Reports: Miami-Dade office inventory grows as businesses shrink, become fewer
By Zachary S. Fagenson
Miami-Dade businesses looking to set up shop or move can expect to have a valuable bargaining chip as office inventory grows and the size and number of businesses shrinks.
That's the conclusion of first quarter market reports from CresaPartners and Marcus & Millichap. The commercial real estate firms predict unemployment to continue to rise in 2009 while another 1.3 million square feet of office space in downtown Miami and the Brickell Avenue corridor come online in 2010.
Marcus & Millichap reported that in the coming year, asking rents countywide are expected to drop an average 5.2% to $29.08 per square foot. What the landlord is likely to get will dip an average 6.4% to $23.94 per square foot.
Additionally, the report said that continued declines in office employment would increase the vacancy rate to 15.9%.
Meanwhile, CresaPartners' report said that in South Florida, the average rental rates per square foot for Class A and Class B are $40.44 and $27.05, respectively.
"It's clearly shifted from a landlord to a tenant's market and it will continue to go that direction for quite some time," said Charles Barton, principal of tenant representative CresaPartners in an interview. "It becomes a game of market share. [Landlords] will fight harder to keep existing tenants and they will find out if their assets have a competitive advantage."
He attributed these new opportunities to the contracting financial-services industry but also predicted local recovery will take "a lot longer than people think." Additionally, he said stabilization hinges on some of the same industries that have been accused of causing the recession.
"Look at the industries that make up our business community. They have been the most affected by the economy," Mr. Barton said. "I think what we need down here is for our financial and trade industries to recover.
"[This is] the beginning of what think is going to be a very nice long tenants' market," he added.
CresaPartners' first-quarter report predicts tenants can expect more concessions from landlords as well as more opportunities for rent relief or renegotiation in the coming year.
On the other hand, finding and keeping tenants will be a difficult challenge, according to Alex Zylberglait, associate vice president of investments for Marcus & Millichap.
"One thing that's key is being a proactive landlord," Mr. Zylberglait said in an interview. "Many fall asleep at the wheel and just expect tenants" to renew their leases.
Sweetening the deal with green initiatives and additional incentives is another move that could give some landlords a competitive edge.
"There are only so many tenants, and landlords are going to have to fight for them," Mr. Zylberglait said. "You can't change parking spaces or ceiling heights, but making sure your tenants are happy can go a long way."
Unlike Mr. Barton of CresaPartners, he said he expected "this to be a short-lived phenomenon" and that once significant moves toward recovery begin, the window of opportunity would close.