With vacancy rates at about 8% in Fort Lauderdale’s downtown Class A office market, it’s likely that we will continue to see a strong appetite for office space in the Central Business District within the next 12 to 18 months. Plans are already afoot to meet this new demand, with the Stiles Corporation working to secure pre-leasing to kick off a 408,000-square-foot Class A office building. Unlike previous cycles however, new office space will be in mixed-used projects. Located at 201 E Las Olas Blvd., the building will have 17,000 square feet of ground floor retail and restaurants as well as a 45-story Hyatt Centric hotel across the street.
Last summer, the city council unanimously approved Traina Cos.’ bid to build FATcity, two 30-story towers on 2.7 acres between North Third and Fourth streets along North Andrews Avenue in the heart of the emerging Florida Arts & Technology District. The project will combine 612 residential units, parking and 270,000 square feet of commercial space, including Class A office space with open floor plates for co-working and networking. Other developers have submitted similar proposals for consideration.
One factor behind the move toward mixed-use development is simple economics: developers of multifamily projects can pay more for land than other types of development, driving up prices beyond what office development alone will support. There are also a number of other trends that come into play.
The Millennial Lifestyle
Over the past eight to 10 years, downtown Fort Lauderdale has evolved into a live-work-play environment, driven by the priorities of the Millennial generation. Many of the tenants I work with cater to that generation as they are quickly becoming the largest sector of the workforce. Millennials seem to prefer open, interactive work environments located within walkable urban cores. Because they are in general less car-dependent than their predecessors, having living spaces, choices for lunch, grocers and other amenities nearby is also important. All of this has fueled mixed-use developments.
Interestingly, everything is getting smaller. When it comes to residences, millennials seem to prefer experiences over owning and are willing to sacrifice apartment size to obtain a well-located residence that offers a variety of amenities. Consequently, the residential units being developed are much smaller than in the past. Computers have allowed most offices to trend toward paperless and the workspace has shrunk. The majority of office tenants are using 15-20% less office space when they relocate.
A few years ago Fort Lauderdale’s city officials designated central downtown a Regional Activity Center-City Center District (RAC-CC), which relaxed zoning guidelines to allow for a wider range of uses. A number of projects now on the drawing board, such as Related Group’s luxury condos & spa on Fort Lauderdale Beach and Property Market Group’s Riverfront, have taken advantage of the RAC-CC designation, adding value to the downtown market. Subsequently, the City’s Downtown Master Plan was adjusted to include transit-oriented development (TOD) guidelines, which aim “to create pedestrian-friendly, vibrant station areas to support the continued growth of the downtown as a live, work and play environment” –– an open invitation to mixed-use projects.
The View from the Suburbs
Currently, the area’s suburban office markets are also doing well, as there has been very limited new construction the last 8 years. Vacancy rates continue to decline in high-performing western markets, suggesting a growing demand for Class A office space in those markets as well.
At Sawgrass Park and in Plantation, for example, the Class A vacancies are as low as 8% in both markets. Historically, we would see new construction as vacancy approaches 15%. This has resulted in a fairly significant increase in rental rates. Though the suburbs are holding their own, current trends favor the continued transformation of Downtown Fort Lauderdale’s office market into a thriving, Class A-rich component of a user-friendly mixed-use environment.
Rod Loschiavo, Executive Vice President, at JLL Fort Lauderdale
Rod Loschiavo’s main expertise lies with handling large and complex Tenant Representation assignments exceeding 30,000 square feet. In addition to the primary focus of representing tenants, build-to-suit projects, land sales, tax-deferred exchanges, and investment sales. This vast array of commercial real estate transactions has allowed Rod to build a wealth of knowledge from which he can creatively assist clients to overcome obstacles and maximize leverage in lease and purchase negotiations.
To learn more about opportunities in Fort Lauderdale’s office market, contact Rod.