Office supply rising across South Florida, rents not dropping

Average office asking rents rose in Miami-Dade and Palm Beach counties and remained flat in Broward in Q2, according to a report

Miami skyline (Credit: iStock)
Miami skyline (Credit: iStock)

Even with an onslaught of new office supply and the economic impacts of coronavirus, landlords did not give tenants a rent break during the second quarter, according to a new report from JLL.

Miami-Dade County’s office market was hit hard by the pandemic, due partly to its exposure to the hospitality industry. Interval International, a vacation and timeshare firm, consolidated to just two floors at its office building at 6262 Sunset Drive in South Miami, resulting in 43,882 square feet of negative absorption, according to the report. Windhaven Underwriters, Spectrum Brands, Starwood Capital and IMC Health moved out of space they occupied, causing absorption to drop to negative 358,838 square feet during the second quarter.

Yet rents rose, with the average office asking rent in Miami-Dade County reaching $43.22 per square foot in the second quarter, up from $41.30 per square foot in the same period of 2019, according to JLL’s report.

Over 900,000 square feet of office space is expected to come on line in the second half of this year, but only 22 percent of that space is already leased, according to the report.

Miami-Dade had an office vacancy rate of 16.4 percent in the second quarter, up from 15.3 percent in the second quarter of 2019.

Broward County

Broward County has a large amount of office space that is expected to be delivered — but that has not been pre-leased.

Over 519,000 square feet of office space is going to be delivered by the end of the year, but 258,126 square feet is still available for lease, according to JLL. Broward also has another 181,900 square feet of office space available for sublease, the report showed.

In Broward, leasing volume slowed to 22 percent of first quarter levels, and average asking rates stabilized at $35.41 per square foot after three years of sizable growth, according to the report.

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Still, fewer tenants ditched their office space compared to Miami-Dade. Broward posted a slightly positive absorption of 4,406 square feet, due to large move-ins from HCA, NationsHearing and Chetu.

Broward’s office vacancy rate was 13 percent in the second quarter, down from 14.5 percent in the second quarter of 2019, the report shows.

Palm Beach County

In Palm Beach County, leasing activity slowed by nearly 60 percent compared to the first quarter.

But other metrics show that Palm Beach County’s office market wasn’t hit as hard as the rest of South Florida. Absorption fell just shy of 100,000 square feet, bringing the year-to-date total to 213,780 square feet, according to JLL.

Average office asking rents rose to $38.13 per square foot in the second quarter, compared to $32.34 per square foot in the second quarter of 2019.

Palm Beach’s office vacancy rate dropped to 14 percent from 15.7 percent in the second quarter of 2019, the report shows.