Miami office vacancies rise, as do new towers
By Marilyn Bowden
More space translated into higher vacancy rates for the Miami office market in third-quarter 2011 with the entry of 615,000 square feet at Brickell World Plaza, 600 Brickell Ave.
It's the last addition to a market that has been inundated with new product for some time, suggesting that the record high vacancy now characterizing Miami's core represents a kind of bottoming out in terms of unoccupied space.
It's not the end of new product in Miami-Dade, however. Under construction, several third-quarter market reports from local brokerages note, are a number of new projects.
Jose Bromberg's Aventura Optima Plaza will add 122,000 square feet to the North Miami area. A 39,000-square-foot project is under construction in South Miami at 5966 S Dixie Hwy.
Three new projects will alter the Coral Gables skyline. One is the new 172,000-square-foot North Tower at 396 Alhambra, scheduled for completion by year's end. According to Jones Lang LaSalle's third-quarter Office Outlook, Citibank has signed for 5,550 square feet there.
The Building, a 58,000-square-foot office tower at 2990 Ponce De Leon Blvd., is 57% preleased, according to Jones Lang LaSalle. Tenants include Zubi Advertising, Mas Group and Sanchez-Medina law firm. Projected completion is the end of 2012.
Allen Morris Co.'s Ponce de Leon Towers, a 203,000-square-foot, 16-story office project at the former Old Spanish Village site, is tentatively scheduled for a construction start in mid-2012, Jones Lang LaSalle reports. An executive suite center affiliated with the Rockefeller Group has preleased 24,500 square feet, and the developer will relocate its 7,000-square-foot headquarters there.
The backdrop for office leasing and construction countrywide remains gloomy.
"The US economy," states the Third Quarter 2011 Studley Report for South Florida, "appears to be on the verge of falling back into recession. Over the course of the summer, retail sales declined, manufacturing production fell and business as well as consumer confidence weakened."
Bucking that trend, Studley and other analysts note, the Miami-Dade office market showed modest improvement during the quarter. "Deal volume increased," Studley summarizes, "as area businesses signed long-term leases to lock in very tenant-favorable terms."
Studley's numbers show leasing up 9.5% in the quarter, with Miami-Dade accounting for 1.1 million of 1.8 million square feet of South Florida market activity, a 60.1% hike from the previous quarter, and a drop in Class A availability to 21.6% from 23.3% a year ago.
Optimism on the landlord side is still in evidence, Jones Lang LaSalle researchers say.
"Existing buildings with higher occupancies are fairly optimistic and are working to hold up rental rates," the company reports. "Additionally, new buildings are pushing for mid-$40 per square foot strike rates, often by offsetting higher rates with large concession packages."
Low-occupancy buildings, the report continues, must combine low rates with large concessions to lure tenants.
In MarketView, its quarterly report, CB Richard Ellis — also known as CBRE — cites a "wait-and-see mode" in the Miami market as larger tenants opted to renew rather than relocate. The three largest transactions in the quarter, CBRE notes, were Crispin Porter & Bogusky, renewing close to 70,000 square feet at Mayfair in the Grove; Genovese Joblove & Battista, renewing for 46,000 at Miami Tower, and Aon, renewing for 38,000 at 1001 Brickell Bay Drive.
Each company reporting on the office market uses slightly different parameters, resulting in generally modest variations in vacancy and lease rates. Grubb & Ellis Office Trends for the quarter puts vacancy in Miami's core at 23.7%, suburban vacancy at 17.7% and overall vacancy at 18.8%, down from 19.8% a year ago.
Jones Lang LaSalle measures third-quarter vacancy in Miami's core at 24.7% and suburban vacancy at 18.9%, or 21.1% overall.
Average asking rates at the higher end, Jones Lang LaSalle finds, range from $37.76 in Brickell and $35.32 downtown to $32.23 in the Gables and $35.09 in Aventura. Low average asking rates of $24.05 were found in Miami Lakes, $24.91 in the Miami Airport market and $27.74 in Kendall.
Cushman & Wakefield's third-quarter MarketBeat cites the new stadium for major league baseball's Miami Marlins, opening in second quarter 2012; the Port of Miami Tunnel project, due to complete in second quarter 2014; and projects in the works by the Genting Group and Swire Properties in the Biscayne Boulevard corridor and Brickell area, respectively, as indications of better times ahead.
These, the Cushman & Wakefield team says, "bode well for Miami-Dade's economic future, while strong trading partners in South America play a key role in future economic growth."
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