Office rents head toward old peak
Office space leasing rates in downtown Miami and Brickell are rising up to reach the peak they were at before the realty market slide. While new inventory is being added, rental rates continue to climb as demand increases.
Class A space in Brickell now goes for around $43 per square foot, compared to the around $48 to $50 during the office space peak, said Christian Driussi, vice president of leasing at Brickell Bay Office Tower at 1001 Brickell Bay Dr. And rates are continually rising.
“Every couple weeks you get the feeling, whether it’s a quarter or a half a dollar, that there is definitely continued growth,” Mr. Driussi said. Greater Miami, and specifically downtown Miami and Brickell, have benefited from quicker recovery than other cities like Fort Lauderdale and Atlanta. Although office space rates are still below those in New York City, the international appeal and, of course, the weather have helped to buffer Miami rates.
Although office space rates are healthy and rising, the style of new-to-market tenant leases has changed. Today, while legacy tenants are expanding and snapping up more space in current buildings in anticipation of market growth, new tenants tend to start with much smaller spaces. It’s more common to see initial leases for 2,500 to 3,000 square feet, Mr. Driussi said.
Over the past few years, lenders have seen a constant reduction in vacancies and as a consequence, rates have risen and concessions granted after the market skid have vanished. “We expect this trend to continue for the years to come, mainly driven by improvements in the job market because there is going to be more need for office space,” he said.
Along with a recovering office space market, there has also been healthy development in downtown and Brickell. But while new space has been added in the past couple of years, demand has kept up with supply to keep vacancy rates down.
Currently, vacancy in Brickell is around 15%, and Mr. Driussi said he expects it to settle down to around 10%.
“Sooner rather than later, we are in a situation right now where it’s just a matter of time. You’re going to see a constant reduction in available space,” he said. “We still sit overall around 15%, but that is going to go down to 10% and then it will become a very, very strong market.”
The Brickell Bay Office Tower is currently 92% occupied, he said.
New projects like Brickell City Centre, which still have a way to go before coming online, shouldn’t greatly affect vacancy rates. At that point, demand will have grown, Mr. Driussi said.
“Since inventory really grew in the last couple years, each new building added is going to have less of an effect on the overall market,” he said.
Office space in downtown and Brickell had also been complemented by development on another front – residential. As more and more people are moving into those areas, the attractiveness has increased and demand along with it.
“It is a huge help,” Mr. Driussi said. “People start moving here and it becomes a 24/7 area where they can work, live and have fun.”