Despite the lack of new office development since the recession, Palm Beach has emerged as South Florida’s healthiest office submarket in 2019, registering the highest rent growth, a vacancy rate that is close to the national average and a steady construction pipeline.
The gains come even as office employment growth decelerated across the country. As we are late in the economic cycle, marginal gains are harder to come by, especially when the Palm Beach unemployment rate is close to 3%, a multi-year low.
Currently 1.3 million square feet of office space is under construction, just over 2% of Miami’s total inventory. Most of that is expected to deliver in 2021. The bulk of new supply is concentrated in the city’s central business district of West Palm Beach, where two large projects broke ground this year. One West Palm and 360 Rosemary will deliver a combined 670,000 square feet of high-end office product in 2021.
Overall pre-leasing activity looks healthy and in line with both Miami and Fort Lauderdale, with roughly half of the under-construction space already leased.
Deal volume has been robust in 2019, totaling close to $700 million. Prices rose by just over 3% over the past year, while capitalization rates have remained relatively stable, close to the 6.5% mark.