Southeast Financial Center Harvard Case Solution & Analysis

Urban AreasPopulation

            Additionally, the demand for office building space depends on the urban areas, because the population of urban areas is more involved in commercial activities in comparison to the population of rural areas, who are more involved in agriculturalactivities. Further, the urban area is in a majority within the Miami city and within the South Florida, which will increase the requirement of office space in Miami city.

Profession of the Population

            Moreover, the demand for office space also depends on the nature of the professionfor the majority of the population. Because more of the office space will be occupied by the population who is in the managerial or other professional positions, additionally, the technical and administrative staff will also occupy more of the office space. Meanwhile, the growth in professional and financial services also affect the demand for office building properties, which has been estimated to grow at 3.6% for professional services and 3.2% for financial services in Florida.. Therefore, the percentage of population in these professions growths in professional and financial services will directly affect the demand for office space in a particular area.

Employment Rate

            Further the demand for office space is also dependent on the employment rate in a particular area, because higher employment rate will require more space to accommodate employees for the conduct of their business activities. However, the employment rate in Florida has been estimated to be at 93.80%, which, means that this factor will increase the demand for office space in Florida.

Supply Forces

Entitlements and Barriers to Entry

However, the supply of office property depends on how easily the entitlement of a project can be achieved by the investor. If the entitlement of a project can be achieved without a significant level of difficulties, then this factor will increase the supply of new office building. On the other hand the supply of new office buildings also depends on the barriers of theentry of new real estate and construction companies.

Land and Construction Cost

Additionally, the cost associated with the acquisition of the land and the difficulties of acquiring the land will also determine the supply of office space, meanwhile, the construction cost for completion of a building is also an important factor in determining the level of new office space supply in the Miami market.

Absorption Rate

An absorption ratewill also affect the demand of office space, because the higher absorption rate will mean that a higher proportion of the available space is being sold. Therefore, the higher absorption rate will encourage the development of office space.

Total Office Space Available and Sale Trends

However, the supply of office space is linked to the total office space available for sales in a particular area, meanwhile, increase in total available office space and will lead to decline in supply of additional office space or vice versa. However, the trends of the office property market in Miami city show that the sales trends for office space has been verymuch volatile in Miami city as shown in the exhibits 1.

Vacancy Rate

Additionally, the supply of office space is affected by the total vacancy rate in Miami city, because the highest vacancy rate will discourage the development and construction of more office space property. Further, the market trends show that the total vacancy ratein the Miami city has declined since 2010, meanwhile, the vacancy rate has declined to 15.4% in the third quarter of 2014, which had been at 20.7% during the year 2010 as shown in the exhibit 2.

With the improvement in economy the market for leasing has also shown positive response by long term leases and renewals of lease terms. During the second quarter of 2014, there were two significant transactions which included a significant number of square feet being leased by PwC and UBS for 43,277 square foot lease for a period of 13 years and 43,500 square foot lease for a lease period of 12 years.

Growth was restricted by the cumulative effect of the availability of land, labor supply and prices of Metro study’s South Florida Housing Market 2014 surveyed: ULY 2014.Prepared to the last quarter of the annual rate fell slightly in 6848. An annual rate of 5% per year higher than the rate recorded in the second quarter of last year to start the fourth quarter 2013 activity was about 6850 stables.........................

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