All About Commercial Real Estate

Month: March 2020


Developments are extremely fluid, and tremendous uncertainty remains regarding how broadly the virus will spread and what its ultimate impact will be on public health, economic growth and financial and real estate markets.

All eyes are on the financial markets.

  • The virus is battering China’s economy. The precise impact to the global economy is unknowable, but it’s clearly causing disruptions to certain sectors of the economy.
  • Stocks have tumbled in recent days as the virus spreads to other countries and investors struggle to price in the potential economic fallout and growing downside risk.
  • Central banks are responding aggressively. Odds are increasing that the Federal Open Market Committee will also vote to cut the federal funds rate.

It’s premature to draw strong inferences about the virus’s impact on property markets.

  • Commercial real estate sector is not the stock market. It’s slower moving and the leasing fundamentals don’t swing wildly from day to day. If the virus has a sustained and material impact on the broader economy, it will have feed through impacts on property as well. 
  • The outbreak has also prompted a flight to quality, driving investors into the bond markets, where lower rates are creating more attractive debt/refinance options.
  • If past outbreaks are a useful guide, then COVID-19 should largely be contained by the first half of 2020. Most anticipate a strong rebound in markets in the second half of the year.

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How Do Office Rents Compare Around the State?

Florida office rents have increased to near-record highs based on solid demand for space that provided confidence for developers to build speculative construction. Average rent growth YOY in Florida was 4.5%, and rents are now on average 18% higher than previous cycle highs.

Most Florida office markets, however, are still a relative value compared to historic highs. Only Tampa and Palm Beach have asking rents higher both numerically and on an inflation adjusted basis. According to the BLS’ Consumer Price Index, prices in 2019 are 19.17% higher than average prices since 2009, which equates to an average inflation rate of 1.77% per year. While office rents in Florida are up almost 18% on a numerical basis, this cycle they are still down -4.5% on an
inflation-adjusted basis.

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