Downtown Miami’s office space may not sit dark, but leases may come at deep discounts in the years ahead. It’s a tenant’s market, which has tenant brokers seeing opportunity.
Howard Ecker + Company, a national commercial tenant representation company headquartered in Chicago, opened an office in Downtown Miami in December to focus on markets with high office vacancy rates.
Howard Ecker + Company is preparing for the onslaught of Downtown Miami office space in 2010. That’s when three large-scale buildings come online. In all, Brickell Financial Centre, 1450 Brickell and Met 2 will add 2 million square feet of office space to the Downtown area and offer competitive options to tenants whose leases expire in 2010, 2011 and beyond.
The Real Deal caught up with Howard Ecker, principal of the firm that carries his name, to discuss his outlook on Miami’s office market, the subleasing opportunities and what’s in store for the future.
Why did you decide to open an office in Miami?
Office vacancies in South Florida buildings have grown over the last several quarters, and according to the latest industry data, the office vacancy rate in Miami was 9.2 percent in the third quarter. We think it’s a great opportunity to represent tenants, because where there’s vacancy there’s a lot of negotiating room.
How much negotiating room?
We are already seeing renegotiations occur with tenants that have seven years to go on a 10-year lease. It’s a credit issue. If you are a good tenant with good credit, then you can renegotiate to lower your rent. Don’t worry that your offer will insult the lessor. It’s a business transaction. What’s the worst answer you can get?
Is this a good time for small businesses to get a great deal on a sublease?
Yes, you might sublease a space for $10 a foot that is going for $20 a square foot in some cases. But the real issue we are running across is the credit of the company that’s subleasing the space.
If you pay me to sublease my space, and I don’t pay the landlord because I have financial problems, then you are also out on the street — even though you’ve paid your rent to me. So there’s gold there, but it’s only gold if the person you are subleasing from has the money to subsidize the lease.
How can tenants protect themselves in that scenario?
The solution is to have the sublease holder post security equivalent to concession. If he can’t do that, you shouldn’t be subleasing the space.
What do you see going forward? Will things in Miami’s office market get worse before they get better?
I don’t think the full impact of the office economy has hit Miami yet. It’s just getting there. That means great opportunity for tenants and very difficult times for landlords. We see this shakeout continuing for a minimum of two years in the commercial field.
What about the green building trend? Will green office buildings in Miami fare better than their less eco-friendly counterparts?
Yes, I think green office buildings have a substantial advantage as long as the tenants in those green buildings are willing to be energy-efficient. Energy savings is a major issue. Green office buildings have the ability to operate at a lower cost assuming tenants turn off their computer and monitor every night and take other eco-friendly steps. You can have the greenest building in the world, but if the tenants aren’t willing to participate, it won’t be as beneficial as it could be for anybody.
Have you also moved into other new markets recently?
Yes. We moved into Detroit because Michigan offers incredible incentives for companies and huge volumes of space are going to have to be reengineered as the automobile industry shrinks.