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WEST PALM BEACH, FL-With demand softening and the continued tightening of the credit markets, office property fundamentals are beginning to shift in Palm Beach and Broward Counties, according to market reports.

According to CB Richard Ellis office market reports for the third quarter 2007, the Palm Beach County vacancy rate rose to 11.9% during the quarter, up from 8.4% recorded during the third quarter of 2006. In Broward County, the vacancy rate was 9.5% during the quarter, up from 8.3% a year ago. Despite the rise in vacancies, rental rates are on the rise or stabilizing. In Palm Beach County, average asking rental rates increased from $18.93 to $19.90 per sf from the third quarter of 2006 to the third quarter of 2007. In Broward County, the overall direct average asking rates for class A properties remained stable at $17.71 per sf and, for class B properties, dipped slightly to $14.98 per sf.

Despite the shifting conditions, experts are predicting that job growth will continue to buoy demand for office space, although at a slower pace than recent years. According to a Marcus & Millichap Real Estate Investment Services office research report, employers in Palm County were expected to have generated 17,700 jobs in 2007, reflecting a 3% increase over the previous year. In Broward County, experts were predicting the creation of 7,900 jobs during the year, reflecting a 1% increase.

According to the Bureau of Labor Statistics, the national unemployment rate increased 0.6 percentage points to 4.9%. Unemployment in the state of Florida is 4.2%, which is a full percentage point increase from record low unemployment earlier in the year. Palm Beach County’s unemployment rate rose to 4.7%, up from 3.3% and Broward County’s rate rose to 3.8% up from 2.9%.

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