Miami office vacancies, now near 20%, expected to soar this year
By Marilyn Bowden
Firms looking for office space in 2011 should have little trouble finding it in Miami. Vacancy rates, which remained stagnant at close to 20% in the first quarter of the year, are poised to soar with the arrival of still more new space later this year.
Foram Group announced an August opening for its 600,000-square-foot tower at 600 Brickell Ave., rechristened Brickell World Plaza. In Jones Lang LaSalle's first-quarter market overview, On Point, analysts called that imminent completion "the most compelling news for the office market" in the quarter.
"The delivery of nearly 600,000 uncommitted square feet by third quarter this year," Jones Lang LaSalle reports, "will certainly put a lid on any landlord's thoughts for raising rental rates."
That project and another 172,276 square feet due to open by year's end at 396 Alhambra in Coral Gables will translate into higher vacancy rates in the overall Miami-area market to start 2012. In its first-quarter Office Trends Report, Grubb & Ellis researchers project vacancy in the Central Business District to exceed 26% by the end of December.
"Along with last year's completions of 1450 Brickell and Wells Fargo Center," the Grubb & Ellis report states, "the district will have seen 1.9 million square feet of new product built."
CB Richard Ellis's first-quarter MarketView reports total vacancy countywide unchanged from fourth quarter 2010 but cites a loss of tenants in Southeast Financial Center and 100 S Biscayne Blvd. The Miami market as a whole, CB Richard Ellis reports, "continued to show signs of stabilization," with vacancy at 18.4%.
Cushman & Wakefield's first-quarter MarketBeat meanwhile calculated a vacancy rate of 18.6% for the quarter, up slightly from 18.5% in first quarter 2010. Jones Lang LaSalle establishes vacancy in the quarter at 21.4% in the Central Business District and 17.7% in the suburbs. Discrepancies in rate can be traced to the use of varying boundaries and properties to compute it.
"For the most part," Jones Lang LaSalle researchers say, "vacancy remained virtually unchanged over the past three months, with asking rates either flat or down just slightly."
With the health of the office market linked to employment, a number of office summaries for the quarter expressed optimism. Jones Lang LaSalle cited the drop in the national rate to a single digit of 9% for the first time since 2009, while reporting an improvement in the statistics for Miami to a still high jobless rate of 12.1%.
In its report, CB Richard Ellis added a note of caution that these slightly improved figures can also be attributed to "people no longer filing or qualifying for unemployment benefits." This report also notes that "Miami-Dade County was the only South Florida market to report a net increase in unemployment over the past year."
CB Richard Ellis analysts cite an increase in transaction volume as grounds for optimism. "Tenants still have opportunities to take advantage of the market conditions," they report, "but will not see the same concession packages offered as a year ago, especially from buildings with high occupancy levels."
Cushman & Wakefield researchers find more reasons for optimism in the continued rise in trade, which hit a record high in the dollar value of goods through area ports last year, and robust airport traffic figures. With the expansion of the Panama Canal, they speculate, "more companies will be looking to establish offices in South Florida to serve the demand for trade."
Jones Long LaSalle noted the Miami Custom's District alone handled nearly $100 billion in trade in 2010, and more than 36 million passengers passed though Miami International Airport.
The first quarter saw hikes in occupancy in Aventura and Kendall, according to CB Richard Ellis, but negative absorption characterized the Airport West, downtown, Miami Beach and Miami Lakes markets.
Jones Lang LaSalle puts asking rates at an average $41.33 for downtown Class A properties and $24.85 for Class B. Suburban rates, company figures show, average $32.18 for Class A and $24.18 for Class B.
However, actual deal prices have been considerably lower —— in the area's newest properties, 1450 Brickell and Wells Fargo Center, as much as $5 to $15 a foot less, Jones Lang LaSalle reports.
With most tenants coming from within the market, shifting vacancies from building to building without impacting overall market occupancy, competition among landlords remains fierce.
Grubb & Ellis forecasts "ample concessions" for prospective tenants with good credit.
Downtown landlords, Jones Lang LaSalle's report says, "will continue to be challenged by over-supply," with tenant enticements running from reduced rates or abatement packages on the front end of deals to generous tenant improvement allowances.
In this environment, Jones Lang LaSalle's analysts conclude, perks such as high-level LEED green-building ratings or on-site hotel facilities, price differentiators in a normal market, "really are no premiums," since "all landlords have been undercutting to attract users or retain their existing tenant base."
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