Office Rates Rising in All But One Market

ORLANDO—Statewide, asking rental rates for class A office space increased 5.4% over the past year on strong leasing activity and absorption. That's according to Cushman & Wakefield's 3Q 2015 Florida Statewide Rental Report (FLRR).

Only Orlando saw a slight decrease. The firm says that reflects the fact that several blocks of premium space were leased this year, removing those properties' higher asking rental rates from the market's calculations.

"Growth in rental rates across the state since the last cycle have been driven mostly by gains in the suburban markets," Larry Richey, senior managing director and Florida market leader, tells GlobeSt.com. "For the South Florida and Tampa CBDs, rents are comparable or slightly higher, while in Orlando and Jacksonville, there is still significant room to grow. "Overall, limited new inventory and strong economic fundamentals increase the likelihood of positive momentum for the office sector across the state."

Asking rents in the Miami-Dade had the highest percentage growth compared to the high water mark for rents in the last real estate cycle. Demand for space has pushed the direct vacancy rate in Miami-Dade down by 5.3% over the past five years.

Broward, Orlando and Jacksonville have yet to surpass the rent highs from the last cycle, off by 2%, 8.8%, and 8.1%, respectively. Broward has benefitted from strong tenant and investor interest as a lower cost alternative to the Miami market.

Orlando and Jacksonville typically lag behind most other Florida markets in terms of rent. As office rents get higher in other markets, tenant interest for competitive space options in these markets has increased over the past three quarters. Click here to read more about Orlando's office market.

Florida Research Manager Chris Owen believes the short-term prospects for rent growth across Florida remain positive. Owens says new office construction statewide lags compared to rising tenant demand.

"While there are several pockets of larger speculative development across the state, these projects will not, for the most part, come online until 2017 at the earliest," Owen tells GlobeSt.com. "Consistent rent growth in existing buildings over the next 18 to 24 months will be maintained before new inventory adds to increased vacancy levels and more tenant options."