Miami's signature office buildings still see opportunity as tenants seek stability, security in a shaky economy
By Risa Polansky
Acknowledging challenges in a rough economy, leasing agents for downtown Miami's signature office towers say they still see opportunity ahead, citing longstanding reputations, stable ownership and impressive tenant bases as buoys.
Would-be tenants are looking for secure ownership in a shaky economy, says Eric Groffman, vice president with Transwestern, which leases the Miami Center downtown.
Sumitomo Corp. of America last year bought the more than 782,000 square-foot office building.
"You have an owner who is here to stay very long term," and the building will always be professionally managed, Mr. Groffman said. "It's a stable situation."
Donald Cartwright, director of leasing client solutions for Cushman & Wakefield in Miami, said the same of the Wachovia Financial Center downtown.
"The stability and history of the building… are more important today during the current economic times and do provide a higher degree of certainty to tenants," he said.
J.P.Morgan owns all interest in the nearly 1.2 million square-foot building after buying Macquarie Office Trust's 50% share last year.
"They [J.P.Morgan] are very familiar with the market and are an outstanding institutional investor, and that clearly as far as we're concerned is something we want to emphasize — the quality and the financial strength of the sponsor," Mr. Cartwright said.
In today's market, stability is beginning to take priority over newness, Mr. Groffman said, referencing law firm Bilzin Sumberg's recent decision not to move into Brickell Financial Centre, set to open early next year.
Now, "I think there's a little bit of a scare in their [tenants'] mind of being in these buildings with such potentially low occupancy when they deliver. …That bodes well, obviously, for the existing trophy buildings in the market that have stable ownership," he said.
The Miami Center's vacancy now sits at 5%, and the building is to be home to newly secured tenants such as the Bank of Nova Scotia, which last month signed a deal for 5,500 square feet.
Mr. Groffman said existing leases position the building well for the next couple of potentially economically bumpy years.
"Our rollover schedule is well-positioned to limit the building's exposure in the next one to two years," he said. "None of our large users are expiring or rolling over between now and 2011."
The 600,000 square-foot Bank of America Tower at International Place, another signature building downtown, faces a different situation.
Bank of America is to vacate 50,000 square feet early next year when its lease expires, said Tony Puente, senior vice president with Fairchild Partners.
The building is 95% leased now, he said, and will be occupied "in the high 80s" even when the bank leaves.
Several tenants are committed for the long term, Mr. Puente said — including the building's largest tenant, law firm Carlton Fields, which occupies 90,000 square feet.
Tenant Vector Group, which rents 14,000 square feet, recently renewed and extended its lease for five years.
One-and-a-half floors are to open up at the Wachovia Financial Center when financial services firm Deloitte Touche Tohmatsu vacates its space to move into the new Met 2 office tower on Southeast Second Avenue.
Mr. Cartwright said he hopes to hold on to tenant Bilzin Sumberg now that the law firm has scratched its plans to move to the new Brickell building.
Now, though, the Wachovia tower is 98% leased, he said.
At the close of last year, vacancies in the downtown office market hit 13.5% — more than 1.2 million square feet of space, according to a year-end report by Colliers Abood Wood-Fay.
Leasing professionals say they are wary of businesses reducing space as they downsize staff and expect subleasing to become a growing trend.
Though some predict rental rates in some buildings declining to adapt to the changing market, they expect pricing in the signature downtown towers to hold steady through the downturn.
"We have not seen a fall off in rental rates. We're not getting deep into concessions that have not been consistent with the past two years," Mr. Groffman of the Miami Center said.
Because of the building's reputation, stability and existing tenant base, there's a "tolerance" to continue paying $45 to $50 a square foot to rent in the tower, he said.
Mr. Cartwright of the Wachovia center said the same.
"The question of concessions is one that is a matter of market. What we are stressing, however, in this building is the old adage, "you get what you pay for.'"
He said "we are sensitive to the current economic situation," but expects tenants will see the value in paying for quality.
Rents in the building depend on the floor and run about $40 to $60 a square foot, full service, he said.
Space at Bank of America Tower rents for about $38-$44 a square foot, full service, Mr. Puente said.
The average full service rental rate in the downtown market at the end of last year was $45.49 for Class A space, according to the Colliers Abood Wood-Fay report.
Mr. Puente of the Bank of America building said he's willing to work with prospective tenants through the down market.
"We have an end goal that we need to achieve, but we can differentiate the different line items of the transactions," he said, such as helping offset moving costs.
"There are different things we're doing, and there are different things we can do," he said. "Creativity is the right word. We can be creative in how we structure these terms and conditions."
The same comes into play in improving the building's offerings.
In today's uncertain economy, Mr. Puente anticipates would-be tenants seeking smaller spaces faster.
"Because of the uncertainty in the marketplace, a lot of times tenants are not able to make a long term decision," he said. Rather, they may bide their time before making a move, then seek space in the shorter term.
Bank of America Tower will be positioned to accommodate the new trend, Mr. Puente said.
The building is to offer 2,000 square-foot to 5,000 square-foot pre-built-out spaces that will allow tenants to move in within 60 days rather than the usual four-to-six months it takes to design, permit and build offices — putting the tower in an "advantageous position," he said.
Plans are also in the works to enhance the building itself, in potentially adding restaurants and improving the fitness center and its services.
Improvements are also on the way at the Wachovia Financial Center.
The plan is to renovate the plaza area between the tower and its garage and potentially modify its retail mix, Mr. Cartwright said.
Restroom and common-area renovations are to begin soon on multi-tenant floors, he said, phased over a few years because of the sheer size of the 55-story building.
And though the tower has long operated environmentally friendly, the hope is to get it certified, Mr. Cartwright said.
Leasing agents for the office towers say they see opportunity in the months ahead.
Mr. Cartwright said he is actively promoting the space set to open when Deloitte moves out of the Wachovia building.
Marketing is well under way at the Bank of America Tower as well, Mr. Puente said.
"We are talking to different prospects and different tenants," he said. "Whether times are good or times are bad, we're always marketing."
The local office market is changing between the economy and the new buildings set to open, so "landlords have to be understanding of that," he said, and "do what it takes to get tenants in the building."