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(Crystal Proenza is associate editor of Real EstateFlorida.)

MIAMI-Local brokers assert that the city’s office market is returning to equilibrium after enjoying all-time low vacancy and record high rents for class A space. Overall vacancy reached 9.2% in the second quarter, according to CB Richard Ellis’ latest market research report.

That’s a full percentage point increase from this year’s first quarter, yet still well below the national average, brokers say. They maintain confidence that the market’s strong fundamentals keep Miami insulated from the nation’s economic turmoil.

Rental rates have continued to level off after major increases over the past two years, as brokers had predicted last quarter. The class A average rate is $37.31 full service gross, up only 25 cents from last quarter yet $3.72 higher than a year ago, according to CBRE.

Cushman & Wakefield reports put Miami-Dade County’s Q2 overall average asking rents at $30.94 per sf. Leasing activity is down 9.9% compared to the first half of 2007, C&W reports, with no recovery in site until the end of the year.

“I am witnessing landlords becoming more aggressive to secure tenants in an effort to stabilize their respective projects prior to the significant supply that will be delivered in Miami’s CBD and Airport West commencing in late 2009 and 2010,” Alan Kleber, senior director for office brokerage services with Cushman & Wakefield of Florida Inc., states in the report. “This is particularly the case for landlords with a low basis comparative to recently traded assets.” Concessions are expected to continue into 2010 when 1450 Brickell, Brickell Financial Centre and Met2 deliver 1.9 million sf of new office space into the market.

The most significant lease of the quarter, and the first of the three buildings coming online, took place at Brickell Financial Centre. Bilzin Sumberg Baena Price & Axelrod LLP signed a a ten-year, 115,000-sf lease with an estimated value of $58M, with rent in the low-to-mid $40 per sf range, said Danet Linares, senior vice president and director of real estate services for Foram Group, in a GlobeSt.com story in April. Brokers add that companies looking for an alternative for those rising rental rates in the CBD are considering the Airport West and eastern Kendall submarkets, but have not yet seen any moves in that direction.

Office building sales have slowed due to bank restrictions, especially institutional transactions, says Alex Zylberglait, associate director of the national office and industrial properties group of Marcus & Millichap. Deals are getting done with somewhat different or creative financing structures, primarily in the form of seller financing, assumptions of existing mortgages and mezzanine financing, he says.

“I think lower-priced assets are performing better in sales velocity. Those with a lower price tag of under $10 million are still being traded,” Zylberglait tells GlobeSt.com. There also continues to be a disconnect between seller and buyer expectations in the market, brokers agree.

Of course, deals are still getting done, most notably by all-cash buyers. For example, the 237,286-sf 1401 Brickell Ave. was sold last quarter by Spanish bank Testa Inmuebles en Renta to Banco Santander, also a Spanish bank, for $114 million, or $606 per sf, according to CBRE. Last month, GlobeSt.com reported that the 207,000-sf class A Colonnade in Coral Gables was acquired by Deka Immobilien, a German open-end property fund based in Frankfurt, for $82.9 million in an all-cash transaction. C&W noted that both sales are proof of the strength of European currency driving international interest in Miami.

Medical office space is also getting a lot of interest, says Kirk Felici, regional manager of Marcus & Millichap’s Miami office, when asked about noticeable trends. “Many clients are requesting that product type, especially if it’s an on-campus product,” Zylberglait agrees.

“Miami is positioned well to sustain itself through the national economic shift,” states Scott Sime, CBRE managing director for Miami-Dade County, in a recent report. “The international business investment and the expanding life science industry ensures Miami’s place as a global business center.” A new 1.4 million sf Life Science Park being planned by the medical school at University of Miami is expected to draw that industry with office and laboratory space near Jackson Memorial Hospital.

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