It was a stagnant second quarter for South Florida’s office market, a recently released report shows.
Vacancy rates crept up in some areas, asking rents mostly stayed flat and net absorption hit negative territory across Miami-Dade, Broward and Palm Beach counties, according to Colliers. The negative absorption rate in the tri-county region is largely due to new pre-leased buildings coming online with tenants not yet moving in, Colliers’ Kevin Gonzalez told The Real Deal.
“The net absorption lags when a new building is delivered,” Gonzalez said. “It is not tracked until tenants actually move in.”
Overall, South Florida’s office market is stable with some submarkets like Coral Gables and downtown Miami experiencing growth from tenants that can’t afford pricier rents in Brickell and Wynwood, Gonzalez said.
“Tenants being pushed out of Brickell are spilling over into surrounding submarkets. They started moving to Coconut Grove, then into downtown Miami. Now we are seeing activity in Coral Gables and near Miami International Airport.”
Leasing data compiled by Colliers shows that 49 percent of the 450,000 square feet of office space absorbed in Coral Gables during the second quarter represented tenants that moved out of Brickell, Gonzalez said.
Office tenants are also on the hunt for spaces in newer buildings since the pandemic has subsided, Gonzalez said. “There is a flight to quality,” he said. “Many tenants are upgrading as they look to get employees back into the office. They want employees to be excited about where they are going back to work.”
Miami-Dade County
The office vacancy rate hit 10.4 percent in Miami-Dade County during the second quarter, according to Colliers. It’s the fifth consecutive quarter that the county’s vacancy rate has hovered at about 10 percent, showing no signs of progress or regression in more than a year. In the second quarter, Miami-Dade also had a negative net absorption of 235,000 square feet, compared to a positive net absorption of 183,000 square feet during the same period last year.
The county had 4.9 million square feet of new office space under construction in the second quarter, compared to 3.5 million square feet during the same period of last year.
The average asking rent jumped to $51.90 a square foot in the second quarter, compared to $48.06 a square foot during 2022’s second quarter.
CP Group, owners of One Biscayne Tower in downtown Miami, had an active second quarter. Five new tenants, including Fintech firm Fundkite, signed agreements to rent a combined 32,000 square feet in the office tower at 2 South Biscayne Boulevard.
Broward County
In Broward County, the office vacancy rate climbed to 11.5 percent in the second quarter, compared to 10.8 percent during the same period of last year, Colliers reported. The county had a negative net absorption of 99,000 square feet, with 210,000 square feet of new construction during the second quarter. During the same period of last year, Broward experienced a positive net absorption of 207,000 square feet, with 599,000 square feet of new construction.
The average asking rent remained relatively the same. In the second quarter, landlords asked $36.70 a square foot, compared to $36.42 a square foot during the same period of last year.
During the second quarter, the 200 East Broward office building in downtown Fort Lauderdale landed five new leases and one lease renewal totaling 35,000 square feet of office space.
Palm Beach County
During the second quarter, Palm Beach County’s office vacancy rate rose to 9.3 percent, compared to 8.7 percent during the same period of last year, Colliers shows. The county experienced a negative net absorption of 514,000 square feet, with 1.2 million square feet of new office space under construction during the last three months. During the second quarter of last year, Palm Beach had a positive net absorption rate of 467,000 square feet, and 921,000 square feet of new construction.
The average asking rent remained flat, clocking in at $39.47 a square foot during the second quarter. Last year, during the same three-month period, the office asking rent in Palm Beach was $39.28 a square foot.
Investment bank Piper Sandler was among the new tenants in the county. The Minneapolis-based financial services firm leased 6,000 square feet at Esperanté Corporate Center in West Palm Beach.