Considering the small size of the West Palm Beach office market, a move by one of Florida’s largest law firms to a competitor’s building could easily represent a difficult hole to fill.
In a city with only four Class A buildings, the vacancy left behind is a coveted space, especially when demand is growing and the supply remains limited.
“Ideally between now and then we will find a large user to fill the entire space, but we are also exploring multiple options, among them dividing the space into smaller offices” said Anthony Librizzi, vice president of CBRE Inc., the broker for the Esperante Corporate Center at 222 Lakeview Ave., where Akerman was a tenant for 15 years.
Librizzi denied rumors the landlord is considering giving a break on its rent price to attract more tenants. The Esperante, which is on the market, has a 74 percent occupancy rate, which will be drastically reduced once the law firm leaves.
If sold, the new owner would face major renovations including the 39,000 square feet Akerman is vacating. The building also has a floor with 11,000 square feet available. Lease rates are $20 to $29.75 per square foot, according to LoopNet.
“Law firms have changed dramatically in the last five to ten years. They don’t need the huge libraries they had before, lawyers require less support from paralegals, and everything is more efficient and in less space. That’s why the old space was not very efficient,” Librizzi said. “The firm had to decide if they wanted to live through one year of renovations or leave, and they chose the path of least resistance.”
This is a general trend in the market, according to Mathew Cheezem, vice president of Cresa South Florida, who brokered Akerman’s 12-year, $25 million deal.
“Everyday business climate has changed dramatically. Businesses interact more externally, and there is a big push to create efficiency,” he said. “It’s very different than how things were done years ago.”
Akerman’s new lease covers 40,000 square feet and almost three floors—the 11th, 10th and most of the ninth floor—in the west tower at the Phillips Point building. The firm, whose local office has grown from 10 to 48 lawyers since opening in West Palm Beach in 1995, plans to move Sept. 1, 2014.
Akerman is the building’s largest tenant signed by Taylor & Mathis of Florida LLC principal Brian Gale, exclusive leasing agent for the complex.
“This was a great opportunity for them and for us,” he said. “We had several spaces opening in high floors at that time, and they were coming from lower floors.”
The list of tenants at Phillips Point includes Greenberg Traurig, FTI Consulting, Goldman Sachs and Morgan Stanley.
West Palm Beach’s leading office buildings are the 18-story CityPlace Towers with 90 percent occupancy; the 18-story Phillips Point, which is climbing to 95 percent occupancy; the 21-story Northbridge Centre Tower at 65 percent occupancy; and the 17-story Esperante building, which was purchased by a CBRE investment fund in 2009.
“We are seeing lately a lot of demand in West Palm from hedge funds and wealth management companies. The attraction is a mixture of new opportunities and tax reasons,” said Gale, who considers Phillips Point the trophy asset of West Palm Beach.
Foreseeing growth in the market, the Related Cos., which co-developed CityPlace Towers with Boca Raton-based Crocker Partners LLC, is pre-leasing a new building at 560 Okeechobee Blvd. Although still not shovel ready, it’s said by the real estate community to be at least two years from becoming a challenging competitor.
“They did a good job in CityPlace Towers and filled it up. They obviously know what they are doing and they know this market well,” Gale said. “I personally don’t think the market supports a new building today, but I think it will in a few years.”