South Florida’s office market earned a reputation in recent years of being immune to the slowdown in demand found in other parts of the country. The influx of out-of-state businesses pushed up asking rents at prime buildings to well-above $100 per square foot, a new high for the tri-county region.
Developers were eager to join the party. At the end of the second quarter, more than 7 million square feet of offices were under construction, a record for the past decade, according to brokerage Lee & Associates.
But the buildings are coming as major cracks are emerging in the South Florida office market –– raising doubts about the success of office leasing. New-to-market corporate moves have slowed, and many longtime local firms have downsized amid the hybrid-work and work-from-home shifts. Sublease availability swelled by nearly 30 percent in the second quarter, year-over-year. And data put a damper on the buzz that Miami is the next Big Tech mecca. Not only has tech leasing declined since 2021, but by some metrics, it has failed to surpass pre-pandemic levels.
The Real Deal looked at how some of the region’s most prominent office developments are faring with preleasing. Of six projects surveyed, half have secured tenants, but the rest are yet to score any preleases.
Historically, tenants tend not to prelease offices in South Florida, especially for buildings that are not yet under construction. Miami tenants want to see tangible space before committing, Brian Gale of Cushman & Wakefield said, adding that it’s a “If you build it, you can lease it” market.
Developers also aren’t likely to jump on the first firms that call, and are biding their time in hopes of scoring the highest rent. “They think the market is going to continue to go up, so if they sign up someone at $85 per square foot, it might be $100 [a foot] in 10 months,” said Robert Orban, of Cresa.
Still, stunted preleasing at some buildings could be another sign of a slowing market, Orban cautioned. He wouldn’t be surprised if developers who are hoping to lease their buildings in two to two and a half years actually end up filling them in six years.
“To hear these guys putting 1 million square feet of office space in the Miami market … it’s an extraordinary commitment. It’s very courageous,” Orban said. (Miami-Dade County as a whole has close to 5 million square feet under construction, according to Colliers.)
“I think the construction and development has been fueled by this idea that we will continue to have new-to-market tenants,” he said. “That will run its course at some point.”
Here are the buildings TRD surveyed that are faring well with preleasing — and those that are not:
The Ursa
When Craig Robins’ Dacra and his partners announced plans for the 15-story project, a news release said preleasing is underway. That was in March of last year.
So far, no space has been preleased, according to a representative for the development team.
Dacra partnered with Brookfield Properties and private equity firm L Catterton Real Estate, backed by LVMH Moët Hennessy Louis Vuitton, on the project at 30 Northeast 39th Street in the Miami Design District. The Ursa will have ground-floor retail, three levels of parking and 180,000 square feet of offices from floors five to 15, according to the project’s website.
Construction is expected to begin when the developers complete the city permitting process, according to the representative. Asking prices start at over $100 per square foot.
Wynwood Plaza
A 12-story, 266,000-square-foot office building that is part of the mixed-use Wynwood Plaza development is 16.3 percent preleased to two tenants.
Law firm Weitz & Luxenberg will open its first Miami office in an 18,000-square-foot space on the second floor. Marcelo Claure’s Claure Group, which is part of the Wynwood Plaza development team, leased the entire 25,400-square-foot eight floor for its headquarters.
Claure Group is partnering with L&L Holding Company, Oak Row Equities and Shorenstein on the 1 million-square-foot project at 95 Northwest 29th Street in Miami. It will include a 509-unit apartment building, 32,000 square feet of retail and a 26,000-square-foot public plaza.
The developers started building the project in March, about two months after they scored a $215 million construction loan from Bank OZK.
Gale, the Cushman broker leasing the offices, said the influx of out-of-state businesses continues. It will bring more companies from New York and Chicago, he said, where preleasing is more common among tenants, to help fill the rest of Wynwood Plaza’s offices by the time the project is completed in 2025.
WNWD21
The mixed-use project under construction in Miami’s Wynwood neighborhood will include roughly 63,000 square feet of offices –– none of which is preleased.
That’s because preleasing just launched this summer, said Colliers’ Kevin Gonzalez, the developer’s broker. The brokerage has had preliminary discussions with potential out-of-state and local tenants, including in the tech, finance and marketing industries.
The Pérez family’s Coconut Grove-based Related Group and Boston-based Rockpoint are
developing WNWD21, which will have a pair of 12-story towers at 2115 North Miami Avenue. The project will include 304 apartments, over 18,000 square feet of retail and a seven-story garage.
An entity tied to Related bought the 2.3-acre assemblage for $18.5 million in 2020, according to records.
Construction of the apartments is expected to top off this month, with the offices following suit next month, Gonzalez said.
Records show that Citibank provided Related a $9.3 million loan in late 2020, but the financing was assigned to Bank OZK and boosted to $117.1 million late last year.
Eighteen Sunset
The five-story project in Miami Beach’s Sunset Harbour neighborhood is two of the six surveyed by TRD that had high preleasing.
Developers Deco Capital Group, led by Bradley Colmer, and RWN Real Estate Partners, part of billionaire Marc Rowan’s family office, agreed to scrap plans for a fifth level residential penthouse in favor of adding a third level of offices, according to Colliers’ Stephen Rutchik, the landlords’ broker.
Overall, 85 percent of the 60,000 square feet of office space on floors three to five are preleased, said Rutchik, though he declined to disclose tenants’ names or lease terms.
Sources told TRD that the tenant that took about half of the fifth floor signed a deal for about $170 per square foot, triple net, marking one of the highest rents in South Florida.
New York-based investment manager Pretium Partners, which has over $51 billion of assets under management, last year took 11,600 square feet at Eighteen Sunset, the Miami Beach Economic Development Department confirmed. Also, an unidentified Toronto publicly traded firm has preleased an office, and restaurant Uchik took some of the retail space.
Eighteen Sunset, at 1759 Purdy Avenue, is expected to be completed in December.
T3 FATVillage
Hines and its partner, Alan Hooper and Tim Petrillo’s Urban Street Development, have big plans for Fort Lauderdale’s burgeoning FATVillage district.
While Hines declined to provide preleasing, data from Lee & Associates shows none of the space at the T3 FATVillage East office building is preleased. (The data was sourced from Lee & Associates and CoStar Group.)
The seven-story, 179,000-square-foot T3 FATVillage East will be part of the project’s first phase, which also will include a 24-story, 355-unit apartment building and a 13-story, 249-unit apartment building.
In a statement emailed through a spokesperson, Hines said it’s “in active discussions with several prospects” for the office building,
Construction is expected to start this year.
One Flagler
Ross’ One Flagler in downtown West Palm Beach is the second tower of the six surveyed with high preleasing.
The 25-story building under construction at the foot of Royal Park Bridge, overlooking Lake Worth Lagoon, is 75 percent preleased, according to Related’s spokesperson. Chicago-based private equity firm GTCR expanded its prelease to 26,000 square feet, up 16,700 square feet from its original lease.
Last year, Greek restaurant Estiatorio Milos, Siris Capital and First Republic Bank also preleased space at One Flagler. It is expected to be completed next year.
The project is part of Ross’ office empire in downtown West Palm. Aside from buying two towers and half of the ownership stake in a third, the firm also completed and fully leased 360 Rosemary Square. It also plans the 25-story 515 Fern, as well as the East Tower and West Tower at West Palm’s mixed-use The Square complex.
Through its spokesperson, Related declined to comment on 515 Fern’s preleasing activity. It confirmed that it secured some tenants at the pair of towers at The Square, but didn’t provide details.
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