Miami 1q07robinsonoswalt4pager

MarketWatch: Miami Dade County Office Market Trends — First Quarter 2007 MIAMI at a glance... • Miami-Dade was ranked by the US Census Bureau as one of the 2006 Top Five counties for new housing unit growth • Miami was just ranked one of the “Top 10 North American Cities of the Future” by fDi Magazine based on economic potential, cost effec tiveness, business friendliness, development and investment opportunities, infrastructure and quality of life

Miami-Dade County, FL Miami is a true international city, setting trends in the areas of fashion, dining, the arts, and entertainment. It is also a key global business center, second only to New York in terms of the number of international banks. The “Gateway to Latin America and the Caribbean” for the US, Miami is the uncontested leader for doing business in these growing markets. With a strong infrastructure, anchored by the Port of Miami and the Miami International Airport, as well as the economic advantages offered by no or low tax structures and multiple free trade zones, Miami has only further positioned itself as the place to be when it comes to doing business on a global scale.

• The local unemployment rate is 3.1% — the lowest rate in MiamiDade County since the State of Florida began keeping records in 1983, and well-below the national average of 4.5% • Miami’s economy is predicted to grow ahead of the national average over the next ten years • The ever-diminishing supply of developable land guarantees a continual increase in real estate prices

• Mortgage interest rates, adjusted for inflation, will likely remain attractive • The cost of doing business in South Florida is mounting as landlords pass through skyrocketing expenses (especially insurance) to tenants • Tenants are in for challenging year as space options are decreasing — vacancy rates have been dropping since 2004 due to the lack of new inventory and a large number of condo space in the submarkets • It’s still a small part of Miami’s office market, but some buildings are becoming more environmentally friendly as market forces like water shortages and rising energy costs are encouraging the emerging trend • Miami’s largest worldwide trading partner is China — the market’s biggest regional trading partners are Brazil, Colombia, Costa Rica, the Dominican Republic, and Honduras

The fact that Miami offers an enviable location, unmatched economic opportunity, diversity and connectivity only adds to the overall attractiveness of the area. Transwestern South Florida 501 Brickell Key Drive, Suite 210 Miami, FL 33131 Phone: 305.808.7310 Fax: 305.808.7309

MarketWatch: Miami Market Snapshot — first quarter 2007 Statistics Submarket Name

Total Market Inventory (SF)

Vacancy Rate (inc. subleases)

Average Asking Rental Rate PSF

YTD Net Absorption

Space Under Construction

Airport West Class A

8,953,647 4,238,433

12.3% 11.0%

$24.24 $26.51

104,507 122,008

130,000 130,000

Aventura Class A

1,004,304 789,910

4.5% 5.8%

$38.72 $39.34

(16,204) (16,204)

96,000 96,000

Brickell Class A

5,560,653 3,291,804

10.0% 8.1%

$32.92 $36.84

(49,593) (32,227)

1,145,000 1,145,000

536,428 57,039

11.2% 7.1%

$31.27 $32.90

(11,003) (2,322)

-0-0-

Coral Gables Class A

5,327,021 2,994,464

6.1% 6.6%

$32.24 $34.87

(8,360) 11,325

59,920 -0-

Downtown Class A

6,310,924 3,549,625

7.7% 6.3%

$29.60 $34.56

58,107 36,212

740,000 740,000

Kendall Class A

3,676,650 748,229

4.8% 3.4%

$26.67 $34.57

(34,409) (6,627)

311,537 113,324

Miami Beach Class A

1,754,395 524,189

7.2% 11.8%

$33.73 $35.14

3,800 7,083

38,400 -0-

Miami Lakes Class A

942,315 180,696

9.7% 24.9%

$23.18 $23.06

21,735 (6,959)

82,192 -0-

38,300,144 16,810,542

9.0% 8.6%

$27.96 $32.84

33,266 112,289

3,142,339 2,342,620

Coconut Grove Class A

OVERALL MIAMI-DADE Class A

Source: Transwestern analysis of data from CoStar and other sources, March 2007

25

30

20

28

15

26

10

24

5

22

0

1Q/03 2Q/03 3Q/03 4Q/03 1Q/04 2Q/04 3Q/04 4Q/04 1Q/05 2Q/05 3Q/05 4Q/05 1Q/06 2Q/06 3Q/06 4Q/06 1Q/07

20

RENTAL RATE PSF

PERCENT VACANT

Historic vacancy and rental rate trends — 2003 to YTD

Dade County Office Market Trends First Quarter 2007 Overall Highlights Leasing Activity • While rents rise, leasing activity remains strong as tenants are simply willing to pay higher rents — some may have to relocate, but there are others waiting in line to take their place • Significant leases during the quarter include, Ernst & Young at 201 S. Biscayne Blvd. (23,540 SF), and World Fuel Services at Doral Costa Office Park Phase II (16,000 SF)

