Justin Oates On How Cain International Disrupted the Miami Office Market

When OKO Group and Cain International began marketing 830 Brickell, their goals seemed a tad ambitious. The developers expected rental rates at the 57-story office tower in Miami’s central business district to top $100 a square foot, a level never achieved in South Florida.

Fast forward half a decade, and 830 Brickell is fully leased to a roster of prominent tenants, including Microsoft, investment giant Citadel, private equity firm Thoma Bravo, and law practices Kirkland & Ellis and Sidley Austin. And the rental rates on the building’s final deals are approaching $200 per square foot.

“I was confident we could get to $100,” said Justin Oates, senior vice president at Cain International. “We got there a lot sooner than I could have anticipated.”

Oates in 2019 joined Cain International, a privately held investment firm focused on real estate and other business opportunities. The firm has offices in Europe and the U.S., and manages more than $16 billion in real estate equity, real estate debt and private equity assets.

The trophy tower on Brickell, meanwhile, has reshaped Miami’s office market, which itself has been achieving record rental rates. Tenants began moving into 830 Brickell in September. The first user to set up shop was Banco Santander, which has 95,000 square feet in the building.

The tower was designed by architecture firm Adrian Smith + Gordon Gill, with interiors by Italian architecture and design company Iosa Ghini Associati. This summer, 830 Brickell secured a $565 million refinancing.

Cain International also is working on the renovation of the Delano, the landmark hotel in Miami Beach.

830 Brickell is part of a real estate portfolio being delivered across South Florida by developers OKO Group, led by Vlad Doronin, and Cain International’s Jonathan Goldstein. Those projects include Una Residences, a luxury condo on Brickell; Missoni Baia, a luxury condo in Miami’s Edgewater neighborhood; and One River, a rental project in Downtown Fort Lauderdale. OKO Group and Cain International also partnered on One Beverly Hills, a 17.5-acre mixed-use project.

The following interview has been edited for length and clarity.

Commercial Observer: Before the pandemic, $60 was the high-water mark for office space in Miami. You’ve blown past that. How did you know $100 per square foot was possible?

Justin Oates: In other markets, there’s a premium for the true Class A-plus properties. You look in New York, One Vanderbilt and a couple assets in Hudson Yards and on Park Avenue are just well ahead in terms of rental rate. When we started leasing in 2020, our rates were a slight premium to the market. And we’ve been able to push from there. The office space at 830 Brickell is fully committed. The average blended rate is well north of $100 a foot. I can’t disclose the exact number.

We’re really excited to deliver the first true trophy office tower in Miami. It’s been 10, 15 years since the last stand-alone office building was delivered. We’re delivering something on the quality level that doesn’t exist in the marketplace. Because of that, we’re attracting some new-to-market tenants who didn’t exist before. 

Both from a physical design and aesthetic perspective as well as from a technology standpoint, both tenant-
facing and behind the walls, 830 Brickell is the premium asset in the region. We have really good ceiling heights, floor-to-ceiling glass — no columns — so you have uninterrupted views of Biscayne Bay, Brickell and west to the airport. 

We’ve gone the extra mile in terms of amenitization. We’ve created an app for tenants. A lot of buildings have that, but we’re integrating it into our parking and café. We have a restaurant on the top two floors of the building. About halfway up, we have a fitness center. We’re bringing an amenity package and a hospitality package that will help draw people to the office.

I’m intrigued to hear you mention hospitality. In some ways, you sound more like a hotelier than an office developer.

OKO Group and Cain International both have experience in the hospitality sector. When you look at the office sector as a whole, you’re seeing a convergence with hospitality, given how much time people spend in the office.

How were you able to push rental rates so aggressively?

It’s a combination of factors. First, we realized there was not a true Class A-plus office property in Miami. We took a calculated risk. When we started planning 830 Brickell back in 2017, the top of the market at that time was in the $60s up to the $70s. It’s hard to quantify that premium above Class A space, but we knew we could get it.

We thought by building the best-in-class building, we could draw best-in-class tenants to the market. We saw the densification of Miami, and we thought Miami was reaching a tipping point. We thought we could draw the blue-chip tenants, and we were right in that. We took the calculated risk on building a building that had no competition. 

Beyond that, we had the benefit of a surge in demand. Miami is really shifting into a global hub for commerce. If you build it, the tenants will come, and 90 percent of the tenants in our building are new to market. We were able to time it right. We were able to capture the new-to-market demand.

Ninety percent of our tenants in the building are new to market. Most of the demand we captured was from tenants who decided, “We need to be in Miami.” We’ve tripled asking rents since starting lease-up of the project. The rents we can achieve are still a discount to buildings like One Vanderbilt.

How did the pandemic affect your lease-up?

When we look back to 2019, our best case was we expected we would have 30 or more tenants. The average tenant size in downtown and Brickell was around 5,000 square feet. We figured we would capture existing relocations from financial and law firms in Miami’s CBD. This is the type of space that national and international firms look at when they’re considering an outpost in Miami, or moving their headquarters. 

We ended up with fewer than 20 office tenants. We’ve kind of been the catcher’s mitt for a lot of these new-to-market tenants. If you’re a tenant that needs a decent amount of space, the only real option is a new building.

How is 830 Brickell’s success affecting the regional office market?

We’ve been the proof of concept. What we’ve done with 830 Brickell is prove there’s demand for premier office space in South Florida. There’s a huge follow-on effect. Creating a best-in-class product drives the premier, blue-chip tenants who can afford the rental rates. It’s a positive circular effect that should drive more activity in the future.

What was your biggest challenge with this project? 

The significant growth that was happening across the region simultaneously. When we started the project, it was before the market had started accelerating. Now, there’s a lot of construction happening across South Florida. It just creates more pressure on the contractors and the subs to maintain schedules and adequate staffing. It was a good problem to have.

Has the success of 830 Brickell spurred you to develop more high-end office space?

We’ll see. There are a couple of projects in the pipeline for Brickell. Our view is, net-net, the market will dictate how and when those get built. Most projects need to secure a significant amount of pre-leasing to get construction financing and get out of the ground. There’s a need for high-end office space, both in city centers and in some of the affluent suburban markets. If the circumstances and market conditions present themselves, we’ll do it, but there are no imminent plans. 

The lease-up at 830 Brickell happened during a difficult time for the office market nationally.

It’s clear the pandemic forced a rethinking of what office space should be. In order to have a thriving, successful business — and if you want to advance in your career — it’s really critical to be in the office. I believe that the office sector is correcting. It’s been a challenging few years for Class B and C office. Class A trophy towers, the market we’re in, has been doing very well. Miami has been the strongest office market in the country.

A lot of work-from-home dynamics that played out in the pandemic are starting to unwind. We’re approaching a point where everyone is expected to be back in the office. We’re seeing statements from Amazon and other key employers who are saying, “Work from home is over. Everyone is expected to be back in the office.”

Florida’s appeal for a long time was that it was affordable. As its home prices and office rents soar, is that advantage going to go away?

No, I don’t think so. I think of the people I know who moved here in the past five years. They can’t imagine returning to San Francisco or New York or London. The quality of life here is so superior to most other major global cities. It’s a very exciting place to be. 

From a cost-of-living perspective, a lot of people have woken up to the fact that Miami is a great place to live and do business, and that has driven up demand, which has driven up costs. It’s not a bargain like it was 10 or 15 years ago, but it’s still a discount.

Jeff Ostrowski can be reached at jostrowski@commercialobserver.com.