Q1 2014.
Though the office market is
experiencing positive movement yearover-year as the market pushes toward
sustainable growth, the rate of
negative absorption for the quarter
indicates that tenants are either
reducing their space requirements,
making lateral moves within the same
submarket or consolidating to one
location outside of the region. AT&T
moved out of 50,000 sq. ft. at the
North 40 building in Boca Raton to
consolidate at its Broward County
location. Peachtree Financial movedout of 50,000 sq. ft. at 3301
Quantum Blvd. in Boynton Beach,
consolidating into its Atlanta, Georgia
location. Buckingham, Doolittle &
Burroughs, LLP an Ohio based law
firm, closed its Florida operations in
Q1 2014, moving out of 14,500 sq.
ft. at The Plaza in Boca Raton.
The Boca Raton and West Palm Beach
submarkets were the most active Q1
2014, posting 21,922 sq. ft. and
11,877 sq. ft. of positive absorption
respectively. These two submarkets
accounted for the majority of the
positive activity in the market. Larger
tenants that have taken possession in
© 2014, CBRE, Inc.
Q1 2014
Figure 2: Market Statistics
Palm Beach County Office | MarketView
Submarket
Building Sq. Ft.
Direct Vacancy (%)
Total Vacancy (%)
2014 Net Absorption
Under Construction
Avg Dir Asking
Lse Rate (NNN)
Boca Raton
11,328,882
22.7%
23.1%
21,922
0
$17.00
Delray Beach
1,410,872
49.6%
49.6%
2,562
0
$12.63
Boynton Beach
448,063
37.2%
37.2%
(40,424)
0
$12.85
Lake Worth
396,353
18.1%
18.1%
(2,554)
0
$9.57
West Palm Beach
5,572,311
20.4%
20.8%
11,877
0
$18.22
Royal Palm Beach
296,578
6.7%
6.7%
160
0
$16.89
Palm Beach
541,306
15.2%
16.7%
5,112
0
$40.77
2,688,428
20.4%
20.5%
(20,964)
0
$18.49
471,338
17.8%
17.8%
(368)
0
$14.72
Total Palm Beach County
23,154,131
23.2%
23.6%
(22,677)
0
$17.03
Class A
10,244,388
19.5%
20.1%
(21,678)
0
$20.79
Class B
11,242,428
27.8%
28.0%
(490)
0
$14.32
Class C
1,667,315
15.0%
15.0%
(509)
0
$12.38
North Palm Beach
Jupiter
Source: CBRE Research, Q1 2014.
Q1 2014 include Tyco Integrated Security which
leased 72,234 sq. ft. at Boca Corporate Center
and Campus and Newsmax Media, leased 50,107
sq. ft. at 750 Park of Commerce Blvd. in Boca
Raton. Prestige Health leased 21,944 sq. ft. at the
Professional Centre at The Gardens in Palm Beach
Gardens.
The largest lease signed in Q1 2014 was by
Garden of Life. The company leased 22,000 sq.
ft. at Corporate Center at The Gardens in Palm
Beach Gardens. The anticipated move-in is
scheduled for Q4 2014. Morgan Stanley leased
21,159 sq. ft. at the Financial Centre at The
Gardens in Palm Beach Gardens. They are
making a lateral move within Palm Beach
Gardens.
2
The overall current average asking direct lease
rate remained relatively unchanged year over
year, coming in at $17.03 per sq. ft. Average
asking lease rates for available Class A properties
experienced an increase of 1.4% from the $20.51
per sq. ft. rate quoted in Q1 2013 to a current
rate of $20.79 per sq. ft., while Class B properties
also witnessed an increase, rising 1.3% from Q1
2013, with a current asking rate of $14.32 per sq.
ft. Class C space witnessed a decrease of 7.1%
over last year’s rate to a current rate of $12.38
per sq. ft. Lease rates are likely to remain stable in
2014 with negotiated lease rates holding close to
asking rents and some Class A landlords
tightening up on concessions.
Economic Influence
Palm Beach County’s current unemployment rate
is 6.4%, a 140 bps decrease from the February
2013 rate of 7.8% according to the Bureau of
Labor and Statistics. The state’s unemployment
rate for February 2014 is 6.3% and the national
rate is 7.0%, non- seasonally adjusted.
