Office shuffles likely with big leases coming up for renewal
By Marilyn Bowden
A significant number of large leases will come due in the next couple of years before new office buildings bring relief to tight markets, and brokers say those tenants are facing tough and sometimes risky decisions.
In Downtown Miami and Brickell, three new buildings are slated to open up in late 2009-early 2010 — the 600,000-square-foot Brickell Financial Center, the 585,000-square-foot 1450 Brickell and the 750,000-square-foot Met II.
"There are a fair amount of tenants coming up for renewal," said Don Cartwright, senior vice president at DTZ Rockwood. "Most the larger tenants in the Brickell-downtown area are on 10-year leases. Once they are in there, five-year renewal cycles are not unusual."
The most likely candidates for filling those buildings, he said, are tenants currently occupying space in the market who are thriving, need more space and can't be accommodated by their present landlords.
Among tenants generally known to be looking to consolidate or expand in new buildings in that area are Greenberg Traurig, UBS and Bank of America. But so far none of the new buildings has announced a tenant.
"There is always a risk and a cost involved in signing up early to move into a new building," Mr. Cartwright said, "because you are assuming it will be delivered on time.
"Any tenant whose space is up for renewal would look at all the opportunities, including the new buildings, but if you're in a competitive class A building, staying there is always the most economic option."
In Airport West, a significant number of leases of 10,000 square feet or greater will be rolling over by 2010, said Jorge Morales, vice president at Jones Lang LaSalle. "That is traditionally the size that would be going into new buildings," he said. "There are several over 40,000 square feet, in the anchor tenant range."
Mr. Morales said the largest block of contiguous space currently available in the airport area is 58,000 square feet in the east building at Crossroads at Dolphin Commerce Center, due at the end of this year.
"Doral Costa Office Park has a block of about 35,000 square feet," he said, "and Amadeus Center has one of 32,535 square feet. After that, they will have to wait for the new buildings."
New construction proposed or under way in Airport West includes 1000 Waterford, a 260,000-square-foot building in Waterford at Blue Lagoon; One Park Square, a 231,500-square-foot office tower in Shoma's Park Square at Doral; and the 160,000-square-foot Park Place at Doral.
"New buildings can offer longer terms, higher tenant improvement allowances and sometimes even a lower rate than existing landlords," Mr. Morales said. "The possibility of signage is another advantage.
"But there's the risk of disruption to their business if buildings don't get delivered as promised."
That risk is the biggest challenge for tenants contemplating a move, said Alan Kleber, a broker at Cushman & Wakefield.
"They take a significant risk of exposing themselves to a holdover," he said. "It will be interesting to see what happens.
"Most class A buildings are now owned by institutional investors, and they know when they have a tenant over the barrel.
"There will be a lot of leasing over the next three years across the market. Right now it's a tough market environment for tenants until the new buildings get built — and there's still a question of whether all will really get built."