Miamis Office Market On The Mend
By Scott Blake
A newly released report and a panel of local commercial real estate professionals agree: Miami-Dade County’s giant office market is on the mend.
But this giant isn’t such a fast healer.
Although vacancy rates are declining in much of the area, it could be two more years before substantial recovery and the market tilts back in favor of landlords instead of tenants, according to the Commercial Industrial Association of South Florida’s annual Office Market Report.
The group released the report Friday during a luncheon at the recently opened Town Center One office tower in the Dadeland section of Kendall.
The event featured a panel on the issue, with the big question: When will the lingering effects of the real estate crash of past years dissipate?
"The economy is definitely doing better," said panelist Juan Ruiz, director at Codina Realty Services.
"But it will be two years" for a true rebound, he added. "The good news is at least we’re well-positioned for a turnaround."
The Office Market Report, which covers the first quarter of the year, also tabbed the turnaround at about two years.
"The office market remains a tenant’s market, however concessions are less generous than they were a year ago for Class A space," the report states. "Class B and C properties are still mired deep in a tenant’s market."
Class A is considered the most luxurious space.
The report adds: "It is expected that in approximately 24 months, the market will shift in favor of landlords as vacancies drop below 10%."
Real estate research firm Jones Lang LaSalle prepared the report for the association, which consists of professionals in the development, design, construction, sales and leasing of commercial and industrial properties in South Florida.
What the report’s findings mean will be that local office tenants should continue to enjoy depressed lease rates for a while, although those rates can vary substantially from place to place.
Overall, Miami-Dade contains nearly 35.5 million square feet of Class A and B office space, which was 20.4% was vacant in the first quarter, according to the report.
The average asking rent for that period? cOverall, it was $31.61 per square foot.
The report breaks down the county’s market into two categories. One is the central business district, which includes downtown Miami and the tony Brickell area, home of the city’s financial district.
The other is suburban Miami, which consists of Aventura/North Miami, Coconut Grove, Coral Gables, Kendall/Dadeland, Miami International Airport, Miami Beach and Miami Lakes.
Not surprisingly, Brickell had the county’s highest asking rents, averaging $42.02 per square foot for Class A space. Brickell also had the second-highest vacancy rate, averaging 24.8% for both Class A and B space, second only to a 27.9% vacancy rate in Miami Lakes.
Somewhat surprisingly, the lowest asking rents could be found in downtown Miami, averaging $22.17 per square foot for those willing to settle for Class B space. Meanwhile, the lowest vacancy rates could be found in Aventura/North Miami, which averaged 11.2% for Class A and B.
Another panelist, Danet Linares, executive vice president at Blanca Commercial Real Estate, was somewhat bullish about the market.
"The rents will go up," she said. "The concessions already are coming down in the properties where we have leased."
Mr. Ruiz, however, noted that much of the leasing activity overall is coming from companies and firms moving from other locations in the region.
"We’re not getting a lot of new market tenants," he said.
It’s not that there aren’t deals out there for tenants, said panelist Gregory Katz, executive vice president at Studley.
"We’re still seeing good deals in the trophy properties," Mr. Katz said.
What tenants are looking for, he added, is either "efficiency of space" — meaning they don’t want to lease more space than they absolutely need — or they’re seeking "flexibility of space for the future," meaning they want to be able to possibly expand someday.
Mr. Ruiz said he has noticed an uptick in business from Japanese and European clients.
"Instead of renting, they’re buying more now," he explained. "They’re looking for a place to park their money."
With the strong international influence of Miami’s office market, the outcome of economic troubles in Europe could have an impact on the office market here, said panelist Carol Ellis-Cutler, senior vice president and partner at Colliers South Florida.
"We’re monitoring the situation in Greece," she added.