Miami’s Tech-Leasing Boom Peaks as Projects Stall and Companies Balk

As the pandemic has wound down, so has the Miami region’s bid to become the next Silicon Valley, at least for now. Interest in cryptocurrency, which local leaders touted, particularly in Miami proper, has cratered. Venture capital investments in Miami have plunged. Tech leasing is down, with developers failing to land anchor tech tenants to launch new office buildings. 

All the while, San Francisco, despite the grumbles of top tech executives over its liberal politics and crime rate, has managed to stay on top, thanks to the emergence of the artificial intelligence industry. 

“Let’s just be frank about it: We were mixing the Kool-Aid without the capital,” said Miami-based venture capitalist Jeff Ransdell. “It’s like having a Ferrari in your garage with no gas.”

In the beginning, though, there was no shortage of excitement. Fed up with Bay Area liberals and locked up in their houses at the onset of the pandemic, conservative tech executives wanted an alternative. Miami became the answer. Unlike California, the Magic City and its host state offered unrestricted living, sunny weather and low taxes. Miami Mayor Francis Suarez turned into an overly supportive cheerleader, coaxing tech leaders to move. 

As they poured in, the newly minted transplants proudly extolled the city’s benefits. Bars in Miami Beach, Wynwood and Brickell hosted tech-themed happy hours nearly every night. Altogether, the hype created something of a movement and helped put Miami on the map as a budding tech hub. 

“That type of community and structure brought seriousness to the Miami market,” said David Seifer, a Miami-based lawyer who runs Bilzin Sumberg’s corporate practice, specializing in tech companies.

Miami made great progress. Microsoft and Apple, new-to-market tech giants, signed 50,000-square-foot leases in 2021 and 2024, respectively. Wynwood, a mural-filled neighborhood, emerged as a startup destination, attracting venture capital firms Atomic and Founders Fund, the latter of which was started by billionaire Peter Thiel, a co-founder of PayPal and an early investor in Facebook. Spotify opened a 20,000-square-foot Latin American headquarters, also in Wynwood, three years ago.

Amazon remains in the market. The e-commerce heavyweight is in advanced negotiations to take between 60,000 and 80,000 square feet at L&L Holding Company and Oak Row Equities’s Wynwood Plaza development, which remains under construction, according to sources familiar with the pending deal. 

Miami went all in on cryptocurrency, too. The city hosted the Bitcoin 2021 conference, which drew about 12,000 attendees, making it one of the first mass gatherings in the U.S. after the COVID lockdowns. FTX, the cryptocurrency exchange run by now-imprisoned Sam Bankman-Fried, won the naming rights for the city’s waterfront NBA arena as part of a $135 million deal. The City of Miami, at the behest of its mayor, created its own digital coin.  

But just two years into Miami’s experiment, crypto crashed (and has only mildly recovered). The meltdown dealt a stinging blow to Miami’s mission to shed its unserious, party-centric image. Interest rates were also steadily rising, which made it difficult for startups to raise capital and grow. This year, venture capital funding for Miami-based companies is on track to plummet, having recorded only $1 billion in deals during the first six months — a far cry from the $5.5 billion raised throughout 2022, according to data from Pitchbook. 

Office landlords that had banked on tech tenants have taken a hit, including Brick & Timber Collective. In 2022, the San Francisco-based investor purchased the Cube Wynwd, an eight-story office building in Wynwood, for $62 million, with Blockchain.com set as the anchor tenant. But the cryptocurrency tenant never moved in to its 22,000-square-foot office. Within four months of Brick & Timber’s purchase, the leasing brokers sued the landlord to receive their commission. 

The lender of the nearby Gateway at Wynwood office building sued the owner, R&B Realty Group this year, after it allegedly failed to pay back $102 million in debt, despite landing notable tech tenants, such as OpenStore, a startup cofounded by Keith Rabois, a prominent Silicon Valley venture capitalist who became perhaps the loudest and proudest proponent of Miami tech.

Wynwood as a whole has yet to recover. While the Biscayne corridor, which includes Wynwood, boasts some of Miami-Dade County’s highest asking rents, averaging $70.79 a square foot, it also boasts one of the county’s highest vacancy rates, hovering just shy of 20 percent, according to Cushman & Wakefield (CWK)’s latest data.  

So far this year, tech leasing across Miami-Dade County has slowed, generating 111,661 square feet in deals — less than half the previous year, which nabbed 227,717 feet in lease agreements, per C&W. The sluggish leasing pace has slowed the office development pipeline across town. During the height of the tech frenzy, developers were quick to announce office projects. Years later, many have yet to materialize. 

In perhaps the most public snafu, Stephen Ross’s Related Companies partnered with Swire Properties to develop an 80-story office skyscraper in the heart of Brickell, which could have become the city’s tallest building. So far, the joint venture has failed to secure an anchor tenant or reach a 30 percent pre-lease benchmark, typical requirements for lenders before they fund construction. 

“Miami is not a market that routinely signs 200,000-square-foot office leases. It’s not like New York City or Chicago,” Arnaud Karsenti, managing principal of Miami-based 13th Floor Investments, said during Commercial Observer’s annual South Florida development and investment event in Miami this month. “A big lease in Miami is 40,000 square feet.”

Tech companies, especially startups, don’t always have good credit ratings. Even smaller, 150,000-square-foot office projects, spearheaded by high-profile developers Goldman Properties and Dacra, have yet to break ground, despite being announced two years ago.

In the meantime, San Francisco and its surrounding region are staging a tech comeback. While still struggling with a glut of empty offices, artificial intelligence has breathed new life into the area’s tech scene and office market, accounting for more than 1.7 million square feet in leasing in the city alone since 2022. 

To level up, Miami is missing some key elements. For one, it doesn’t have the same breadth of tech investors as the Bay Area, according to Ransdell, who founded Miami-based Fuel Venture Capital in 2016. 

“You can have all the ideas in the world, but without the investor fueling that, it never happens,” the venture capitalist said. 

The region also lacks world-class universities. The Bay Area boasts Stanford and the University of California at Berkeley, which provide a steady pipeline of new entrepreneurs and sought-after hires. Even though the number of tech-centric jobs has grown in South Florida since 2020, companies are still struggling to fill all their open positions, making them hesitant to commit to years-long office leases, according to Alexandra Poses, an urban strategist at South Florida consulting firm The Euclid Group, who has studied tech hubs. 

It takes time to blossom into a tech mecca. “Silicon Valley has been around for 50 years, and Miami is only just emerging as a tech hub,” Poses added. 

Thanks in part to its proximity to New York, Miami’s recent quest to become the Wall Street of the South has fared better. The city landed the global headquarters of Ken Griffin’s sister companies, hedge fund Citadel and market maker Citadel Securities, from Chicago. The billionaire plans to build a 54-story headquarters tower, designed by world-famous architect Norman Foster, along Brickell’s waterfront. 

A slew of other high-profile financial firms also expanded their presence in Miami during the pandemic, including Goldman Sachs, BlackRock, Millennium Management and Point72 Asset Management — all of which are headquartered in New York. 

For others, however, these rebranding efforts, whether it be tech or finance, are nothing new for Miami. 

“There’s always a new fad that gets people excited. They use that to sell condos and to generate investment interest for office space,” said Peter Zalewski, a condo analyst and longtime resident of South Florida. “But, at the end of the day, it always craps out. 

“It’s like taking two steps forward, one step back. That’s how you progress when you’re a young community that’s 125 years old.”

Julia Echikson can be reached at jechikson@commercialobserver.com.