Commercial activity strong in state
ORLANDO, Fla. - May 2, 2007 - The 2006 price tag for commercial activity in Florida: $18 billion, or 6 percent of the nation's transaction volume, according to a 15-page state research study commissioned by the Florida Association of Realtors® (FAR) and conducted by the National Association of Realtors® (NAR). The number includes commercial properties valued at $5.0 million or more in the office, industrial, retail and multi-family sectors. The study tracks commercial activity by market, including Fort Lauderdale, Miami, Orlando, Tampa and West Palm Beach.
The study found that transaction volume increased over time due to investor interest and higher prices. Since 2004, demand for commercial real estate in Florida increased steadily, with modest dips in activity in 2006.
The office sector
The demand for office space in Florida improved significantly starting in 2004. Increased demand coupled with a slowdown in construction resulted in falling office vacancy rates from midway through the decade. In 2002-2003, vacancy rates in Fort Lauderdale and Orlando approached 20 percent, but are now below the national average. An upswing in new supply will cause vacancy rates to rise later in 2007.
The industrial market
Trade with Central America, as well as goods coming into the country from China via the Panama Canal, fueled demand for warehouse and distribution space in Florida, with that demand increasing from both tenants and end users. By the end of 2007, industrial vacancy rates will begin to edge upwards as new build-to-suit facilities leave obsolete buildings vacant.
The multifamily market
Florida is the only state market still experiencing an appreciable amount of condo conversion activity. Nationwide, $30 billion of 2005's $88 billion in multifamily transactions resulted from condo conversions. However, transactions dropped to $9 billion in 2006. Investors now look for income appreciation and improving fundamentals.
The vacancy rate for multi-family housing will remain in the 5.5 percent to 5.9 percent range for most of 2007, according to NAR's forecast. For much of 2005 and early 2006, the vacancy rate was at least 1.0 percent lower - but NAR attributes the change to condo conversion projects that reverted back to active rental leasing when the home sales market slowed down, putting additional units on the market.
The retail market
In Florida, the retail sector continues to perform better than in the nation as a whole. For example, the retail vacancy rate in Miami at year-end is projected to be just one-third of the nationwide vacancy rate. Nationwide, the retail sector has been hurting more than other commercial sectors.
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