While downtown Miami has been working to recover from the addition of three large-scale office towers, its neighbor on Miami Beach is quietly stabilizing.
Overshadowed by condominium hotels and a surging luxury residential market, Miami Beach has held a small but solid office sector, taking advantage of a tenant market that often has motivations different from its counterparts on the mainland.
“I would say that it’s healthier than downtown at this time,” said Alex Zylberglait, vice president of investments at Marcus & Millichap in Miami. “Downtown is a funky market, because you’ve got downtown Brickell and the new supply. Overall, I think it’s been a steadier recovery on [Miami] Beach because it hasn’t had the new supply.”
In fact, there are only a handful of Class A buildings in Miami Beach, headlined by properties like the LNR building on Washington Avenue and the Lincoln building on Michigan Avenue.
“The [Miami] Beach [office market] has been performing relatively nicely compared to what’s going on in the market,” said Steven Hurwitz, vice president and shareholder at Continental Real Estate Companies in Coral Gables. “It is a unique office market — it’s not as much of a commodity market as you’d find in downtown.”
Miami Beach typically attracts tenants with specific needs in mind that don’t revolve around high-profile signage and the formality of Miami’s Brickell Avenue, brokers say.
“You’re going to find a lot more corporate clients down toward the Central Business District, said CB Richard Ellis’ senior associate Chris Dekker. “On Miami Beach, you have a lot of people who want to live, work and play right there. It’s a little bit different attitude, a little bit different environment.”
It also brings tenants looking for smaller space. The average tenant in Miami Beach takes around 1,000 square feet less than the average tenant does in the CBD, Dekker said.
“They’re not your typical corporate America-type tenants,” he said.
Dekker said pure vacancy in Miami Beach was hanging around 12 percent, with rents down about 10 percent from what had been an average of $34 to $35 per square foot.
Historically, many tenants had been real estate firms, Hurwitz said. That trend has continued, with companies like Cervera Real Estate, which announced plans to open a Miami Beach office in South Beach, and Engel & Voelkers, which has already branched out to Miami Beach.
While it lives in the shadow of its imposing parking garage, the office component at 1111 Lincoln Road has continued to see strong activity, according to Hurwitz, who previously leased space to clients at the project.
“They maintain a very high occupancy [at 1111 Lincoln],” he said. “It’s a very nice project and what they’ve done on the retail side and on the garage side have only complemented the office component, and made it stronger.”
Summer is a slow season for most of Miami’s real estate market, but Hurwitz said activity has been good in the last few quarters on Miami Beach.
And in another sign of South America’s continued dominance of the local real estate market, the trend of Latin American firms opening up small offices in Brickell has come to Miami Beach, too.
“We’ve seen newer tenants coming in from South America who want to open up offices in Miami Beach,” said Michael Comras, principal of the Comras Company. “They’re moving their money out of South America and opening up new companies here.”
Overall, Zylberglait said the Miami Beach office market has been doing progressively better, led by creative types, from advertising companies to entertainment industry firms.
“It’s a good market with good tenants, but it’s not for everyone,” he said.