The following is an excerpt from an article originally published in The Palm Beach Post by Alexandra Clough. VIEW LINK | VIEW PDF
The city of West Palm Beach is not worried about the future of office space in the city’s downtown. This is despite a glut of new space about to hit the market, an unsightly half-finished office complex and a lingering pandemic that has kept most workers at home for months.
In West Palm Beach, only about 20% of workers are coming in to the office, brokers said. Other workers are coming in on staggered days so as not to crowd interior spaces and risk spreading the airborne COVID-19 virus.
As a result, a number of companies are paying for leased space that is mostly empty, prompting questions about the future of office space. Some national companies, such as Twitter, have told employees they can work from home forever.
But West Palm Beach officials remain upbeat that people will return to the office, and the market will return.
“Though there is current uncertainty due to the upcoming presidential election and COVID-19, all indications suggest the office market will rebound,” said Kathleen Walter, a city spokeswoman.
Last December, prior to the pandemic, commercial real estate brokers warned there was a sizable shadow market of empty space downtown.
Neil Merin, chairman of NAI/Merin Hunter Codman, said that with two new office towers under construction, the amount of vacant space would rise to 35% from about 17%. Other brokers said leasing activity was very slow, and no large tenants were even making inquiries about office space.
The following article was published in the Fall 2020 Palm Beach County Quarterly Economic Development Magazine from the Business Development Board of Palm Beach County.
Palm Beach County’s office market may wind up benefiting from the changing national work-from-anywhere landscape. “I believe our market will be more attractive to companies from the crowded Northeast seeking to relocate here,” said Jeffrey M. Kelly, executive vice president, CBRE in Boca Raton. “But in the short-term, availabilities will increase. I believe this is a hiccup and am optimistic that we will recover.”
Neil Merin, Chairman,NAI/Merin Hunter Codman in West Palm Beach, says the work-from-home trend due to the COVID-19 health threat has shown that people don’t have to be in a large office to stay connected. “Owners and executives with small offices in Palm Beach County are finding they can spend more time here,” Merin said. “That portends more movement away from the big Northeast cities to offices here.”
Meanwhile, the need for social distancing at work may change the size and configuration of office spaces, added Merin. While some businesses may downsize and try to sublet their current space, others will retain their current footprints, even if there are fewer employees on the premises at any one time.
“There will be lower demand for co-working spaces until the pandemic has receded,” Merin said.
Another trend will be the need to provide healthy office workspaces, including stepped-up sanitation and ventilation systems. “When employees are spending eight or 10 hours a day in an office, they want to feel safe,” he added. Common areas like kitchens and lounges may also need to be reconfigured for employees taking a break during the day.
Jeff Kelly expects a lower employee headcount in office spaces to drive down the need for on-site parking. “That’s a positive because land in Palm Beach County is so valuable,” he said. “It may lead to some creative uses of that extra space.”
As for new construction, Jeff Kelly said some buildings under construction, like 360 Rosemary in West Palm Beach, are likely to be completed on schedule, while others may be delayed until preleasing commitments support the financial investment. “Fortunately, Palm Beach County is not a big office market, and a few major leases could move the vacancy rate downward significantly.”
Click here to view the article and video, originally published by WPBF.
More and more people are working from home because of the pandemic and that means fewer people are renting office space.
Real estate experts admit the future of the business is uncertain.
“The biggest problem in leasing office space right now is people’s inability to make a decision, because we just don’t know what the future looks like,” Neil Merin, Chairman NAI/Merin Hunter Codman.
Some in the industry say they see opportunities.
“I’d love to be a part of an office building that converted to medical,” Rebecca Giacobba, Team Leader Illustrated Properties, GIA Realty, said. “I’d love to be a part of a big group from New York that wants to get out of the city to invest in Palm Beach County.”
Giacobba said, nationally, rental rates are holding at about 88%.
Merin believes we will see people telecommuting and partially working in an office.
