Q1 2023 Office Space Report: Palm Beach County, FL
Specializes in providing actionable insights into the commercial real estate space for investors, brokers, lessors, and lessees. He covers quarterly market data reports, investment strategies, how-to guides, and top-down perspectives on market movements.
Palm Beach County is known for its beautiful beaches, luxurious resorts, and world-class golf courses. It’s also home to many major employers, including Publix Super Markets, Florida Power & Light Company, and the Palm Beach County School District.
As of Q2 2023, the county’s population is currently growing at a 1.13% growth rate.
In Q1 2023, Palm Beach County’s office space market saw negative absorption, rising vacancies, and declining rents.
General Area Overview & Demographics
Palm Beach County is a diverse and rapidly growing area in the southeastern region of Florida, United States. The county is the third-largest population in Florida, with an estimated 1.5 million residents as of 2021.
The county is a popular tourist destination due to its stunning beaches, world-class golf courses, and luxurious resorts. The county is home to numerous cities, including West Palm Beach, Boca Raton, Delray Beach, and Jupiter, all offering a unique blend of urban and suburban lifestyles.
The demographic profile of Palm Beach County is diverse, with a significant Hispanic population that makes up 22.6% of the county’s population, according to the U.S. Census Bureau’s 2020 estimates. Non-Hispanic White residents make up the largest ethnic group at 54.9%, followed by Black or African American residents at 18.4%, and Asian residents at 3.5%.
Palm Beach County, FL Median Household Income
The median household income in Palm Beach County was estimated to be $73,267 in 2020, with a poverty rate of 10.8%. Tourism, healthcare, and technology industries largely drive the county’s economy, yet many residents in Florida are still paying large percentages of their income to rent.
Palm Beach County is also home to several world-renowned educational institutions, including Florida Atlantic University and Palm Beach State College. The county’s public school system is one of the largest in the state, serving approximately 180,000 students across 187 schools.
The county is governed by a Board of County Commissioners and has a strong mayor system. The county has a comprehensive land-use plan to guide its growth and development, which includes promoting sustainable development, protecting natural resources, and ensuring access to affordable housing.
Summary of Palm Beach County Office Space Performance in Q1 2023
Overall vacancies for Palm Beach County’s office space market increased from 8.2% in Q4 2022 to 8.7% in Q1 2023.
Vacancies in the Boca Raton North submarket were the highest at 12.3%, with both Boca Raton West and West Palm Beach CBD tied for next-highest at 10.5%.
The Palm Springs/Lake Worth submarket saw the lowest vacancy rate at 1.8%.
Office space absorption went negative in Q1 2023, with -293,500 square feet absorbed. In the CBD, Boca Raton East was the only submarket to post positive absorption at 4,635. Boca Raton West negatively absorbed 105,639 square feet. Class A space accounted for 94,529 of that number.
What are office space rents like in Palm Beach County?
Average asking rents for Palm Beach County office space declined quarter-over-quarter from $40.71 to $39.68 per square foot.
The Palm Beach submarket saw the highest asking rents, averaging $88.24 per square foot. It was the only submarket in the CBD to have its average Class B rent ($92.03) be more than its average Class A rent ($86.74).
Across all submarkets, Class A office space posted an asking rate average of $45.64, a decline from Q4 2022’s average of $46.04.
Purchase & Leasing Activity
Everglades College made the largest purchase in the first quarter of 2023 when it acquired 2081 & 2085 Vista Pkwy for $30 million.
Vertical Bridge leased 38,470 square feet of Sundy Village Bldg 1, 2, & 3. This was the most significant leasing activity for the quarter.
Other Notable Office Space Deals in Palm Beach County in Q1 2023
There were several other notable deals for Palm Beach County office space that took place in Q1 2023:
- Oak Lane Partners acquired The Park at Broken Sound for $20 million.
- Randall Realty Group acquired 2875 S Ocean Blvd for $15 million.
- Marsh and McLennan Agency leased 16,500 square feet.
- Trustaff Travel Nurses leased 13,700 square feet.
These are select examples among other activity.
New Office Space Development Activity in Palm Beach County in Q1 2023
Palm Beach County saw no new office product delivered to market in Q1 2023; however, developers added approximately 50,000 square feet of new office space to the county’s construction pipeline, bringing the total number of square feet under construction to 1.041 million.
The West Palm Beach CBD accounted for most of that new product, as it will receive 614,000 square feet of what was under construction.
Market Forecast for Palm Beach County’s Office Space Market
With financial strains continuing throughout and beyond the initial three months of 2023, a division is escalating across Southern Florida as occupants pursue superior, adaptable space alternatives with favorable stipulations: The contrasts between building quality will intensify.
Expect many enterprises to downsize their space, with larger tenants trimming their area by approximately 20% to even 50%.
Takeaways for Office Space Investors
Given the economic circumstances, office space real estate presents particular challenges for investors. Palm Beach County, FL has shown indicators of a weaker office space market, so proceed with caution.
Do your research, stay diligent, and happy investing.
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