Microsoft Leases 50K SF As Miami Aims To Balance Tech Influx, Hesitant Return To Office
Cain International Vice President Justin Oates, a panelist at Bisnow's South Florida Office Outlook event Wednesday, described how the partners consciously set out to build something different from anything else on the market.
"Many of the marquee tenants interested in the building seek best-in-class space, and having a building like 830 Brickell is helping drive them to Miami," he told Bisnow.
Oates spoke about the lease as part of a larger discussion of the active South Florida office market, which is aided by the arrival of new companies but faces the headwinds of a youthful workforce that in some cases has only ever worked remotely.
Mariana Castro, vice president of sales, marketing and operations for Latin America at Microsoft, wrote on LinkedIn that the office would serve as a new regional hub and support other Microsoft businesses.
"The new location will also serve as a bridge to deepen relationships with our customers while navigating the ever-changing hybrid work environment and maintaining Microsoft’s high standards around sustainability and accessibility," she wrote.
She suggested move-ins would take place in mid-2023. 830 Brickell was designed by Adrian Smith + Gordon Gill Architecture, with interiors by Italian firm Iosa Ghini Associati. It will incorporate ultraviolet lighting in air filtration systems, touchless technologies, a health and wellness center, a rooftop bar and a restaurant.
Other tenants announced for the property so far include private equity firm Thoma Bravo, which is taking 37K SF. WeWork in 2019 announced that it would lease 146K SF over 10 floors, enough space for over 2,400 desks. Though it has canceled some of its other Miami leases since its failed initial public offering, Oates said WeWork's lease at 830 Brickell is still in effect. There is more on tap, Oates told Bisnow.
"We have another significant lease finalized that we can’t yet announce and are in discussion for over 300K SF of interest between LOIs, lease negotiations and engaged prospective tenants," he said.
The move by Microsoft is part of a bigger migration of tech and financial services firms to Miami.
"Strong demand has pushed rental rates up, ending Q2 2021 at $43.44 per SF full service, an 11.9 percent increase year-over-year," according to a Colliers International Q2 market report for Miami-Dade County.
The average direct asking rate in the Brickell submarket was $69.89.
Pebb Capital also announced it has acquired 1501 Collins Ave., a 100K SF trophy Miami Beach mixed-use building — previously the Bancroft Hotel and Ocean Steps building — in a joint venture with Maxwelle Real Estate Group, for $47M.
The owners intend to spend $20M on capital improvements and convert about half the building into what it calls super-Class-A office product, with a food and beverage program from LDV Hospitality, a spa, a fitness center and private beach access available only to a select number of members. The seller was an entity linked to Russell Galbut, managing principal of Crescent Heights, who will remain as a partner in the project, the announcement said.
Pebb Capital co-founder Todd Rosenberg, who was also a panelist at the Bisnow event, said in a statement that the deal capitalizes on strong interest in Miami Beach’s office market.
"It is a long-term value play in a submarket that historically has set leading market rates and has been supply constrained," Rosenberg said. "There is no better location to introduce an experiential office product."
Despite the activity, the market faces its fair share of headwinds. Cushman & Wakefield Vice Chair for Florida Brian Gale said a big challenge at the moment is building out spec office space. Incoming tenants "have a month or two before the lease expires," Gale said, but "it takes six months, seven months to build out a space, to build out 2K SF."
"I can tell you a lot of these guys won't show up six months prior," he said. "They want the space immediately. ... Do we build out spec, spend $100 a foot to build a 3K SF space, because construction costs have gone through the roof?"
Keystone Property Group Vice President and Regional Director Randolph Johnson said that employers are challenged in building now to accommodate Generation Z, which will dominate the workforce in years ahead.
"Their whole job experience has been to never really come to an office," he said. "Trying to get them to come is going to be extremely difficult. So what do we build?"
The panelists said that face time is still critical for businesses, but Allied Title & Escrow Managing Attorney Gabriela Lazaro and Swivel Chief Revenue Officer Bobby Goodman said they got few applicants when their firms posted jobs that required being in the office full time. When they offered a remote or hybrid option, they were flooded with applicants. Companies are wary that they will miss out on top talent if they require being in-office.
Panelists said the longer-term outlook on Miami as an office hub remains positive.
"Miami is the logical location to link Latin America with North America," The Allen Morris Co. Chairman and CEO W. Allen Morris said. "In North America, you've got the rich capital markets and high technical capabilities. You've got cheap labor and rich natural resources in Latin America, and you've got the second-largest international banking center in the United States here in Miami."
Integra Investments principal Victor Ballestas, who is developing a 144K SF office building in Miami Beach with Starwood Property Trust, said he met someone from California who decided to move his 24-person company overnight because he doesn't want to go back. For every announcement like Microsoft's, "there's probably 20 or 30 smaller companies doing the same thing," he said.
"I grew up in Miami," Ballestas said. "I've seen two or three boom-and-bust markets come through the city. Usually, it's the same speculation. It's the developers that go crazy, then South Americans that absorb everything, and at some point, the South Americans go back, or something happens in South America that's unsustainable. This time, it feels very different."