South Florida Commercial Real Estate Market Due for Shakeup
Changes appear to be on the horizon for the commercial real estate market in the Sunshine State. As the Sun Sentinel reported in mid-October, “Large blocks of office space are scarce in South Florida, and commercial real estate brokers say that could lead to something we haven’t seen in at least seven years: traditional lenders financing new construction.”
That would be welcome news to a state that was among the hardest hit by the Great Recession and financial mortgage crisis of recent years. Palm Beach County in particular has been slow to bounce back, and for some businesses that’s bound to leave them with too few options when it comes to finding viable commercial real estate in the area.
Not Enough Space
That Sun Sentinel story goes on to cite a research study showing the vacancy rate for Class A properties – those the real estate industry considers among the most desirable – continuing to fall. Specifically, only two commercial properties in Palm Beach County would presently be able to accommodate a business needing 70,000 square feet or more, and only four buildings have at least 30,000 square feet available.
Building new office space would not only improve the region’s employment picture in the short term but also lay a foundation for long-term business growth. The Palm Beach Post reports plans are already underway in the county to break ground on 400,000 square feet of warehouse space at a 34-acre development along the Florida Turnpike. The same company has also undertaken a project to build distribution space in suburban West Palm Beach.
Think Carefully Before Investing
Investing in the local commercial real estate market now at the beginning of what looks like an upswing may appear lucrative. But the laws affecting these types of transactions are numerous and complex.
Constructing the new space is one thing. Negotiating the leases to fill the space is another matter. The whole process involves what may seem like a mountain of documents and an endless series of bargaining talks. In some cases, the business ventures in question may require filing rezoning requests with local government agencies, negotiating easement agreements, drafting additional construction contracts, and the list goes on.
Commercial Tenants Rethinking Financial Models
Complicating things further, previously long-held business models are changing. The resulting transformation is among the top 10 issues in commercial real estate this year, according to an analysis published by Deloitte & Touche. The report, which appears on the Wall Street Journal website, predicts moderate improvements in the commercial real estate market but cautions, “tenants’ technology use and a changing workforce are now influencing leasing decisions to a point that requires (commercial real estate) property owners to re-evaluate their existing space and service levels, and determine the need for redesign in the near-to-medium term.”
If you are considering selling, purchasing, or leasing commercial property, you’ll want a veteran lawyer with experience in handling these types of transactions on your side.
The Law Offices of Larry E. Bray, P.A. regularly associates with a team of experts that many South Florida investors and business owners have entrusted with their commercial real estate ventures. To arrange a consultation, contact us today.