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Miami Real Estate - Miami Real Estate news

Monday, June 22, 2009

South Florida Commercial Real Estate Market,
Itís a Steal

While booming, South Florida commercial real estate market is still considered a steal.

John Bell, managing director of DTZ Rockwood's investment sales activities in Miami says, "We're still viewed as very reasonable by investors".

Since Miami doesnít command the prices Manhattan does, many investors are seeking office and industrial deals in the region. Bell and other real estate brokers report more interest than actual inventory.

According to CB Richard Ellis, real estate investment trusts have become more aggressive, as have equity funds. As a result, current acquisitions require hard money up front and short closing periods.

Institutional investors with national portfolios are also in a better position to operate with lower overheads. Rents are up, but margins aren't because of increased taxes and utility surcharges and storm-related insurance premiums.

He adds that South Florida commercial real estate across the board are in demand, including Miami retail spaces for sale and multifamily properties in Miami. Insurance costs have stabilized after a year without hurricanes and rents continue to increase dramatically. While a slew of new projects are moving forward, vacancy rates are at the lowest in more than a decade.

"It's a very tight market and the market recognizes that," Bell said.

Miami alone has three major office buildings moving forward that could add more than 1.9 million square feet to its central business district. In the meantime, CBRE reported the downtown vacancy rate plummeted to 8.3% in the first quarter of 2007 from 16.4% two years earlier.

The surge for Miami commercial real estate comes as the housing market staggers. Office construction has increased throughout Miami-Dade, Broward and Palm Beach counties, but a recent pair of national CBRE reports said the real commercial boomtown today is Washington, D.C. About 13% of all domestic office construction is slated to rise in the nation's capital in the next five years.

According to an analysis by CBRE and its independent research firm, West Palm Beach, along with San Diego and Los Angeles, has produced the highest returns for investors holding office property in the past five years.

CBRE reported that growth will be tied closer to exports, rather than construction and retail activity because of the weak dollar. Mirroring the residential slowdown, economic factors will shift to business-to-business transactions and away from consumer-to-business transactions. Investment, investment banking and business services are expected to increase in influence.

The national industrial market is expected to be only "mildly affected" by the country's economic slowdown coming in the wake of the collapse of residential and a cutback in consumer spending, CBRE reported.

None of the South Florida cities cracked the top three highest-returning markets for industrial properties. For the past five years, the strongest performers have been Orlando, the Inland Empire region of Southern California and Sacramento.

Regardless of recent returns, Miami's industrial zone west of Miami International Airport has become strongly favored for the future, Bell said. Vacancy is at 4.2 percent for industrial space in Miami-Dade. Some major institutional players are willing to buy smaller properties - warehouses valued at $25 million or less - just to establish a presence in the area, he said.

Flagler Real Estate Services recently sold a 6.1-acre site in the Pan American Business Park near Florida's Turnpike and Okeechobee Road for $6.2 million. Buyer Cintas Corp. acquired the industrial land from Cardinal Commercial Development for $23 a square foot, an area high that brokers say reflects the evaporating availability of land in the region. A 500,000-square-foot warehouse is proposed for construction.

But the industrial market in Miami is tilting toward large institutions, making it difficult for local developers, which worries Ernesto Casal, principal of Miami-based Capital Commercial Group.

"There's only so much inventory and so much land," he said. "The rush of capital has become very aggressive."

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