Hope that renters will fill Brickell’s unsold new condos has prompted a surge in leasing activity and bolstered the neighborhood’s commercial real estate prospects.
Touted as the next hot area of Miami’s condo boom, many towers stood unfilled until developers began renting units, and the response has given retail a push as well. New stores continue to open, cutting the vacancy rate by more than 50 percent. In the first quarter of this year, there was 63,000 vacant square feet of retail space in the Brickell corridor, whereas in the first quarter of 2008, there was 142,000 vacant square feet.
That’s welcome news for area realtors and developers caught in the market implosion of the past 18 months. But not all commercial real estate in the Brickell area is thriving. Retail leasing has improved, but office vacancies are rising.
“We are seeing a saturation of available office space because many businesses are cutting down or closing down altogether,” said Michael Suarez, a realtor-associate at Coldwell Banker’s Key Biscayne office. He has worked and lived in the Brickell area for 15 years.
The office climate is only going to get worse. Three office buildings are currently under construction in the Brickell area. When these buildings are complete and added to the neighborhood’s current vacant space, there will be more than 2 million unfilled square feet of office space available. High unemployment — Miami-Dade County’s unemployment hit 9.8 percent in May, the state work force agency reported — makes the trend unlikely to reverse.
“There isn’t a whole lot of demand right now, and many existing tenants are consolidating and downsizing,” said Hamid Shantiai, a commercial realtor with Coldwell Banker who works in the Brickell area and said he’s had few recent deals.
Empty condos still outnumber occupied condos in this district that was once going to be Miami’s next hot spot. Developers are now fighting against time and looming debt maturation, hoping to whittle away loan balances and huge unsold inventories.
“Closing dates have come and gone on a lot of these construction loans and the banks want that money so the developer is trying to buy time by leasing them out,” Suarez said. “I always tell people a buyer should never go looking for a condo on Brickell without a realtor because these developers are a lot more desperate than they seem.”
Of the 2,744 properties for sale in the Brickell area, roughly 1,800 are owned by developers. Prices have plunged. In 2007, an 820-square-foot one-bedroom condo on Brickell sold for anywhere from $296,000 to $319,000 ($369 to $388 per square foot). Now it’s tough to get more than $150,000 to $157,000 (about $190 per square foot) for that same unit. Any property with a sales tag of $450,000 or more has spent an average of 18 months on the market.
Brickell also has its fair share of foreclosures. Though there are only 10 active foreclosures listed, there are about 450 foreclosure filings in the court system. “These foreclosures haven’t reached the banks yet,” Suarez said. “They could sit in the court system a year, year and a half. People are learning they can stall the process by appealing things.”