South Florida office space draws more companies from up north
With asking rents well below those in New York and other northern cities, plus the subtropical climate and diversified workforce, South Florida office buildings continue to draw businesses from all over.
“New-to-market, high-profile companies are making strong commitments,” said Ken Krasnow, managing director at CBRE in Broward and Palm Beach counties.
For example, global law firm Jones Day signed a 21,363-square-foot lease in August for a full floor at 600 Brickell, a 40-story tower developed by Foram Group and known in the market as Brickell World Plaza. Krasnow represented the tenant in that deal, while Noel Steinfeld, senior vice president of Jones Lang LaSalle Capital Markets Group, represented the landlord.
Jones Day is not alone. Law firms and financial services providers are among the most notable businesses scooping up sizable spaces. In one of the last large office leases completed in 2013, law firm Shutts & Bowen signed a 69,000-square-foot deal at Southeast Financial Center in downtown Miami. Another law firm, White & Case, renewed its 58,000-square-foot lease at the building.
Steinfeld said she is seeing a significant uptick in tenants coming from up north, including some that are moving their headquarters to South Florida. Among them, Cancer Treatment Centers of America, a privately held network of hospitals, which said in January it will to relocate its corporate base to Boca Raton from Schaumburg, Ill.
Local companies are also making significant commitments. TotalBank signed a 55,000-square-foot deal to move its headquarters to Downtown’s iconic Miami Tower, which becomes TotalBank Tower next month. The bank was based at 2720 Coral Way since its inception in 1974. And Office Depot, which merged last year with Illinois-based OfficeMax, opted not to vacate its 600,000-square-foot Boca Raton headquarters.
Such tenants signify the market’s strength, said Krasnow. “Those are the needle movers.”
The Boca Corporate Center and Campus in Boca Raton also inked a few major deals last year. Tyco International subsidiary Tyco Integrated Security, a business security provider, signed for 72,000 square feet (the deal happened earlier than the date cutoff for the top deals chart below), and health care services firm Conifer Revenue Cycle renewed for 98,000 square feet in the building.
Office vacancies in Miami-Dade County dropped to 16.5 percent by the end of 2013, the lowest rate since early 2012, according to CBRE’s latest quarterly report. At $38.61 per foot, Brickell had the highest average asking rent in the county during the fourth quarter.
“The Coral Gables office market is recovering, but the Brickell Class A sector is running away with it,” Steinfeld said.
Brickell also leads in office space under construction, with nearly 129,000 square feet on the way. Brickell City Centre is slated to include 30 floors of office space in its proposed 1,049-foot tower, making it the tallest outside of New York City and Chicago if the project is approved.
Behind Brickell, Aventura had an average asking rent of $36.20 per square foot during the fourth quarter.
Palm Beach, located in its namesake county, topped all other South Florida office submarkets with rents averaging $40.72 per square foot in the final three months of 2013. Boca Raton and West Palm Beach were the most active last year in Palm Beach County, respectively posting nearly 100,000 square feet and nearly 92,000 square feet in newly occupied space, according to CBRE.
Class A buildings in Broward County had the highest occupancy rates. Broward’s central business district saw its vacancy rate fall 3.8 percent year-over-year.
“The market is definitely improving,” Krasnow said. “Rental rates, with the exception of the core urban markets, will likely hold steady.”