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(Crystal Proenza is associate editor of Real Estate Florida.)

MIAMI-Commercial real estate in South Florida continues to soften, with occupancy, rents and property values dipping as job losses climb. Unemployment has been on the rise over the past year, with January numbers up a full 2% in Miami-Dade County and 4% in Broward County and Palm Beach County, according to the Beacon Council.

Between January 2008 and January 2009, the tri-county labor force was reduced by 80,800 non-agricultural jobs, or 3.4%, the economic development partnership reports. Despite the continuing economic turmoil, South Florida’s unemployment rate stood at 7.6%, almost a full percentage point lower than the national rate of 8.5%.

Local experts say the region differs from other locations in the US that had large employers let go of hundreds of employees all at once. “We have a lot of businesses that still need to operate during this time, so reduction is limited,” says Jaap Donath, vice president of research and strategic planning at the Beacon Council. The fact that Miami and Broward have become more diverse in terms of tenancy, including the hundreds of multi-national corporations headquartered here, makes the region less dependent on one or two industries like other markets in the country.

However, no matter how the unemployment rate compares against the national numbers, it does not alleviate the fact that commercial real estate is directly affected by the continuous job losses. “The area that’s hurting the most is vacancies in all of the major product types, mostly apartments, office and retail,” says Greg Matus, regional manager for the Fort Lauderdale office of Marcus & Millichap. Hundreds of employees may not get laid off all at once, but more people are out of work every day.

“They have less money to spend to go out and shop, and businesses are slowing down. Class A apartment rents are flattening out and there are a lot of concessions out there. In addition, office vacancy will hit a record high in the next 12 months,” adds Matus.

In Miami-Dade County, a large vacancy jump took place in the office sector, which increased 22% from year-end 2007 to year-end 2008, where it stands at a rate of 11%, according to research by Colliers Abood Wood-Fay. The retail sector suffered even worse, making a 39% jump in Miami-Dade and a 70% jump in Broward from fourth quarter 2007 to 2008.

The Miami retail vacancy rate is currently 4.3%, Broward is at 5.8% and Palm Beach is 6.3%–rates that seem low only because the statistics do not track smaller retail operations below 10,000 square feet, which encompasses a majority of South Florida’s retail, says Stephen Nostrand, executive vice president with Colliers in Coral Gables.

Longer unemployment lines are also impacting property values. “When I drive down the street and see smaller shopping centers that are usually not in the statistical base with dark windows, I know that those are tenants that not only had to lay people off, but their business has collapsed,” says Nostrand. Losing those tenants decreases the value of properties, and it’s happening all over South Florida, experts tell GlobeSt.com.

The industrial sector has fared best so far, and is expected to continue to do so. “Jobs being laid off in warehouse and distribution have an effect on property values, but the shining light is that in South Florida our import/export business is still holding up pretty well,” says Nostrand. Miami Dade’s industrial vacancy rate for the fourth quarter of 2008 was 8.2%, slightly higher than Broward at 7.5% and lower than Palm Beach at 9.3%.

Unemployment is expected to continue to rise, most likely for the rest of the year, and will continue to affect vacancies, rents and values, says Nostrand. A recovery will be likely once distressed properties and bad debt are disposed, adds Matus: “In the first or second quarter of 2010, you will start to see job loss and properties stabilize.”

Until then, industry professionals continue to look for the bright side of softening market conditions. From an economic development viewpoint, the lowering of commercial real estate rents and values may help attract companies to the region, says Donath. “Compared to other places, South Florida is still very competitive and pricing has leveled off. It’s a buyer’s and tenant’s market, and remains a viable option versus against other major markets in the US.”

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