Decelerating leasing activity and rent growth across South Florida’s commercial real estate sectors are signs the region’s pandemic-fueled velocity is petering out, according to experts at the CCIM Institute Florida Chapter’s annual outlook conference.
Still, commercial real estate activity is expected to be healthy through this year.
Retail, especially grocery-anchored shopping centers, is outperforming other U.S. markets. Office rents are high and vacancies low amid a slump in new development. Industrial leasing prices are holding steady, but landlords are starting to offer tenant incentives. And multifamily is settling into a more normalized growth pattern after years of fast-paced development, panelists said at the CCIM conference, held at Florida International University’s south campus this week.
Retail
Retail is the darling in South Florida commercial real estate. The sector’s fundamentals are solid, and landlords have seen rent growth since the pandemic, said Franklin Street’s Carrie Smith.
“If you are a well-positioned asset, you’re probably feeling pretty good,” she said.
Grocery-anchored centers are still the most desirable assets, with occupancy averaging 95 to 96 percent compared to low 90s for unanchored properties, she said.
Seven of last year’s biggest retail transactions involved outdoor shopping centers, selling for a combined $636 million and representing more than half of the $1.2 billion in combined retail sales for the year’s top 11 deals, according to an analysis by The Real Deal. Half of the outdoor shopping centers in the biggest transactions are anchored by grocery stores.
Much of retail’s momentum has come from Florida’s population growth and business expansion, Smith said.
The state’s elimination of sales tax on commercial leases in 2024 was a “huge win” for retailers and restaurateurs.Miami retail rents are among the highest in the country.
“Miami market rents compared to the country are almost double,” Smith said. “You’re seeing rents in the mid-to-high $40s per square foot triple-net, and some topping triple digits. Supply is low for the demand we’re seeing — not only in this market, but throughout the Southeast.”
Office
The office market has experienced turbulence since 2024, after a boom in tenant demand and rents in downtown submarkets the previous two years, said CBRE’s Grant Killingsworth.
“The spigot of new tenants from the Northeast quickly dried out,” Killingsworth said. “We had landlords with debt coming due turning the keys back to the bank.”
Some office property owners faced more dire consequences last year.
A joint venture led by Boston-based Rockpoint sold One Clearlake office tower in West Palm Beach for $45 million in May, representing a 26 percent discount from its 2021 sale price. And New York-based R&B Realty lost Gateway at Wynwood, a Miami mixed-use project with 195,000 square feet of offices, in a bankruptcy auction in August.
Even so, high-end submarkets saw spectacular rent growth.
“Brickell went from $65 a foot to $150 a foot,” Killingsworth said. “That’s trophy pricing, the same as Midtown Manhattan.”
Signs Brickell is still booming include Spanish billionaire Amancio Ortega’s $275 million acquisition of the 30-story Sabadell Financial Center, and a $630 million refinancing for 830 Brickell, 57-story high-rise completed in 2024 by Vlad Doronin’s OKO Group and Cain International.
Other neighborhoods are benefiting from tenant migration.
“Coral Gables became very attractive,” Killingsworth said. “Financial companies that normally never went there are moving because commute times are less and it’s half the cost” of Brickell.
Looking ahead, the office market will hold steady, Killingsworth said.
“We’re out of the challenging debt cycle,” he said. “There’s not a lot of new construction planned in the next three years. I don’t foresee any major disruption in rents.”
Industrial
South Florida’s industrial sector hit a lull after several years of runaway growth, CommReal’s Edison Vasquez said.
Vacancy went from 5 percent to 6 percent, and it’s more of a balanced market, favoring tenants, he said.“We saw incentives from anywhere between six to twelve months of improvement allowances and moving expenses,” he said. “They’re doing what they can to avoid empty spaces.”
But sales are strong.
“End users will likely pay 10 to 15 percent more than investors, with user sales averaging $275 a square foot and some hitting $300,” Vasquez said.
Blackstone sold about $1.9 billion in warehouse portfolios to institutional buyers last year, he said.
This year will bring more rent stabilization and increased leasing activity, he said.
Land pricing has a disconnect. Sellers want $3 to $4 million an acre, while developers can only pay between $2 million to $2.5 million.
“This year will be key to resolving that,” he said.
Operators face headwinds from property taxes and insurance, but limited inventory should keep values high.
“People are waiting for prices to collapse,” Vasquez said. “We don’t see that happening. Prices will continue to stay strong due to limited availability and lower interest rates.”
Multifamily
Miami-Dade’s multifamily sector is entering an era of stabilization after years of extreme rent growth fueled by pandemic migrations to South Florida, Cushman & Wakefield’s Mitash Kripalani said.
The market peaked in 2021 and 2022, when capital was inexpensive and liquidity abundant, he said.
“Rising interest rates slowed down transaction activity, but pricing per unit has remained stable because of strong demand and disciplined investors,” he said
Development continues at a furious pace, especially in Miami-Dade. About 50,000 units are under construction across South Florida, and over 30,000 of those are in Miami-Dade, most of them in the urban core, he said.
“Developers are choosing dense, walkable, transit-oriented locations with strong employment drivers,” he said.
Some developers shelved planned projects and sold their entitled multifamily sites last year.
With borrowing costs expected to ease this year, Kripalani predicted renewed investment momentum.
“Stable occupancy, stable rents, and improving liquidity is setting the stage for a gradual recovery,” he said.