'The Money Never Stops Coming': Miami's Office Market Is Hot, Despite Pandemic
Plenty of people have been speculating about the end of the office since the coronavirus spurred a work-from-home revolution. But Brian Gale, vice chair of Cushman & Wakefield of Florida, has been seeing something different.
People have always come to Florida for sunshine and a lack of state income taxes, Gale said during a Bisnow webinar Oct. 20.
“But, my goodness, in the last month or two, it’s like every other day," Gale said. "We get inquiries from tenant rep brokers: ‘I need 5K SF, 10K SF.’ We've seen it up to 60K SF. I've been doing it 27 years and have never seen this amount of activity in South Florida for the office market that we're seeing now.”
Downtown Development Authority Executive Director Christina Crespi pointed out that Icahn Enterprises, Starwood Capital, Payless Shoes and Blackstone Group have all recently opened offices in Miami or announced plans to, lured in part by incentive packages that her agency helped arrange.
“We've been actively working with firms in the Northeast to come down,” Crespi said. “We've had about, I would say over the last month, 15 to 20 companies per week that we've been speaking to … We are seeing over 50K SF asks where we haven't seen that before. Our sweet spot was more of the middle, 100 and under employees.”
Part of the draw is financial, Gale said.
“If you make a million dollars a year and you live in New York City, you're going to net $535K," Gale said. "You live in Miami, you're going to net $640K. You actually keep over $100K more to live in South Florida. And things are less expensive down here as well. So it really sort of escalates from there, that's just on the income side.”
Justin Oates is vice president at Cain International, a development firm headquartered in London. It is partnering with OKO Group on 830 Brickell, a 57-story Class-A office building with wellness facilities, cafés and a 30th-floor Sky Lobby. Oates said that 830 Brickell will be a best-in-class product that hasn’t existed in Miami, akin to Hudson Yards or One Vanderbilt in New York.
“You're not going to get, just naming names, JP Morgan or Blackstone or whoever to go to a 1960s, 1970s, 1980s vintage building. You need to have the best-in-class product,” Oates said.
As for fears about climate change, Crespi said the region has strong building codes put in place after Hurricane Andrew in 1992. “I would say that that is all propaganda.”
Oates said Cain chose to move forward here despite climate-associated risks because the problem is not unique to South Florida. He said that the problem should be tackled with more public-private partnerships combining technology and infrastructure.
“I was in New York during Hurricane Sandy, and we had several office buildings in lower Manhattan that were flooded and it was a multimillion-dollar cost to move building infrastructure from the basement to the mezzanine floors," Oates said. "Miami is already ahead of that, in terms of how buildings are built.”
Gale said that Miami is attractive not only to Americans fleeing cold, high-tax states, but also foreigners. “We always say when Latin America is not doing well, we get a lot of flight capital here to Miami," Gale said. "When Latin America is doing really well, we get a lot of disposable income here in Miami. The money never stops coming.”
Newmark's South Florida office market report for Q3 found that in Miami, the third quarter saw over 424K SF of supply returned to the market.
"The office sector saw its largest quarterly correction since 2009. Year-to-date, Miami-Dade County recorded over 391K SF of negative absorption," it said.
However, the report noted, most of the vacancies came from small tenants, and owners have yet to decrease rents. The average asking rent in the sector is $38.53 per SF.
"Construction completion of new Class-A inventory push the averages upward," Newmark writes.