Author: Tucker, Michael
Date published: April 1, 2012
Several Florida markets are beginning to see effective rents increase after prolonged static market conditions, according to CBRE Florida Research, Tampa, Florida.
Increasing trade, stability in some housing markets and some new construction activity have increased the demand for industrial space in Florida markets, according to the firm's Florida Rent Cycle Report.
Miami, which has seen increasing industrial rents for some time, is starting to see effective rents "increase at a faster pace." And with limited quality industrial space available in Miami, "users are beginning to look in southern Broward [County]/' said the report.
Palm Beach, Jacksonville and Tampa Bay all reported "consistent" levels of net effective industrial rates at the end of the fourth quarter. With these markets reporting stability, CBRE anticipates no further declines in effective rents.
With Floridians' consumer confidence largely unchanged, most Florida retail markets remain at the bottom of the effective rent cycle with rent growth not yet accelerating.
In Broward County, Palm Beach, Tampa Bay and Jacksonville, "effective rents are anticipated to remain stagnant until surplus retail space is absorbed," said the report. It anticipates no further rent declines and predicted that growth may return to these markets within the next six months but cautions it "will likely be slow, beginning with class-? centers in prime locations."
The Orlando and Miami markets, benefiting greatly from their strong tourism bases, are already experiencing effective rate increases.
Effective rents in Florida's office markets continue to lag the industrial and retail markets. "The Tampa Bay, Orlando and Miami office markets are experiencing small increases in demand from tenants as well as improving local economies, but effective rents have not increased marketwide," said the report.
With no significant increase in office demand from tenants, "Tampa Bay and Orlando real estate professionals anticipate seeing consistency among base rents and concession packages during the first half of the year at the very least," the report noted.
But Miami could see effective rent increases as new and existing tenants expand in the area and absorb surplus office space from recent construction completions. The Broward County and Jacksonville markets reported small increases in effective rents for the first time since the economic downturn.
Looking at multifamily, }ack McCabe, chief executive officer of McCabe Research and Consulting, Deerfield Beach, Florida, said Florida apartment rents are on the rise,
"The apartment industry is definitely in recovery mode throughout the state," McCabe said. "Occupancy rates in new developments throughout South Florida range from 91 [percent] up to 99 percent. We're seeing rent rate growth and we're predicting rents will increase 3 [percent] to 10 percent per year over the next five years simply because of the demand and because we've had a fairly limited pool of apartment development over the last five years."
McCabe said he's seen a "paradigm shift" and a growing and long-term trend from homeownership to renting. "At the height of the building boom, we saw a 70 percent to 30 percent buy-to-rent ratio," he said. "Now it's more like a 64-36 split. We expect to see rentals continue to increase to as much as 40 [percent] to 45 percent."
McCabe said because of this paradigm shift and increased demand for rentals, there are now 41 new apartment communities and more than 6,000 new units under construction, permitted or announced for future construction in three South Florida counties. "REITs and major developers think it's a long-term trend," he said.