Mid-Year Figures Point to Strong 2006

The office leasing market remains strong, with pent-up demand in nearly every submarket. Vacancy rates are low across the region, with Miami-Dade County experiencing the lowest rate at 7%, down from 9.5% a year ago.

Until new office space is constructed, this trend will continue through the rest of the year and into 2007. "Market conditions are excellent overall and we expect them to remain strong through the end of 2006," says Colliers Abood Wood-Fay CEO Donna Abood. "However, the commercial office market is beginning to transition into an even stronger landlord market for leases as rental rates begin to rise and investment sales begin to move at a slower pace."

Colliers is predicting that rental rates for new, class A buildings will start in the high $30s to the mid-$40s per sf when construction is completed in the next few years. The company is also predicting that commercial property sales will continue to be strong over the next two years. However, the market is beginning to change from a seller's market to a buyer's market.

"Many property owners are now considering selling their assets due to rising short-term and long-term interest rates and continued, favorable capital gains tax rate," the report states. "Colliers Abood Wood-Fay has experienced a 100% increase in sales listings inventory from an average of $300 million in properties for sale at any given time to over $600 million in the last six months."

The only factor that could potentially damage the market is rising property insurance rates. "The only looming factor for South Florida is the increase in property insurance, which will have major effects on financing, cash flow and ultimately, overall property values," says Colliers Abood Wood-Fay president Michael Fay.