Kenny Nachwalter, P.A., searched for new office space for three years. The Miami law firm considered purchasing an office condo, building a stand-alone facility or leasing office space in one of several new buildings coming online in early 2010.
After weighing all the options, Kenny Nachwalter decided to stay put. The firm recently signed a five-year lease renewal with an option to extend on its 22,904-square-foot space at Miami Center, adjacent to Bayfront Park.
Brokers say commercial tenants are putting off decisions as long as they can, and often taking the most conservative option when they act.
“We’re seeing an awful lot of tenants deferring leasing decisions right down to the last possible moment because they’re just not sure what their business plan is looking like. That attitude set in about a year ago,” said Jack Lowell, vice president of Miami-based Flagler Real Estate Services, which represented Kenny Nachwalter in the deal.
Kenny Nachwalter has been a Miami Center tenant for more than 26 years, but that didn’t keep the firm from exploring all the options in a depressed local market that now offers many choices. In the end, Flagler and Hank Klein, executive director with Cushman & Wakefield, helped the firm negotiate an attractive deal. Terms of the deal were not disclosed.
The negotiation wasn’t easy because ownership of Miami Center changed twice, as did the leasing company. Lowell said getting the landlord to adjust to new market realities was challenging, even after a major tenant, Stanford Financial Group, went out of business and abandoned four floors of the building. Occupancy at Miami Center is now about 85 percent.
Eric Groffman, a vice president in Transwestern’s South Florida office, which represented the landlord SCOA Miami Center in the transaction, said the negotiations spanned nine months. He said the consistency of the property management team and the credibility of the ownership helped sway Kenny Nachwalter. The law firm did not respond to requests for comment.
“There are a lot of new projects coming online downtown and people are expecting companies to jump from one building to another. The firm definitely had plenty of options in the market, but they saw no reason to leave,” Groffman said. “Even though the ownership changed hands, the management personnel didn’t.”
One issue that was never resolved was tenant security. Kenny Nachwalter initially sought a 10-year deal, but settled for about half that span. Lowell said law firms are not known as the best credit tenants. Many have gone out of business in the last 10 years.
“If you’re putting up $80 a square foot of tenant improvements for a law firm, how are you going to guarantee that this firm is going to be in business long enough to pay it back?” Lowell asked. “We’ve had some very interesting financial discussions brought about by the financial crisis over the last year and a half.”
The firm is remodeling its existing space, but the brokers declined to disclose if Miami Center offered concessions for tenant improvements.