Miami’s Office Market Surpasses Pre-Pandemic Absorption Levels

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The Miami office market did OK for itself in 2022, and the West Palm Beach area was not too shabby either, according to JLL’s fourth-quarter report. In Miami, at year-end, office rents were up and vacancy down compared to 2021, and space was being absorbed faster than more became available.

The vacancy rate ticked up by 0.2 percentage point to 16.4 percent in the final quarter of 2022, but fell by 3.1 percentage points year-over-year, just as average asking rents rose by 6.6 percent to $50.44 a square foot. 

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In Brickell, Miami’s financial district, the asking rent shot up by 20.6 percent year-over-year, averaging $79.70 a square foot. That’s largely thanks to 830 Brickell, the first office tower erected in Miami over the past decade. The 600,000-square-foot skyscraper nabbed leases spanning 100,000 square feet, or more, from the likes of Santander Bank, financial firm Citadel, and law firm Kirkland Ellis. Halfway through 2022, the 57-story tower, developed by Oko Group and Cain International, breached $100 a square foot in asking rent — a first for the Magic City. 

The net absorption rate outpaced deliveries by more than 100,000 square feet. Year-to-date, the market absorbed more than 644,000 square feet — surpassing pre-pandemic figures and

reaching its highest level since 2015. This year, the absorption is set to further jump as 830 Brickell’s tenants take occupancy, JLL’s analysts predict. Unlike most of the country, where tenants are relinquishing much of their office footprint, driving up the number of subleases on the market, Miami’s sublease availability has remained below 2 percent since the second quarter of 2021.  

Like Miami, West Palm Beach (and its uber-wealthy neighbor, Palm Beach) posted robust figures. Vacancies in the Palm Beach area remained at or below 10 percent for three consecutive quarters, ending 2022 at 10.1 percent. In Downtown West Palm Beach, the figure dropped to 6.6 percent. 

Simultaneously, the average asking rent rose 3.4 percent year-over-year to $45.07 a square foot, with Downtown West Palm Beach and Palm Beach island leading the pack, boasting a $70.31 per square foot average. 

Like Miami, West Palm Beach essentially had just one trophy building: Related Companies360 Rosemary, delivered in 2021 but now fully leased with Goldman Sachs and Elliott Management part of the tenant roster. Following the success of the 297,000-square-foot building, the New York-based company has launched other office projects, such as One Flagler, now under construction, and 515 Fern, which city officials approved earlier this month. 

Fort Lauderdale, the city sandwiched between West Palm Beach and Miami, remains the most overlooked market. While its vacancy rate was slightly lower than that of Miami at 15.9 percent during the fourth quarter of 2022, its asking rates grew minimally over the past year, increasing only 1.6 percent, averaging out to $38.02 a square foot. 

In a sign of developers’ lack of confidence in the Fort Lauderdale market, the city and its surrounding area had no new office projects come online last year, and only 75,000 square feet is set to be delivered this year. By comparison, Miami has more than 1 million square feet under development and West Palm Beach 600,000 square feet. 

Julia Echikson can be reached at jechikson@commercialobserver.com