Sagging economy kills off West Broward office building boom,
sun-sentinel.com
By Christy McKerney
and Sean Cavanagh Staff writers
Posted November 7 2001
In recent years, many west Broward County cities have ridden a wave of commercial building and office development, courting everybody from dot-coms to delivery companies.
Now they're trying to keep it from drying up.
Layoffs and a surplus of office space -- most recently an empty 230,000-square-foot building in Sunrise -- have cities and developers trying to fill space at a time when many businesses are struggling.
"You're not going to see any new developments on the horizon anytime soon," said Jimmy Rogers, sales and leasing manager for Stiles Realty, the largest commercial-office developer in Sunrise.
"It's going to take a long time. It'll take a while to absorb all the space that's available out here in Plantation, Sunrise, Weston and southwest Broward County," he said.
Up until six to eight months ago, commercial office vacancy rates were very low in west Broward, industry leaders say.
Corporate mergers, buyouts, consolidations and bankruptcies have kept buildings empty and caused some owners to lower rents to keep tenants happy. An estimated 700,000 to 800,000 square feet of newly built, high-end office space is available in Plantation, Sunrise and Weston alone, Rogers said.
That includes the six-story 230,000-square-foot office building American Classic Voyages Inc. had planned to occupy in west Sunrise before the company filed for Chapter 11 bankruptcy last month. Sunrise lost the prospect of 725 high-end jobs after the cruise line laid off 2,150 employees, but the city will not have to pay $1.2 million in incentive money it laid on the table to attract the cruise line.
Suburban markets in west Broward have seen a 5.5 percent increase in overall vacancy rates, rising from 12.5 percent in the first quarter to the most recent figure of 18 percent, according to Cushman and Wakefield in Fort Lauderdale. In contrast, during the period, vacancy rates in Broward County's central business district increased 3 percent from 7.4 percent in the first quarter to 10.6 percent now, the company said.
"I don't think in and of itself, Sept. 11 was the lone catalyst," said Tom Kates, president of Stiles Realty Co. "It was obvious that we were heading toward a recession."
In Plantation, some shopping centers in the central business district have struggled. Real estate leaders say tough economic times are squeezing office developments, too.
"A lot of tenants have disappeared completely, or put their leases up for sub-let," said Ken Morris, who represents both tenants and landlords in the city. "It's definitely had a chilling effect, when it comes to real estate."
Before the Sept. 11 terrorist attacks, west Broward, where many large office parks are located, reported overall commercial office vacancy rates of about 17 percent in the Plantation/Weston market and the Sunrise/Tamarac markets, according to a Sept. 8 third-quarter market report by Cushman & Wakefield. Coral Springs reported 11.6 percent vacancy.
Vacancy rates at warehouse distribution, manufacturing and flexible office and industrial space was 19.1 percent in Plantation and Sunrise during the third quarter, the report said.
There's no real way to tell how much vacancy rates will increase, real estate experts said. But, like the economy, many don't expect them to turn around overnight.
The vacancy rate for Class A, or top-end office space, was as high as 35 percent in Plantation, said Morris, the owner of the Morris Southeast Group. But he cautioned the situation could improve greatly if even one or two sizable employers moved into the city's major office plazas.
There are many of those hubs. Central Plantation harbors an estimated 4.5 million square feet of office space, roughly the same as Fort Lauderdale's downtown district.
Several builders and Realtors say Plantation's market hinges largely on the success of big developments such as Royal Palm at Southpointe, near the intersection of Peters Road and University Drive.
A nine-story, 250,000-square-foot office park already has been built at Southpointe, though only 60,000 square feet has been leased so far. A second phase of the project, with another 250,000 square feet of space, has been planned but hasn't been built yet.
"We had some momentum going, but what happened [Sept. 11] obviously put a damper on things," said Jim Cahlin, a senior director with Cushman & Wakefield, the company leasing Southpointe.
Like offices across South Florida, Southpointe might have to lower rents to draw tenants because of the poor economy, Cushman & Wakefield officials said.
The tough economic times meant the companies most likely to move into Southpointe would be based locally, and not corporations from out of state, Cahlin predicted. He remained confident the office plaza would fill up, because of its prime location near major highways and other factors.
"We're very bullish on it. You're three minutes from the turnpike, five or six minutes from Interstate 95," Cahlin said.
At the nearby Crossroads office plaza, the city of Plantation has offered an Internet firm, TradeStation Group Inc., of Miami, $40,000 to move in, along with county and state money. Last week, the city was still negotiating with the company, said Kris Mory, Plantation's economic development coordinator.
Competition between cities for businesses is as fierce as ever. Kemper National Services, one of Plantation's largest employers, recently chose Sunrise for a new office expansion with 280 employees.
The company's need for space that was immediately available was one of the biggest factors, Kemper President and CEO Dave Patterson said.
On Thursday, city officials will stage a first-ever "real estate summit" aimed at promoting the commercial space for sale and rent across Plantation.
Mory said even in lean economic times, the city had to push as hard as ever to fill open space.
"We're seeing a general softening of the market," Mory said. "When there's an economic downturn you can stick your head in the sand, but the smart thing do is to aggressively go after your market share."
Despite the loss of American Classic Voyages, Sunrise has no plans to react to the current soft commercial real estate market through changing its marketing strategy or by discontinuing its policy of offering cash incentives, City Manager Pat Salerno said.
And it may not need to.
Industry leaders expect the market to turn around sometime in 2002 or as late as 2003.
The city announced on Friday that GEOPAK Corp., which makes engineering and surveying software, plans to build a 75,000-square-foot corporate headquarters in Sunrise that could bring help make up for the loss of American Classic Voyages with 300 new jobs. The building would be at the intersection of Shotgun Road and Northwest 148th Avenue in Sunrise.
"We're in a position now that if you're interested in the South Florida market, and you're interested in a suburban location, we're going to pop up on your radar screen," Salerno said.
Full-service restaurants, different corporate headquarters and the anticipation of two full-service hotels diversifies Sunrise's economic base, he said.
"Those things put us in a relatively good position than some other communities, as well as name recognition," he said. "We are a good corporate address today."
Commercial development is cyclical, said Tom Kates, president of Stile Realty Co. Stiles projected last year that the market would soften. And it was sliding downward even before Sept. 11, he said.
"What effect it will all have is you won't see any new construction now for about a year," he said. Meanwhile, the current vacancies open up opportunities for companies that need more space to locate here. Companies that needed more than 50,000 square feet a year ago had trouble finding it, he said.
Mark Levy, regional director of Opus South, sees this as an opportunity for cities to think hard about their philosophies toward economic development.
"It goes beyond trying to lure companies. I think the whole permit process and development process one goes through with a given city needs to be changed," Levy said.
That includes marketing South Florida as not only a good place for tourism, but a good place for corporate headquarters to be after they've signed on the bottom line to come here, Levy said.
Levy suggests cities must think increasingly like private businesses, not only enticing corporations to come here, but making it easier and faster to build as well as continuing to be attentive to them after they move in.
"South Florida needs to be more of a business friendly region. [With the philosophy that] `We want your business, and we want to make sure once we get your business we'll stand behind your time line and make things easy for you,'" he said.
Christy McKerney can be reached at cmckerney@sun-sentinel.com or 954-572-2008. Sean Cavanagh can be reached at scavanagh@sun-sentinel.com or 572-2009. |
