Miami Office Market Makes Surprising Rebound
The South Florida office market has rebounded this year, but developers hoping for long-term success in the sector should already be paying attention to the popularity of co-working space.
Colliers International South Florida Executive Managing Director Ken Krasnow and Research and Consulting Manager Verity Mosquera spoke to Bisnow about Collier's Q2 market reports, and both experts say the most notable takeaways this quarter were in the office sector.
In Miami-Dade County, demand for office space this year has already dwarfed last year's, which Mosquera said surprised her.
“The net absorption in the first half of 2017 has already surpassed net absorption in the entire year of 2016," Colliers report states. "Year-to-date net absorption has exceeded 770K SF. Last year, the market had an abnormally slow start, with negative absorption in the first quarter."
The Q2 report notes that vacancy rates have consistently dropped quarter-over-quarter, and currently sit at a low of 9.4%.
In Downtown Miami, big players are expected to sign leases at Miami Central and Miami Worldcenter, Mosquera said. The Q2 report predicts that these two developments will drive rents beyond $60/SF. Cisneros, EY (formerly known as Ernst & Young) and Regus have already committed to Miami Central.
“It's a much-needed fix for downtown,” Mosquera said. “There's been a stagnant market for quite a while.”
Meanwhile, after 20 years with no new office space in Coconut Grove, projects are in the works at Mary Street, CocoWalk and 27@Lincoln. And in Coral Gables, WeWork is expected to open a 34K SF office on Ponce de Leon Boulevard with space for 550 members, an addition to its four already-thriving locations around Miami.
Traditional office builders would be wise to take note, Krasnow said. Even markets that have occupied more traditional offices, like banking and law firms, are experimenting with co-working spaces.
“What was seen as a fad is clearly affecting every office owner out there," Krasnow said. "They are dealing with it in different ways. They can ignore it at their own peril. But the concept is where the future of the workplace is going.”
Office lessors are adapting to the rise of co-working by offering upgraded amenities like gyms and cafés, or opening up collaborative spaces even in older offices.
Other observations from the Colliers report:
Broward has its hottest office market in a decade, with three notable office towers in the pipeline: the 550 Building on South Andrews Avenue, a new tower by Stiles at 201 East Las Olas (to replace the Broward College site) and another project at Two Financial Plaza. These projects will transform the city skyline.
In the world of retail, Miami-Dade's vacancy rate stabilized at 3.8% overall, with Brickell having the most empty storefronts with a 21.4% vacancy rate. In Aventura and Coral Gables in particular, there are strong rental rates of $42.98 and $40.73 per SF, respectively.
As consumers turn to e-commerce and expect their packages within a day or two, large distribution centers have become a necessity for vendors. Notable projects underway include the Pompano Center of Commerce Phase II and the Bergeron Distribution Center, both in Broward. But tenants are also creeping northward, looking for better rates. McCraney Property recently completed warehouses at Turnpike Business Park in West Palm Beach.
“A lot of strength in the industrial market is rooted in employment growth, population growth, the growth of ports and airports and the e-commerce revolution," Krasnow said. "We still think there's a lot of room to run in the industrial space.”