Studley Broker: Now is Not the Time to Start Building Miami Office Space

MIAMI—Although some brokers can see the possibility of new office development in Downtown Miami soon—in fact, some is already planned—others aren’t so sure the market is ready for the next wave. A couple of interesting deals does not a recovery make and a lack of new construction in recent years doesn’t justify the need for new cranes, some say.

Chris Lovell, senior managing director at Studley, is part of those "some." Lovell took issue with an article called “Miami Could See New Office Development Soon.” In the article, Jones Lang LaSalle senior vice president Jonathan Kingsley noted that if Brickell Financial Center follows the lease up pattern 1450 Brickell enjoyed, “then now’s clearly the time to start planning for future office space to be delivered two to four years from now.”

Kingsley offered a big "if," but even "if," Lovell isn’t so sure. He points to overall vacancy in class A and class B buildings hovering at about 22%, with absorption of just more than 300,000 square feet in the past 12 months. If absorption continues at that pace, he says, Miami has seen it leaves a seven-year supply of existing new space to fill. That's another big "if."

“Law firms certainly do account for the majority of large renewal or relocation transactions, and many representative foreign banking offices are feeling very confident,” Lovell tells GlobeSt.com. “Although we have seen some minor impact of consolidations in the Spanish banking markets, South American and other European operations are beginning to expand.”

Some South American banks are increasing their presence including the BCI Miami transaction mentioned in the article. But Lovell rightly notes that BCI Miami is leaving behind about 10,000 square feet at 701 Brickell Avenue. Although the bank’s 13,000 square foot expansion is positive in many ways, he argues its impact on vacancy is trumped by Holland & Knight’s approximate 98,000 square foot renewal at 701 Brickell Avenue in which the law firm reduced its rentable area leased by about 10%.

“There is no doubt that Miami will continue to grow, but an overbuilt office market is not a healthy environment,” Lovell says. “With no indication of major shifts in employment over the next 24 to 36 months now is clearly not a time to start building.”