What Will Define Miami's Office Market in '16?

MIAMI—Miami's office market continues its rise from the doldrums. But what should we expect in the year ahead? Some say there's no slowdown in sight.

"In 2016, the Miami-Dade office market will continue to be defined by limited inventory that has driven lease rates up and brought down concessions," Keith Edelman, a principal in Avison Young's tenant representation division in Fort Lauderdale. He's looking at specific submarkets and asset classes.

"Within the CBD—Downtown and Brickell—large blocks of space are limited and those options available will be at higher rates, particularly for class A product, as new office development lags behind other developments, such as condos and retail construction," says Edelman. "Look out in the new year for the production time for architectural/engineering construction drawings to possibly be impacted due to Miami's significant and steady pace of new development."

Practically speaking, the demand for Miami office space should continue rising. Payrolls will expand 2.8% in 2015 through the creation of 31,000 positions, including 9,000 office-using jobs, according to Marcus & Millichap.

The firm reports developers will complete 450,000 square feet of space in 2015, primarily in competitive buildings. Only 121,000 square feet was placed in service during 2014.

During 2015, vacancy will tumble 130 basis points to 13.6%, nearly duplicating last year's 150-basis-point fall, the firm predicted. Tighter vacancy will support a 3.8% climb in the average rent this year to $30 per square foot, surpassing the gain of 2.1% in 2014.