MIAMI—As Miami's residential construction boom causes land prices to soar, the city's office market is feeling the squeeze. In fact, a new JLL report shows the Miami office market is experiencing the highest absorption gains in nine years and rents are reaching their highest level since before the recession.
But as developers and investors continue snatching up the last remaining prime land parcels and centrally-located office properties, such as the recent $140 million purchase of the 777 Brickell tower, to build decked out condos and mixed-use developments, what will this mean for the fate of the office market in Miami's urban core? We asked two experts in part one of this article.
“We've gone over two years of positive absorption with no new office developing coming online until next year with City Centre,” Scott Strickland, executive vice president at JLL, tells GlobeSt.com. “As a result we are seeing office rents rising and availability decreasing as quality space is absorbed. Finding quality space is becoming a challenge, especially for tenants seeking high-floor space with water views.”
As Strickland sees it, the high cost of land being driven by residential developers and the current rental rates being achieved for office space don't justify building new office product. Most local industry watchers agree with him.
Jim Shindell, Bilzin Sumberg partner and Real Estate Practice Group Chair, tells GlobeSt.com if it wasn't clear already, the epic sale of a 1.25 acre site in downtown Miami for $125 million this past summer crystallized this truth: Unless you already owned land, you wouldn't be developing office product in the Downtown Miami/Brickell submarket anytime soon.
“The next office product expected to come to online in this market are at Brickell City Centre and Miami Central, both large multi-sector projects where the developer already owned the land,” Shindell says. “As a consequence, existing core trophy office remains at a premium—with heavy competition among institutional and high net worth private and foreign investors for any assets that may become available.”
Come back to this afternoon's Miami edition to find out what Blanca Commercial Real Estate's Tere Blanca has to say about the topic.
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