Rising Miami Office Rents Reach Another Record
By Jeff Ostrowski October 26, 2023 4:12 pm
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Bucking the national trend of an office market in crisis, South Florida office rents keep rising.
Asking rental rates in Miami-Dade County soared to $59.46 per square foot in the third quarter, up 16.5 percent from a year earlier and setting another record, commercial real estate firm JLL (JLL) reported. Wynwood and Brickell remain the county’s most desirable office submarkets, with annual asking rents topping $90 a square foot.
In Palm Beach County, the average direct asking rate for office space was $53.32 per square foot, up 15.6 percent from the third quarter of 2022, JLL said. In Broward County rents rose a more modest 4 percent.
The spikes in South Florida rental rates come as office markets in much of the nation struggle. Work-from-home trends have hampered office occupancy to the extent that $32 billion in office properties nationwide are in distress, according to a recent report by MSCI Real Assets.
But in South Florida, signs of distress are rare.
“It’s a really healthy market,” Tere Blanca, founder and CEO of Blanca Commercial Real Estate, told Commercial Observer. “I know it’s hard to understand, given what’s happening in the office market elsewhere.”
In other parts of the country, office markets face headwinds. As interest rates rose, a wave of defaults hit office towers in Los Angeles, San Francisco, New York and Washington, D.C. The City of Chicago is incentivizing property owners to convert office buildings to residential. The City of Atlanta bought a landmark downtown office tower with plans to create affordable housing units.
But South Florida has benefited from an influx of employers and employees since the pandemic.
“We were open for business at a time when people were looking for that,” Zach Wendelin, a managing director at JLL based in South Florida, told Commercial Observer.
There are some signs that things are cooling. In Palm Beach County, office vacancy rose to 12 percent, up from 9.7 percent in the third quarter of 2022, JLL reported. In Miami-Dade County, vacancy rose to 16.3 percent in the third quarter, up from 15.8 percent a year earlier.
National office vacancy stands at nearly 18 percent, according to a new report from Yardi Matrix.
“Are we going to have 4.2 million square feet signed like we did last year?” Blanca asked. “I don’t think that’s going to be the case, but we have had 2.4 million square feet signed so far this year.”
The value of distressed commercial property in the U.S. climbed to nearly $80 billion in the third quarter, according to MSCI Real Assets. That was the highest level in a decade. Office made up the largest share of that inventory of distressed property.
But the story is different in South Florida, where the office market might be cooling a bit but is far from crashing.
“While we’re seeing a little bit of a slowdown, we’re still seeing strong activity,” Wendelin said. “There is a strong push to get people back to the office.”
Jeff Ostrowski can be reached at jostrowski@commercialobserver.com.