“Working from home has not been convenient for everybody, but right now one of the biggest problems with bringing the workforce back, forget about COVID, is kids,” Merin said. “Because kids are out of school.”
Click here to view the original article posted by Juniper Square.
Juniper Square’s Strategic Account Directors, Carrie Frugé and Jennifer Sutherland, recently spoke to three leading commercial real estate investors in Florida: Matt Adler, Founder and Managing Principal at Adler Partners; Daryl Shevin, CFO and Principal at 13th Floor Investments; and Neil Merin, Chairman at NAI/Merin Hunter Codman.
Proceeding with caution in uncertain times
Although the panel agreed that the Florida market has a bright future despite unknowns, they were also aware of the current realities.
Merin stated, “The buyers and 90% of the capital that’s out there are looking to see how cheap they can buy things. And that’s freaking sellers out. So sellers aren’t putting properties on the market.”
Buyers feel this is a huge bargain moment. “The way I see it, sellers think it’s January and buyers think it’s July,” said Shevin.
Getting through the current market environment
Merin said the “new normal” requires viewing tenant evaluations through a different lens. “Unless your tenant’s in the PPE supply business, they may not be your tenant next week. Underwriting is going to be a little different now, during this pandemic period. As we consider properties, we’re not just going to look at their financial statement. We want to understand—is this a business that holds up? In retail, six months ago, we used to look for Amazon-proof properties. Now we have to look for COVID-proof tenants.”
Another important tactic mentioned for getting through the downturn is frequent, detailed communication with investors to keep them informed and gauge their needs.
For Merin and his team, technology enables this. “Our primary tool of communication with our investors is Juniper Square. We bring everything into the portal. This allows us to pay monthly to our investors, and report monthly along with the return.”
Being proactive is the key, according to Adler. “You don’t want to be an event communicator. Regularly reporting makes you focused on being very transparent on what the facts are, and not just on waiting for something to happen. That’s a very dangerous game, if you’re waiting for that lease to be signed or that deal to close.”
Looking forward to what lies ahead
As America continues adjusting to life and business during the pandemic, Merin, Adler, and Shevin are rethinking how they approach building management. In addition to protocols such as social distancing, masks, and having ample supplies of hand sanitizer available, Merin cautioned to keep things in perspective.
“At some point, the pandemic will become a distant memory and we won’t have the same fears we do now. In the meantime, you have to observe the fear of the people who work for you, and the people you’re serving as your tenants. You need to be responsive.”
Shevin offered examples of how his business is shifting its residential staging model. “We converted one of our model homes so that the den had a home office. It’s very easy to tell someone, ‘You can make that area a home office.’ But when they walk in and they see the home office, and they see it all set up, it tells a different story.”
Many people love working from home, which is driving relocation from cities like New York to Florida. Merin expects this to continue as workers escape long and crowded commutes, high costs of living, and cold weather.
Merin also predicted that interest rates will continue to stay low, it’ll be easier to borrow money, and the trillions of dollars the government has pumped into the industry will ensure liquidity for the foreseeable future.
As Adler stated, “In 2008 real estate and banks were the catalyst of the financial crisis. This time, banks are part of the solution.”
— NAI/Merin Hunter Codman has been retained for the management and leasing of the property –
West Palm Beach, Fla. – MHCommercial Real Estate Fund LLC (“MHC”) a Florida based discretionary private real estate fund has formed a joint venture with Waterfall Asset Management, LLC (“Waterfall”), a New York based institutional asset manager, to acquire Golden Bear Plaza, an iconic 243,000 SF, Class-A, office complex located in Palm Beach Gardens, Florida for $49,750,000.
Golden Bear Plaza, a three-building project originally developed between 1985 and 1990 by Jack Nicklaus’ development company, is a locally recognized landmark with panoramic views of the Intracoastal Waterway and the Atlantic Ocean that serves as home to some of the most prominent tenants in South Florida including AT&T, Otis Elevator Company, Pike Electric, Dycom Industries, NextEra Energy, SlimFast and Zimmer Biomet 3i.
