A closer look at the Florida office market – Q3 2014. The positive momentum continued across Florida during the third quarter of 2014 as 202,500 jobs were added over the last 12 months, a year-over-year gain of 2.7 percent.The six primary metro areas had compelling growth adding over three fourths of these statewide jobs in the past year.
Given the vast amount of development occurring across the State, particularly in South Florida, it is no surprise that the construction sector led the way in terms of percentage gains, experiencing a 10.8 percent increase from this time last year. All labor sectors, with the exception of government are expanding and, in aggregate, office sector employment grew 3.0 percent, adding 53,000 jobs across the State. The professional and business services sector comprised the majority of that growth by expanding payrolls by more than 41,000 new jobs. Orlando alone has created a significant workforce expansion and has added more than 50,000 to their employed labor force.
This is in line with the rest of the State’s metros which have all been reducing overall unemployment. The current unemployment rate (not seasonally adjusted) statewide is 6.1 percent, down 100 basis points from one year ago. Fort Lauderdale boasts the lowest unemployment rate of the six major metro areas at 5.2 percent.
Strong employment gains have had a positive impact on the office market through three quarters of 2014. Year-to-date, Florida’s office markets have absorbed over 1.9 million square feet, or 1.2 percent of the State’s inventory. The vast majority of this has come from the three South Florida metros, which comprised 89.3 percent of all absorption gains thus far in 2014.
In contrast, Jacksonville and Orlando remained relatively stagnant overall due to limited demand in their respective Downtowns. Every metro’s suburban office markets have experienced positive absorption, primarily lead by large tenant expansions, such as Verizon Wireless in Orlando and Centene Management in Fort Lauderdale.
Miami leads the way with the highest suburban absorption at 2.7 percent of total stock (Graph 1). With vacancy decreasing, asking rents in the tri-county South Florida area have all increased by 240 basis points or more since the start of the 2014. As a result of the strong occupancy gains, rents have increased in every office market in Florida with the exception of Orlando, where negative Class B rent growth has hampered overall gains (Graph 2).
As job growth is expected to continue increasing we will see complementing positive office absorption for the foreseeable future. It is expected that the shift will continue and specifically the number of construction jobs are forecasted to grow by 17.0 percent by the year 2021, underscoring the significance of the State’s future development track. This shift will correlate into creating favorable conditions for the office market and Florida can expect to be catapulted forward with decreasing vacancy and increasing future demand for new office product.
For more information please contact Marc L. Miller, Research Manager, Florida Market.