Spec office development ramps up in Miami: report

Downtown Miami from Brickell Key (Credit: Ines Hegedus-Garcia)
Downtown Miami from Brickell Key (Credit: Ines Hegedus-Garcia)

Despite a flattening vacancy rate, a new report shows the number of upcoming speculative office projects in Miami is beginning to ramp up.

According to a mid-year report from brokerage Avison Young, Miami’s vacancy rate ticked upward year-over-year to 14.2 percent, while absorption — especially in suburban submarkets — rose significantly to 1.2 million square feet.

The relatively high absorption rate is a welcome change for Miami’s office market, which struggled with high vacancies during the real estate bust following a period of oversupply.

Miami Office Vacancy

Vacancy and absorption chart for Miami

But in the past year, it’s also led to a tightening market. A lack of new office construction, which competes for land with more easily developed multifamily projects, has led to a boom in rental prices. As previously reported by The Real Deal, downtown Miami and Brickell in particular are close to their previous peaks in 2008.

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According to the report, Brickell City Centre’s ability to lease 97 percent of its first office tower, Three Brickell City Centre, within months of it opening shows the appetite for Class A space from tenants.

Chart of office supply and new construction

Chart of office supply and new construction

About 2 million square feet of new developments in the pipeline could help close the demand gap: TIAA and Allianz Real Estate of America are partnering up to build a speculative office tower with nearly 250,000 square feet in their Waterford at Blue Lagoon corporate park near the Miami International Airport.

Work is already underway for Two and Three MiamiCentral, a pair of office buildings All Aboard Florida is developing as part of its MiamiCentral train station.

The largest project in the pipeline, Tibor Hollo’s super-tall One Bayfront Plaza, is still in the planning phase. If delivered, the project would bring 750,000 square feet of Class A space to the downtown area — along with a hotel, residential and retail component. — Sean Stewart-Muniz