The 90% occupied property is the third acquisition for MHC which was formed in the fall of 2019 by Dung Lam, Neil Merin and Jordan Paul, Principals of West Palm Beach, Florida based NAI/Merin Hunter Codman, Inc. along with Florida based real estate veteran Joe Sprouls to acquire income producing properties with strong cash flow potential in dynamic markets throughout the Southeastern United States. Corey Winsett, MHC Director of Acquisitions and Asset Management, spearheaded the due diligence for MHC working with Shutts & Bowen LLP who served as counsel for the purchaser under the direction of Art Menor.
“We are very pleased to have successfully closed this transaction in a challenging environment,” said MHC Principal Jordan Paul, “Golden Bear Plaza is a trophy asset that aligns perfectly with MHCommercial Real Estate Fund’s investment goal to acquire high-quality assets in growing Southeastern markets. The property benefits from a strong and diverse tenant base and we are particularly pleased to have an exceptional financial partner in Waterfall Asset Management.”
The project represents the first office acquisition in South Florida for Waterfall, a New York based registered investment advisor with approximately $8.8 billion in assets under management as of February 1, 2020. Patti Unti, Managing Director in charge of commercial real estate equity for Waterfall said, “The acquisition of Golden Bear complements our portfolio with the addition of a well performing asset within a desirable sub-market while partnering with a best-in-class local operator, MHC.”
Financing for the project was provided by M&T Bank under the direction of Senior Relationship Manager Steve Potting. MHC Principal Dung Lam, who structured the financing with M&T Bank stated, “The acquisition of Golden Bear fits very nicely with our investment thesis and hurdles. We were able to structure a phenomenal loan with M&T Bank that will allow us to realize this asset’s potential. This was our first deal with M&T Bank and we hope it’s the first of many as we deploy the remaining capital in our fund.”
NAI/Merin Hunter Codman will provide property management and leasing services for the new ownership group under the direction of MHC Principal Neil Merin, SIOR, CCIM who said, “After 17 years of providing leasing and management services at this iconic office project, we are excited to step into an ownership role and continue to operate this first-class office project as part of our portfolio”.
Jason Sundook, SIOR and Lesley Sheinberg will oversee leasing for NAI Merin Hunter Codman and may be contacted at 561-471-8000.
— NAI/Merin Hunter Codman bringing former Canon Solutions Campus to market. —
West Palm Beach, Fla. – The former Canon Solutions America, Inc. customer experience and showroom center, located in the Park at Broken Sound, is being offered for sale by Court Appointed Receiver Neil Merin, Chairman of NAI/Merin Hunter Codman. The receivership is the result of a foreclosure action filed due to a loan default which occurred when Canon’s long-term lease expired. Consisting of 143,290 square feet of office space situated on 12.24 acres in Boca Raton’s premier mixed-use development, the site and building is one of the largest commercial real estate offerings in Boca Raton, Florida.
According to Mr. Merin the property is being offered on an “as-where is” basis. “This is a significant piece of real estate that has generated much interest as a result of the foreclosure,” Mr. Merin stated, “I expect to market the property and accept bids for just a few weeks before selecting a buyer.” The property is located at 5600 Broken Sound Boulevard NW, Boca Raton, Florida 33487. It was constructed in 2002 to the highest corporate levels as a build-to-suit for the former tenant. Features of the property include a full backup generator facility, over 450 on-site parking spaces, an on-site full-service cafeteria with indoor and outdoor seating, and the offices all feature raised floor electrical distribution for easy reconfiguration and layout. Additionally, due to the large site size, there is potential to add significant additional building area to the existing structures.
For additional information about this opportunity please contact Neil. E. Merin, SIOR, CCIM at 561-471-8000.
The following excerpt was originally written by Katherine Kallergis and Keith Larsen of The Real Deal. Click here to view the full article.
Two weeks ago, billionaire developer Jeff Greene threatened to stop construction of a two-tower, 30-story mixed-use project in downtown West Palm Beach.
