News

Florida Market Showing Signs of a Rebound

April 10th, 2014

After experiencing significant decreases in demand and the associated lower lease rates, the market for medical office buildings in Florida appears to be stabilizing and showing signs of improvement. As a result, Woodside Health has added Florida as a target state and is actively looking to acquire medical office buildings there. "Up until recently we stayed away from Florida. It was harder hit in the recession and we weren't sure where the bottom was," noted Ted Barr, Principal at Woodside Health. "We think it has hit bottom and is recovering. There may be opportunities to acquire properties that will have increasing occupancy and lease rates in the coming years, and can be acquired at fair prices," he added.

Some of the factors that influence our thinking are:

Florida Realtors Chief Economist John Tuccillo was quoted in late 2013 predicting that the commercial real estate market will continue its modest recovery in 2014.

In the University of Florida's Bergstrom Center for Real Estate Studies report published in December 2013, which is based on a survey of 178 industry participants, the outlook for office occupancy improved across both Class A and Class B properties. The continued recovery of jobs in Florida was noted as a key factor. The segment is also benefitting from little new development, which is allowing current buildings time to improve occupancies. The improvement in occupancy is allowing owners to reduce concessions, raising the effective rental rates.

CoStar reported that the South Florida Office market ended the first quarter 2014 with a vacancy rate of 13.2%. The vacancy rate was down over the previous quarter, with a net absorption totaling positive 506,503 square feet building on a positive 713,224 square feet of absorption in the fourth quarter 2013.

CBRE noted net positive absorption of 3.6 million square feet for all of Florida's office market in 2013, compared to 2.4 million in 2012. Both compare to a negative 5.3 million in 2009.

Florida job growth was 2.5% in 2013, above all but 7 other states and above the national average of 1.7%.