In February 2014, Palm Beach County
experienced growth in the following industries;
professional/business services added 6,700 jobs,
education/health services added 2,800 jobs,
construction added 1,900 jobs, government
added 1,000 jobs, trade/transportation/utilities
added 1,500 jobs, leisure/hospitality added 800
jobs and information technology added 200 jobs.
Palm Beach County gained 11,579 jobs over the
year. Industries that gained the most jobs included
trade/transportation/utilities, which added 4,700
© 2014, CBRE, Inc.
Class A
Class B
Class C
$20.79
$14.32
$12.38
$20
$15
Development
$10
$5
$0
2009
2010
2011
2012
2013
2014 YTD
Source: CBRE Research, Q1 2014.
A notable planned project is Atlantic Crossing, a mixed
use project located on Atlantic Avenue in Delray Beach.
The project will consist of 83,000 sq. ft. of Class A
office space, 76,000 sq. ft. of retail space and 343
residential units. This will be Delray Beach’s first true
Class A office project to be developed. The plans also
call for the city’s first green roof buildings. The Atlantic
Avenue corridor is embracing the urban living concept
of live, work and play.
Figure 4: Net Absorption
YTD
Currently, there are no new office projects underway in
Palm Beach County. Future development will be
contingent upon growth in rental rates which will
enable developers to get financing for projects. This will
limit the amount of speculative space added to the
Palm Beach County office market within the immediate
future and will aid in the sustainability for office market
conditions.
(23 K)
Thousands of sq. ft.
1,000
800
600
400
200
0
(200)
(400)
(600)
Palm Beach County Office| MarketView
Service companies support Palm Beach County’s
businesses and residents. There are approximately
50,800 companies in Palm Beach County that supply
services and products, and of that total there are over
17,880 companies which represent business and
financial services.
$25
Investment Sales Activity
2009
2010
2011
2012
2013
2014 YTD
Source: CBRE Research, Q1 2014.
Figure 5: Under Construction and Completions
Under Construction
Completions
0
0
Activity in the Palm Beach County market has shown
steady but slow improvement coming out of the
recessionary period. Market dynamics include
increasing lease rates and occupancy rates. We
anticipate that activity and sales volume will increase in
2014. Continued job growth will help aid the increase
in occupancy, rent and sale pricing levels. Lease rates
are likely to remain stable in 2014, with concessions
continuing in the form of free rent and tenant
improvement allowances. We anticipate further market
growth in 2014, which should provide better
opportunities for the office market.
Thousands of sq. ft.
150
100
50
0
2009
2010
2011
2012
2013
2014 YTD
Source: CBRE Research, Q1 2014.
© 2014, CBRE, Inc.
Four investment sale transactions closed in Q1 2014,
accounting for a total of 232,096 sq. ft. with a dollar
volume of $28.8 million. The average price per sq. ft.
came in at $144.05. Grover Corlew, LLC, purchased
Brandywine Centre I in West Palm Beach from BCI
Associates for $7 million with the average price per sq.
ft. at $100.41. The 69,715 sq. ft. property included a
9,100 sq. ft. restaurant outparcel and was 69% leased
at the time of sale. Tenants included Divine Blalock
Martin & SLLR, Denholtz Associates and Babor
Cosmetics America. Value-add office assets continue to
be highly sought by private equity investors.
Outlook
200
3
jobs; education/health services, which added 2,700
jobs; professional and business services, which added
2,200 jobs; and government, which added 2,100 jobs.
Q1 2014
Figure 3: Average Dir Asking Lease Rates (NNN)
3
Q1 2014
CONTACTS
For more information about this Local MarketView,
please contact:
Palm Beach County Office | MarketView
Palm Beach Research
Endria Maiorano
South Florida Team Lead
Palm Beach Research
CBRE
5100 Town Center Circle
Suite 600
Boca Raton, FL 33486
t: +1 561 393 1642
e:endria.maiorano@cbre.com
Ken Krasnow
Managing Director
South Florida
CBRE
5100 Town Center Circle
Tower 2, Suite 600
Boca Raton, FL 33486
t: +1 561 393 1649
e: ken.krasnow@cbre.com
Market Coverage: Includes multi-tenant office buildings 30,000 sq. ft. and greater in size. Excludes Office Condo, Medical and Gov’t Bldgs.
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