Subleasing could be a leading indicator

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As 2018 drew to a close, Caroline Fleischer, managing principal of tenant representation firm Cresa, received a spate of sublets.

It wasn’t startling in scope or sum of companies looking to jettison extra space. Yet, it potentially was anecdotal evidence, Fleischer says, that some businesses tapped the real estate brakes amid the turmoil and uncertainty of the last half of the year and the start of this one.

“Some [corporations] are seeking ‘right-sizing’ in an ever-changing footprint due to workplace efficiencies today,” Fleischer says.

Companies seeking space are embracing the less-is-more philosophy to gain operationally efficient footprints and lease terms. Brokers such as Fleischer often are at the tip of the market-forecasting spear as they work the business cycle 12 to 24 months out to assist their corporate occupiers with strategic real-estate decisions and economic commitments.

“I have seen a fairly significant increase in sublease space the last few months,” notes Rod Loschiavo, executive vice president and tenant representative at JLL in Fort Lauderdale. “Historically, this has meant a downturn in the market may be in the near future as corporations struggle to maintain profitability. I do not think this is the case at present. I believe much of the increase in sublease space, may be resulting from mergers and acquisitions.”

Circumscribed by limited delivery of new office buildings after the recession, the fundamentals for South Florida’s market still remained healthy in the fourth quarter with no significant increases in vacancy and rent growth across all three counties, according to CBRE data. But South Florida’s office market, punctuated by an upward tick in sublet space (also known as shadow space), broadly continued its year-over-year trend of slowing leasing velocity as measured by space absorption, according to market data.

Regarding market conditions for office landlords and the host of late-cycle office developments now coming out of the ground, Loschiavo says, “there may be some downside for property owners as they find themselves competing with this shadow space and the knowledge that the lease will not be renewed upon expiration.”

Miami-Dade County continues its reign as the regional epicenter of office construction with 1.1 million square feet of offices slated for delivery in the next two years, CBRE data shows.   

Fortunately, preleasing futures remain squarely in positive territory with 1.9 million square feet of tenant requirements, ranging from business services, law and financial firms to co-working operators seeking spaces.

But the development pace also picked up in Broward in the fourth quarter as downtown Fort Lauderdale saw the start of 356,000 square feet at The Main Las Olas, the first major downtown office tower to break ground in nearly a decade. Palm Beach County also ended the year with four new office projects under construction, the largest of which is the 224,000-square-foot Gardens Corporate Center in Palm Beach Gardens.

“There are over 900-plus residents flooding into Florida every day. With staggering numbers like that, more people are going to need places to work, live, play,” Fleischer says.

South Florida’s robust industrial real estate sector continued to fire on all cylinders in the fourth quarter. Despite delivering nearly 2.5 million square feet of new warehouse and distribution hubs in the second half of 2019 with 3 million square feet underway, Miami-Dade County industrial rents grew almost 5 percent year-over-year and vacancy fell 50 basis points, data shows.

“Leasing demand is still very active. Many of the speculative industrial projects are being preleased or with proposals out to lease space,” says industrial broker Michael Silver, first vice president at CBRE. “Demand drivers include increased demand concerning perishables and cooler facilities, fruits, vegetables, flowers, pharmaceuticals and logistic companies expanding. All systems are go.”

Freelance writer Darcie Lunsford is a former real estate editor of the South Florida Business Journal. She is the senior VP for leasing at Butters Group and is avoiding a conflict of interest in her column by not covering her own deals.

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Drew Limsky



Drew Limsky joined Lifestyle Media Group in August 2020 as Editor-in-Chief of South Florida Business & Wealth. His first issue of SFBW, October 2020, heralded a reimagined structure, with new content categories and a slew of fresh visual themes. “As sort of a cross between Forbes and Robb Report, with a dash of GQ and Vogue,” Limsky says, “SFBW reflects South Florida’s increasingly sophisticated and dynamic business and cultural landscape.”

Limsky, an avid traveler, swimmer and film buff who holds a law degree and Ph.D. from New York University, likes to say, “I’m a doctor, but I can’t operate—except on your brand.” He wrote his dissertation on the nonfiction work of Joan Didion. Prior to that, Limsky received his B.A. in English, summa cum laude, from Emory University and earned his M.A. in literature at American University in connection with a Masters Scholar Award fellowship.

Limsky came to SFBW at the apex of a storied career in journalism and publishing that includes six previous lead editorial roles, including for some of the world’s best-known brands. He served as global editor-in-chief of Lexus magazine, founding editor-in-chief of custom lifestyle magazines for Cadillac and Holland America Line, and was the founding editor-in-chief of Modern Luxury Interiors South Florida. He also was the executive editor for B2B magazines for Acura and Honda Financial Services, and he served as travel editor for Conde Nast. Magazines under Limsky’s editorship have garnered more than 75 industry awards.

He has also written for many of the country’s top newspapers and magazines, including The New York Times, Washington Post, Los Angeles Times, Miami Herald, Boston Globe, USA Today, Worth, Robb Report, Afar, Time Out New York, National Geographic Traveler, Men’s Journal, Ritz-Carlton, Elite Traveler, Florida Design, Metropolis and Architectural Digest Mexico. His other clients have included Four Seasons, Acqualina Resort & Residences, Yahoo!, American Airlines, Wynn, Douglas Elliman and Corcoran. As an adjunct assistant professor, Limsky has taught journalism, film and creative writing at the City University of New York, Pace University, American University and other colleges.