A combination of increased renewals, foreign investment and expansion
plans by law firms and insurance companies is helping South Florida’s
office market pull out of the recession.
Brokers say they’ve been seeing
more deals in the first part of the year, especially in the Miami
market, which had more than 2.1 million square feet of new office space
come online last year, led by new towers 1450 Brickell and Wells Fargo
Financial Center .
A third, 600 Brickell, is on
track for an August opening.
“We’ve seen a pickup in activity,” said William Holly, who recently made a high-profile return to Cushman & Wakefield as an executive director from his own company. “It’s an interesting phenomenon. “Some buildings are doing better than others and raising rates, but others — typically older buildings — are having to drop their rates.”
Merin said other firms were coming from other states in the U.S. to flee high-tax jurisdictions.
Rates are still relatively high, especially in the downtown Miami Central Business District, Holly said. “You’re at $43 per square foot [in the CBD], and around $32 outside in the suburbs,” he said. “You’re still seeing high rates on the asking rental rate because some buildings have lease terms that have gone out.”
That was largely due to landlords who have already renewed many of their leases choosing to keep their rates high, he said.
“The activity is probably about 80 percent current, existing tenants in the [South Florida] marketplace,” said Neil Merin, chairman of Merin Hunter Codman in West Palm Beach. “They’re either relocating or slightly expanding, and taking advantage of discounted market rents.”
According to Merin Hunter Codman, the overall vacancy rate has dropped throughout the tri-county area. Merin said Palm Beach’s rate had dropped to 21.7 percent from 29 percent. Broward County’s rates fell to 19.5 percent from 27.
Broward and Palm Beach counties have been attracting many of the U.S.-based tenants, with Miami seeing more foreign investment, particularly from Latin American tenants in the banking and finance sectors.
“In the office leasing market, things are getting better,” said Alex Zylberglait, vice president at Marcus & Millichap. “Concessions are lower than they used to be, with some exceptions — obviously you have the outlier being downtown Brickell with all of the new supply and the musical chairs they’re playing.”
Holly cautioned on reading too much into tenant immigration from out of market.
“Out of market deals get a lot of play, and everybody loves to see a new tenant come into the market,” he said. “But 95 percent of the tenants are already within the market, and are either growing and expanding, or contracting. So 95 percent of the deals are still intra-market deals.”
He pointed to buildings like 1450 Brickell, which have drawn significantly from tenants within the Miami market, like law firm Bilzin Sumberg.
Zyberglait said that, outside of the downtown Brickell market, he had seen a particular demand for space from companies in the health care field. A significant portion of that is part of Miami’s burgeoning health district, which is located near Overtown and west of I-95 in downtown Miami.