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MIAMI-With low interest rates and the lack of available land for new office construction, developers are pursuing office condominium projects. According to a CB Richard Ellis office condo white paper, there are currently 60 properties totaling 4.5 million sf of planned or completed office condominium projects within Miami-Dade County.

In recent weeks, work has started on several office condominium projects. North Miami-based NR Investments is converting a nine-story, 103,000-sf office building at 12250 Biscayne Blvd. into an office condominium project called the BLDG for an estimated cost of $20 million. It will feature ground-level retail space with offices ranging in size from 300 to 11,500 sf. Prices for the units will range from $255 to $330 per sf.

In addition, Jacksonville-based Flagler Development Group and Kenneth Weston & Associates broke ground on One Seventeen Professional Arts Center, a 133,000-sf office condominium project. The project is located within the Kendall Town & Country Center at the corner of SW 117th Avenue and SW 82nd Drive. “Southwest Dade’s residential and business communities continue to grow at a rapid pace increasing the need for medical services,” says Kenneth Weston & Associates Inc. president Kenneth Weston.

Among factors that have contributed to the increased interest in office condos includes low interest rates and limited office construction. As an example, CBRE points out that leasing class B office space in Downtown/Brickell can cost about $25 per sf based on current market conditions. Factoring in rent escalations over a 10-year period, the rate is closer to $28 per sf. By comparison, office space in the space area can be purchased for $400 per sf.

“Once you factor in components such as tax savings and the value an owner builds as the asset appreciates over time, the net cost of owning over a 10-year period is lower than renting, on a after-tax basis,” the report states.

Another factor behind the burgeoning office condo market is the economic infeasibility of constructing new office buildings. Currently there is only 250,000 sf of new office construction. New construction is hindered by many factors, such as the lack of available land, high construction costs and the rezoning of land previously designated for office development into other uses, such as residential.

Other office condominium projects undertaken by NR Investments in recent months include the 180,000-sf Museum Plaza class A office building in Fort Lauderdale and the 55,000-sf Office in Hollywood. NR Investment principal Ron Gottesmann tells GlobeSt.com that, when developing an office condominium project, location is a key factor. “I’m convinced that, in order to have a successful office condominium project, you must be located in an upscale neighborhood.”

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