Greene, who told the Palm Beach Post in late April that he would “leave the shell up” because the city was resistant to approve a zoning request, is changing his tune. Now, he’s saying that he will build the project at 550 North Quadrille Boulevard as is, but at a slower pace, if he can’t get the property rezoned. Greene wants to change the project’s zoning from hotel, office space and multifamily to all multifamily.
West Palm Beach’s Central Business District has 673,350 square feet of Class A office space under construction, with an average asking rent of $54.39 per square foot, according to Colliers International South Florida’s first quarter report.
Neil Merin, chairman of the commercial real estate firm NAI Merin Hunter Codman, said the city has shown that it can only absorb one new Class A office building every 10 years.
To go forward with the office component of the One West Palm project “seems to be silly,” Greene said. He’s already invested $100 million into construction.
The following excerpt was originally written by Alexandra Clough of The Palm Bach Post. Click here to view the full article.
A $250 million twin-tower complex in West Palm Beach is likely to stop construction within days, leaving the city with skeletal towers that could stand as unbuilt eyesores for the next decade.
Palm Beach billionaire Jeff Greene, who is developing the 30-story One West Palm apartment-hotel-office complex, said on Tuesday he is about to pull the plug on construction, three stories shy of reaching the top, because the city is pushing back against his request for a zoning change.
Greene wants to build apartments in a northeast tower, rather than the offices and hotel slated for the space. The southwest tower already is approved for 328 apartments.
With the coronavirus pandemic putting a halt to tourism and shuttering offices nationwide, office space and hotel rooms no longer work, Greene said. He said financing sources for the 200,000 square feet of office and 201-room hotel have collapsed, and a hotel partner withdrew.
Even before the pandemic, Greene said his real estate brokerage could not find even one office tenant willing to lease space in the project, a reflection of the market’s thin demand for new office space downtown.
Real estate experts said Greene’s concerns about office space are valid.
Last year, experts began warning that West Palm Beach’s downtown office market was loaded with empty space, even though business leaders insisted the city needed more space to lure employers.
The city’s existing offices buildings, including its Class A towers, had floors of vacant sublease space. This resulted in a shadow vacancy rate of about 17 percent downtown, said Neil Merin, chairman of NAI/Merin Hunter Codman in West Palm Beach.
Historically, downtown West Palm Beach can only absorb one new office tower every 10 years, Merin said. In addition to One West Palm, the 300,000-square-foot 360 Rosemary office tower also began construction last year.
With businesses alarmed by the pandemic or financially damaged by the tumbling economy, the outlook for urban office leasing is unpredictable.
Some theories predict office tenants will flock to less dense, suburban offices, Merin said.
Others predict companies will shrink their office space to save money on overhead while continuing to let employees work from home.
The following excerpt was originally written by the South Florida Business Journal. Click here to view the full article.
Before the novel coronavirus infected the South Florida real estate industry, it was always clear whether it was a buyer’s or seller’s market.
But, like most industries, it’s a sector of the region’s economy that’s not immune to the virus, formally known as Covid-19.
An abundance of confidence in South Florida’s most valuable sector has morphed into a wealth of unpredictability in recent weeks.
The Business Journal reached out to local experts — many of whom have weathered previous downturns — to get their take on what the future might look like for each segment of the region’s booming real estate industry: residential, industrial, office, retail and hospitality.
We also asked professionals how the coronavirus affected their deal flow. The results of a Business Journal survey offer a rough picture of an industry at a standstill.
From small companies to large ones, a majority told us that the pandemic greatly slowed or halted deal flow. Most say that’s because of uncertainties among buyers and sellers.
Neil Merin offered his take on the office sector below.
“There will be a slightly higher vacancy rate because some companies will totally fail. Some tenants will renegotiate their rent. Some see it as a way to preserve cash.” – Neil Merin, Chairman, NAI Merin Hunter Codman
What do other professionals have to say? How will each sector feel COVID-19’s impact? See the original article here: View PDF | View Article