New Office Tenants and New Development Balance Out Vacancy in Miami

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While the economy has had a turbulent few years — with a global pandemic, record inflation and political drama — the vacancy rate in Miami’s office market has remained fairly static, as the horde of new-to-market tenants was balanced by new development, according to second-quarter research from Colliers

In the second quarter of 2022, Miami-Dade’s vacancy rate stood at 11 percent across its 1,693 buildings totaling 94.3 million square feet, per the report. That marks the highest rate since the first and second quarters of 2021 when it reached 11.3 percent.

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That’s above the pre-pandemic baseline in the second quarter of 2019, when the vacancy rate registered at 9.2 percent — on 91.7 million square feet of office space citywide.

Andrew Hellinger, co-principal of Urban-X Group, has been the beneficiary of national and local businesses coming to set up shop in Miami. For example, his investment in the mixed-use River Landing, along the Miami River, has paid off. 

““The Health District, where River Landing is located, historically had a 0 percent vacancy rate. With the opening of the offices at River Landing, we introduced much-needed space to a tight market, which has leased much faster than we expected,” Hellinger said in a statement to Commercial Observer. 

The vacancy rate has remained more or less the same in Miami-Dade County despite the lingering concern that COVID-19 could stifle the return to office just as more office space was being added, Jonathan Kingsley, executive managing director at Colliers, pointed out.

“There is significant growth into South Florida combined with organic growth of existing companies who are expanding their footprints and upgrading the quality of the buildings and spaces in which they operate their businesses,” Kingsley said in a statement. “This has kept a healthy balance to offset companies and firms who are downsizing due to remote and/or hybrid work models.”

Developers have been building more in the last three months than they were in 2019 with 3.2 million square feet of office space under construction currently, compared to the 2.8 million being built in the second quarter of 2019.

Within Miami-Dade, the highest office vacancies were in the Wynwood District at around 27.7 percent and Downtown Miami with 22.4 percent — both popular areas that have seen recent deliveries. Class A suffered the highest vacancies as well, with Wynwood’s top spaces sitting empty at about 54.1 percent and 25.7 percent in Downtown.

Meanwhile, Hialeah Gardens saw the lowest vacancies in Miami-Dade, with the up-and-coming district having only 2.4 percent of its 792,137 square feet of office space — all Class B and C — available in the second quarter. Medley came in a close second with 2.9 percent of its 2.4 million square feet vacant.

In South Florida’s two other counties, vacancy rates weren’t too far off. Palm Beach County, with its 1,268 buildings and 52 million square feet of office space, had a vacancy rate of 9.1 percent, according to Colliers, while Broward County had an 11.7 percent vacancy rate within its 62 million square feet of 1,488 office buildings.

But recent hiccups in the economy are beginning to ripple through the market, particularly on the investment sales side.

“There are growing challenges on the capital markets/investment sales transactions for office buildings in recent weeks. Many buyers are forced to re-price (i.e. reduce) their offers based on increasing interest rates and cost of equity and debt,” Kingsley said in a statement. “Likewise, many owners who were considering sales of their office assets, are pausing until the debt markets settle and buyers return to more aggressive offers to purchase.”

Mark Hallum can be reached at mhallum@commercialobserver.com.