Downtown Miami Office Rents Make Massive Comeback

MIAMI—Miami's luxury condo market is getting plenty of attention on the international scene. But the urban core's office market is making waves of its own. In fact, a new independent study the Miami Downtown Development Authority (DDA) commissioned suggests office towers could be the hottest asset class.

Growing demand for office space among multinational companies and high barriers to entry for new office development in Miami's urban core are fueling falling vacancy rates, rising office rents and a surge of new investment. That's the conclusion of the DDA report, which assessed 18 million square feet of leasable office space in downtown.

“Nobody could have predicted that Downtown Miami's office market would reach stability just five years after the delivery of 1.2 million square feet of new space,” says Paul Lambert, managing principal of Lambert Advisory, which conducted the report on behalf of the Miami DDA. “Fast-forward to today and rents are approaching pre-recession levels as the inventory of available space continues to shrink, and the world's most sophisticated investors vie for entry into this market.”

According to the report, Downtown Miami saw nearly 450,000 square feet of positive office space absorption in the past two years, with companies from around the world entering the US market via Miami and existing businesses expanding. Downtown's workforce, the most accurate bellwether of office space demand, is expected to add 19,800 office jobs over the next five years. That's prompting a demand for new inventory.

Although this demand will be partially met when the 385,000 square feet of office space now under development comes online, the urban can easily absorb 200,000 square feet of new office development every two to three years so long as current trend lines hold, according to the report. Only 920,000 square feet is currently under construction countywide.

“From small businesses to multinational corporations, Downtown Miami is emerging as a sophisticated hub where real money is being put to work,” says Miami DDA executive director Alyce Robertson. “Downtown Miami is home to one of the largest concentrations of international banks and financial institutions. With over 60 international banks and 100 alternative investment companies that call the area home, it's no wonder why it has been dubbed by many as 'Wall Street South.'”

Coworking and shared workspaces are a growing trend in the urban core. The report suggests there is yet demand for shared workspaces. Meanwhile, small businesses taking less than 5,000 square feet dominate users in this market. The average tenant in the market takes about 2,500 square feet, accounting for 61% of the deal size.

“Record levels of unemployment, a stream of new-to-market tenants and a traditional lack of new office product in the urban core has created a perfect storm for commercial sector growth,” says Danet Linares, vice chairman of Blanca Commercial Real Estate. “Investors continue to see the value in downtown Miami's commercial real estate market because of its affordability, status as the Gateway to Latin America, influx of both global and domestic investors, and growing business diversity.”

MIAMI—Miami's luxury condo market is getting plenty of attention on the international scene. But the urban core's office market is making waves of its own. In fact, a new independent study the Miami Downtown Development Authority (DDA) commissioned suggests office towers could be the hottest asset class.

Growing demand for office space among multinational companies and high barriers to entry for new office development in Miami's urban core are fueling falling vacancy rates, rising office rents and a surge of new investment. That's the conclusion of the DDA report, which assessed 18 million square feet of leasable office space in downtown.

“Nobody could have predicted that Downtown Miami's office market would reach stability just five years after the delivery of 1.2 million square feet of new space,” says Paul Lambert, managing principal of Lambert Advisory, which conducted the report on behalf of the Miami DDA. “Fast-forward to today and rents are approaching pre-recession levels as the inventory of available space continues to shrink, and the world's most sophisticated investors vie for entry into this market.”

According to the report, Downtown Miami saw nearly 450,000 square feet of positive office space absorption in the past two years, with companies from around the world entering the US market via Miami and existing businesses expanding. Downtown's workforce, the most accurate bellwether of office space demand, is expected to add 19,800 office jobs over the next five years. That's prompting a demand for new inventory.

Although this demand will be partially met when the 385,000 square feet of office space now under development comes online, the urban can easily absorb 200,000 square feet of new office development every two to three years so long as current trend lines hold, according to the report. Only 920,000 square feet is currently under construction countywide.

“From small businesses to multinational corporations, Downtown Miami is emerging as a sophisticated hub where real money is being put to work,” says Miami DDA executive director Alyce Robertson. “Downtown Miami is home to one of the largest concentrations of international banks and financial institutions. With over 60 international banks and 100 alternative investment companies that call the area home, it's no wonder why it has been dubbed by many as 'Wall Street South.'”

Coworking and shared workspaces are a growing trend in the urban core. The report suggests there is yet demand for shared workspaces. Meanwhile, small businesses taking less than 5,000 square feet dominate users in this market. The average tenant in the market takes about 2,500 square feet, accounting for 61% of the deal size.

“Record levels of unemployment, a stream of new-to-market tenants and a traditional lack of new office product in the urban core has created a perfect storm for commercial sector growth,” says Danet Linares, vice chairman of Blanca Commercial Real Estate. “Investors continue to see the value in downtown Miami's commercial real estate market because of its affordability, status as the Gateway to Latin America, influx of both global and domestic investors, and growing business diversity.”