Headlines portray Miami’s office market as a pandemic boomtown. While cities like San Francisco and New York suffer, Florida’s Magic City is wielding low taxes and a pro-business mayor to attract high-profile signings, including private-equity behemoth Blackstone, sandwich franchise Subway, and venture capital heavyweights Founders Fund and Atomic.
But a close look at the data tells another story — for now.
Office vacancies in Miami-Dade County jumped to 17.1 percent during the first quarter, up 4.6 percentage points from the first quarter of 2020, according to Cushman & Wakefield research. Net absorption remained in the red at a negative 257,000 square feet. Average asking rents, however, did climb up 4.1 percent to $42.41 per square foot.
While these figures are commendable for a pandemic stricken market, Miami’s office market is “by no means booming,” said Trey Davis, C&W’s associate director of research.
Landlords are staying bullish, given the activity and interest from out-of-market companies, Davis said. They are keeping rates up, particularly for shiny, coveted buildings that attract wealthy firms. Average asking rents for top-of-the-line, Class A buildings climbed to $48.14 per square foot, almost six dollars more than the rest of the market, according to C&W data. The Biscayne submarket, which includes the trendy Wynwood neighborhood, saw the largest gains with rents rising 15.4 percent from a year ago to $51.14.
Like in other cities across the country, Miami’s tenants are downsizing. During the first quarter, television network Discovery, based at 6505 Blue Lagoon Drive near Miami International Airport, slashed its office space by 64.4 percent; and law firms Hunton Andrews Kurth and Carlton Fields shaved tens of thousands of square feet from their office footprint when they relocated within the city, a JLL report noted.
That’s not to say there isn’t good news on the horizon.
Companies that expressed interest in opening new or expanding their current offices in South Florida have yet to sign leases. Consider Chicago-based hedge fund Citadel. Reports dating back to late-2020 state that the firm was searching for Miami office space. Fast forward to April, and there’s still no final word. A spokesperson for Citadel did not respond for immediate comment.
Other industry giants continue to scope out potential offices, without signing contracts. These include Microsoft, Apple, SoftBank, and Goldman Sachs.
“Transactions will take several months to evolve, from the time somebody first says, ‘I’ll evaluate a market,’ until they finally sign a lease,” said JLL broker Ryan Nunes, who represented Blackstone during its Miami office signing. “The data can’t capture” this phenomenon.
These businesses are “taking their time” before signing, because they’re still figuring out how their post-pandemic offices will look, said Adam Mopsick, co-founder and CEO of Amicon, a real estate consultancy firm based in South Florida.
In the second and third quarters, C&W’s Davis, JLL’s Nunes, and Amicon’s Mopsick predict that the market will roar back to life as deals are finalized.
“We’re getting inquiries on a daily basis,” Nunes said. So “when we look back at 2021, we’re going to say, ‘Wow — a lot happened!’”