The Weekly Dirt: South Florida office market in a tough spot

Investment sales have plunged but occupancy and rents have held up

The Weekly Dirt: South Florida Office Market in Tough Spot
Photo illustration of Ken Griffin and Steve Ross (Illustration by Kevin Rebong/The Real Deal)

South Florida’s office market is having a harder time than the industry has let on.

We knew investment sales were down compared to the record years of 2021 and 2022, thanks to the Federal Reserve’s 11 interest rate hikes in recent years, and skyrocketing insurance and other costs. 

But sales are down significantly compared to before the pandemic. 

Over the past 12 months, investment sales totaled $1.4 billion, according to CoStar. That’s a 34.5 percent and 46 percent decrease compared to deal volume in 2018 and 2019, respectively. It’s a much bigger drop from the nearly $5 billion in i-sales that marked a record in 2022. 

Still, the average price per square foot is higher than it was pre-pandemic, which confirms that office buildings have increased in value. And occupancy and rents are holding up. “You can’t take that part away,” says NAI Miami’s Jeremy Larkin. 

As Lidia Dinkova reports, new-to-market firms are no longer signing leases for South Florida office space, and some firms that leased during the boom have already backed out. The hype, propped up by billionaires Steve Ross and Ken Griffin, waned. Some landlords are facing mounting debt woes. Securing financing is hard, and investors have pulled back. 

“Miami has jumped the shark,” Larkin says. 

(For those not familiar with the infamous “Happy Days” episode, this refers to something that’s past its peak.) 

The Fed’s first rate cut, delivered last week, won’t make a big difference in investment sales, says CoStar’s South Florida market analytics director Juan Arias. And larger rate drops wouldn’t be good either because that would signal a bigger economic slowdown. 

“We will start to see a few of these distressed transactions trickle into the market,” Arias says. “I don’t see a significant recovery [in investment sales]. It will take time, and it will be a matter of years.” 

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What we’re thinking about: I’m hearing about a handful of condo developers who have not paid brokers their commissions for projects in the presale phase. Do you have a story to share? Send me a note at kk@therealdeal.com

CLOSING TIME 

Residential: Aviation entrepreneur Randall Fiorenza sold his 22.5-acre equestrian estate at 5141 Lasso Way in Wellington to Heidi Humphries for $11 million

Commercial: Lennar paid $52.5 million for nearly 75 acres in Parkland. Land assembler Brian Tuttle sold the land, which is next to Lennar’s Parkland Bay and Cascata at Miralago developments. The property is approved for 205 single-family homes. 

NEW TO THE MARKET 

A beachfront estate in Naples hit the market for $99 million with Gulf Coast International Properties’ Tim Savage. The nearly 3-acre property at 20 14th Avenue South includes a 4,822-square-foot house built in 1962. Investor and IT businessman Addison McElroy Fischer owns the property. 

— Adam Farence 

The Weekly Dirt: South Florida Office Market in Tough Spot
20 14th Avenue South in Naples (Getty)

A thing we’ve learned 

Developers pay less in capital gains on the profit on land held for more than one year, versus the income tax paid on the sale of condos. This may be why Integra Investments recently sold the land for the St. Regis Residences, Miami condo project to a joint venture it has with Related Group. Thanks to Robert Kaplan of Cushman & Wakefield for answering my question last week. 

Elsewhere in Florida 

  • A nine-foot alligator was “stalking” dog walkers in Sailfish Point, a neighborhood in Stuart. Two Martin County Sheriff’s Office deputies who are known as the “gator girls” “apprehended” the reptile while they waited for a professional trapper, WFXR reports. 
  • Gov. Ron DeSantis continues to fight an amendment on the November ballot that would overturn Florida’s six-week abortion ban. DeSantis and other Republican leaders in the state are using taxpayer-funded resources, including a state-run website, and are using election police to question those who signed the petition to get the amendment on the ballot, Politico reports. The ACLU of Florida and the Southern Legal Counsel asked a circuit court judge in Leon County to have the website shut down. 
  • The Miami-Dade County Commission approved a $12.7 billion budget for 2025, according to the Miami Herald. The budget doubles the county rebate for property taxes paid by low-income seniors, and it provides an additional $1.9 million operating subsidy for the county-owned Adrienne Arsht Center for the Performing Arts. It also rolls back $1.5 million in cuts to county cultural grants and provides more than $2 million for the overcrowded animal shelter system, among other spending items. 
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