Coral Gables office market, with higher vacancies and lower rates, feels uptick
By Yudislaidy Fernandez
Coral Gables' office market isn't immune to poor market conditions dragging down leasing rates across Miami-Dade, as the exclusive business hub faces higher vacancies and lower rates.
Despite this, Gables office brokers say they're seeing an uptick in leasing and interest from anchor-type prospective tenants in search of a new address.
A plethora of space and pricing options is driving down rates at signature buildings in the Gables.
Alison Pages, senior vice president at Colliers International Gables office, says rates are falling as office buildings such as Alhambra Plaza and Columbus Center lower rates from the $40s per foot to the low $30s.
Length of leases is also varying.
"Landlords are considering short-term leases to get through the downturn, waiting to see if the market picks up," Ms. Pages said.
William H. Kerdyk, president and chief executive officer of Coral Gables-based Kerdyk Real Estate, says the city's vacancy rate is higher than in recent years.
The spike in vacancies and softening in rates, he says, stems from office condos turned rentals hitting the market and increased competition from downtown Miami and Brickell, where two new towers are adding 1.6 million square feet of office space.
The Gables' total vacancy now is 19.6% — higher than downtown's 16.6% and Brickell's 15.9%, according to a Jones Lang LaSalle first quarter market report. But that could change once Met 2 Financial Center and 1450 Brickell open as each still has a lot of space to fill.
Gables rates are still competitive. Average asking rates there for class A space is $36.86 per square foot, slightly lower than both downtown and Brickell, the report shows.
As some tenants take advantage of these more affordable conditions, leasing is picking up compared to last year, Ms. Pages said.
"We've been seeing a lot of activity from tenants who are looking for class A space at lower rental rates," she said.
For example, Ms. Pages, who handles the 27,000-square-foot, recently-renovated office building at 400 University Drive, just got Home Financing Center to return to the Gables from Doral. The financing firm leased the third floor and another 20,000 square feet are available, she said, starting at $32 a square foot including parking.
Gables Vice Mayor Kerdyk, whose Gables firm specializes in office and retail leasing, agrees activity picked up in the first quarter compared to that period last year.
"I believe people are starting to feel better about where their economy is at. Even though there are some holes in our market for sure, I have seen some more transactions in office and retail," he said.
Among leases closed in the Gables in the first quarter were Carolina First Bank, d/b/a Mercantile Bank, leased 18,767 square feet at 255 Alhambra Circle. Law firm Colson Hicks Eidson is to occupy the 17,000-square-foot penthouse previously occupied by BankUnited in that building, and the Consulate of Barbados is moving within the Gables to the 13,000-square-foot penthouse at 2121 Ponce de Leon Blvd.
Ms. Pages says the Gables is also benefiting from having no new office buildings finishing up this year.
But underway is a $130 million project at 396 Alhambra that encompasses rehabbing an existing seven-story office building and constructing a 15-story Class A office tower at the southeast corner of Alhambra Circle and LeJeune Road.
Nearby, Allen Morris Co. is also moving ahead with its Ponce de Leon Towers, a 210,000-square-foot luxury office building that's part of seven-acre Old Spanish Village.
The Gables-based company is going through the last project approvals before moving forward with plans and has two tenants committed, including itself and The Rockefeller Group. Mr. Morris has said he plans to begin construction by year's end to complete the 16-floor project by the end of 2012.
The city's central location and high-end amenities, including a wide selection of restaurants, stores and boutiques, is appealing for office executives, Ms. Pages said.
This is catching the attention of several large-scale banks said to be shopping for office space that are eyeing the Gables.
Mercantil Commercebank is looking for a 100,000-square-foot space, Gibraltar Private Bank & Trust is searching for 60,000 square feet and TotalBank has been touring the Gables and downtown for a 50,000-square-foot headquarters, according to the Jones Lang LaSalle report.
Mr. Kerdyk says office tenants often move to the Gables because of the quality of its office environment.
"Tenants like working in the city of Coral Gables," Mr. Kerdyk said. "It's not only a cachet name to have in their letterhead, but a good place for their employees to work."