Is Miami Really the Most Expensive Office Market?

MIAMI—Recent reports indicate that rental rates in Miami's CBD are among the highest in the country. While that may be true, the reality is that rental rates are just now stabilizing, reaching what they were in 2008. Based on the demand for office space in the area, its arguable that the prices should be higher.

GlobeSt.com caught up with Donald Cartwright, senior vice president of JLL, to get his thoughts on changes in rental rates and how occupancy rates will impact the market in the quarters ahead in part one of this exclusive interview. Be sure to come back to this afternoon's Miami edition for part two.

GlobeSt.com: How would you describe the changes in rental rates in Miami from pre-recession to now?

Cartwright: As the supply that was created during the recession gradually absorbed, asking rates for most buildings have risen to a level slightly higher than were quoted in the first half of 2008. In particular, leases that were signed in early 2008 are generating even higher rents due to escalation clauses in the leases, which we believe is more indicative of what we will see moving forward.

GlobeSt.com: As occupancy rates increase, will rental rates continue to follow suit?

Cartwright: Rents are driven by demand and limited supply. As long as the employment growth rate is healthy, rates will continue to increase.

While Miami has received some media attention lately as being one of the most expensive cities to lease office space in the country, the asking rates among the top tier class A buildings that were around in 1987 are still significantly lower than what they would have been if the asking rates had kept up with inflation.

For instance, the asking rental rates among those buildings in 1987 ranged from $28.00 to $36.00 per rentable square foot on a full service basis. If those rates remained proportionate with inflation, the range today would be $57.60 to $74.06 per rentable square foot.

The top tier class A buildings from that era, which continue to be the most sought-after in the Southeast, are those that have applied significant capital improvements to remain on par and beyond what the current market demands. Southeast Financial Center is an example.