Year-End Employment Gains in Florida Push Office Market Fundamentals Higher
Employment in South Florida was on fire at the end of 2021, leading to interesting office market trends and upholding immense growth in the region. In South Florida, over 132,000 new jobs were reported in December, representing a 5 percent increase year over year, according to the Florida Department of Economic Opportunity. The unemployment rate also dropped to 3 percent for the region. The tightest employment market was in Miami-Dade, which experienced an unemployment rate of just 1.4 percent.
The largest block of new hires came from the leisure and hospitality sectors, but office employment saw a fair share of growth as well. Office worker employment surged to 28 percent of the total new hires in the South Florida region, representing 36,500 new jobs over the previous 12 months for roles in professional services, finance and information. Drivers of this increase in both the office and hospitality sectors included significant new-to-market relocations as well as additional confidence by companies for growth prospects going forward.
Another trend seen in 2021 was the flight to quality. Office tenants gravitated toward Class A buildings, and those dominated the market. Well-located and highly amenitized Class A assets captured 60 percent of all leasing deals in 2021, which totaled 7.4 million across the three South Florida counties. This resulted in over 107,000 square feet of positive absorption numbers for Class A buildings in 2021.
The overall office market in the region, however, closed out the year with negative absorption, meaning more tenants moved out than moved in. When looking by county, Miami-Dade and Palm Beach counties had positive absorption while office space in Broward County was weighed down by significant tenant move-outs in the first half of the year, pushing absorption to a negative 660,000 square feet.
A similar dynamic played out in terms of vacancies. Overall vacancy in the office market was 15.8 percent in the fourth quarter, a decrease of 130 basis points from year-end 2020. Palm Beach County had the largest decline in vacancy, falling 100 basis points to 13.1 percent. Even as new construction added large blocks of available space in Palm Beach County, those were quickly leased up.
Miami-Dade, on the other hand, had a modest increase in vacancies, up 20 basis points to 16.4 percent, after trending downward at the mid-year point in 2021. The main reason for the increase in available space was the delivery of new Class A construction, most notably the Gateway at Wynwood. In Broward County, substantial vacancy from the mixed-use Main Las Olas, which was delivered at the end of 2020, combined with the aforementioned move-outs, led to a 16.9 percent vacancy rate, up 230 basis points from the previous year.
Finally, overall asking rents rose 4 percent from year-end 2020 as space from new construction and building owner confidence pushed asking rates higher. In Miami-Dade, rent was $45 per square foot, which was 12 percent higher than comparable rent in Palm Beach County and 21 percent higher than asking rates in Broward County.
These office market trends, while mixed in certain areas, demonstrate the growth that’s to come for the South Florida region. While the omicron variant temporarily slowed momentum toward the end of 2021, South Florida’s economy is nonetheless poised and ready to bounce back in 2022, setting the stage for continued improvement in the region’s office market.
Chris Owen is director of Florida research at Cushman & Wakefield.