Development • Overall, construction costs will limit new development but highpriced acquisitions will continue • Even with more than 3.9 MSF of office developments proposed, only a handful of projects have started so new supply is not projected to meet the strong demand for space until 2009 • More than 2.0 MSF of new office construction is planned for Brickell and Downtown • In the Airport West submarket, Flagler Station’s 1100 building (125,000 SF) is scheduled for delivery in mid 2007 — more than 650,000 SF of new construction is scheduled to break ground by mid-2007 in Airport West alone • Parkside Corporate Center (40,000 SF) in Miami Lakes is scheduled to be completed in mid 2007 • Dadeland Center II (113,324 SF) in Kendall is scheduled to be completed in late 2007 • Construction started on One Aventura Executive Center

(110,000 SF) in Aventura and is scheduled for delivery in 2007

Submarkets by size

Rental Rates • High demand, limited supply, and relatively little new construction are pushing asking rents up to more than $40 PSF for Class A space in some markets — $45 to $50 PSF in prime Class A properties • As a result of rising operating costs, some buildings are now converting to net leases as opposed to full service Concessions • Landlord concessions have nearly disappeared, leaving tenants with no ability to capitalize on “bargains in the market” Investment Sales • Miami has moved into the top-tier for office properties in terms of international investment — behind only Manhattan, San Francisco, Los Angeles and Washington, DC • Several assets changed hands recently, Courvoisier Centre in Brickell ($150 million, $458 PSF), Douglas Entrance in Coral Gables ($126.2 million, $238 PSF), Lennar Corporate Center ($55.6 million, $196 PSF) Market Outlook • Rents will continue to climb roughly 5% to 10% per year over the next few years, vacancies will keep dropping, and overall absorption will increase until more new projects are delivered • Operating expenses are projected to continue to increase due to everrising insurance premiums, tax assessments, utility/energy costs, and a hike in the minimum wage

2.0% 4.6%

10.0%

23.0%

16.0%

3.0% 15.0% 14.0%

1.0%

1.0 MSF

8.9 MSF

Airport West

5.5 MSF

Aventura Brickell

6.3 MSF

3.6 MSF

Downtown Kendall

5.3 MSF

0.5 SF

Coconut Grove

Coral Gables

1.7 MSF

0.9 SF

Miami Beach

Miami Lakes

Submarket rental rates 40

35

30

25

20

15

10

5

0 Airport West

Aventura

Brickell

Coconut Grove

Coral Downtown Kendall Gables

Miami Beach

Miami Lakes

submarket Highlights

27

75 95

Downtown • Downtown’s trophy buildings are approaching full occupancy and rents continue to rise as some have surpassed the $40 PSF point

9

948

41

• Other planned developments include Grouper Financial’s 400,000SF office tower at 2222 Biscayne

• 1450 Brickell, a 585,000-SF, Class A office tower is under construction with a tentative delivery date of early 2009 Airport West • Doral Costa’ second phase was delivered in December and is already 51% leased • Downtown Doral, formerly known as Doral Center, is causing more leasing demand in the submarket as three of the Class B buildings are being demolished to make way for the new Downtown Doral mixed-use city center concept • Royal Palm Offices at Doral, a 122,000-SF office property is being

836

Airport West

Downtown

395

Miami Beach

Brickell Coral Gables Coconut Grove 1

Kendall 878 874

Brickell

• Brickell Financial Center, a 560,000SF, mixed-use development, has broken ground and will marketed as a Leadership in Energy Efficient Design Certification (LEED) — the first in the submarket

195 Miami International Airport

821

• Site work continues on Met II, a 750,000-SF, Class A office tower

• Brickell BayView (286,341 SF) is currently on the market by America’s Capital Partners

Aventura

826

• Construction costs are now as high as $275 PSF

• Rents are expected to increase roughly 4% to 7% a year

1

Miami Lakes

• Class B office building occupancies and rental rates are on the rise and have increased by 10% in a year’s time

• Brickell’s rents are some of the most expensive in the US, with Class A asking rates topping $40 PSF

A1A

860

marketed as office condos by a subsidiary of Pan American Cos. Coral Gables • Coral Gables continues to emerge as a popular alternative to the nearby submarkets for Class A space users • Effective rents, which grew at a 13% clip last year, are expected to gain roughly 8% in 2007 as office users who would rather lease than own find fewer spaces to choose from

For More Information... Please contact any of our Transwestern team members listed below:

Walter Robinson Senior Vice President 305.808.7818

[email protected]

Coconut Grove • Coconut Grove submarket has historically been one of the region’s tightest, with vacancy consistently less than 10% Miami Beach

Laurel Oswald Vice President 305.808.7820

[email protected]

• Rents are now at record levels with overall vacancy rates in single digits Kendall • The upcoming addition of Dadeland Center II will ease the submarket’s current 3% vacancy Transwestern South Florida 501 Brickell Key Drive, Suite 210 Miami, FL 33131 PHONE: 305.808.7310 FAX: 305.808.7309 www.transwestern.net/miami