(Crystal Proenza is associate editor of Real Estate Florida.)
MIAMI-After the Foram Group’s Brickell Financial Center lost its anchor tenant, the law firm of Bilzin Sumberg Baena Price & Axelrod LLP, last week, the reality of the flood of unleased office space about to be delivered to the local market came to the forefront. Two of the three class A projects coming on to the market by mid-2010 do not have any tenants signed to date, and local experts say Downtown Miami will be flooded with available space when development is complete, but remain confident the new space will eventually be absorbed in the growing city.
Neither Foram Group nor Bilzin Sumberg would comment on the mutual release agreement for the 115,000-square-foot, 10-year lease at Brickell Financial Center, but Foram Group CEO Loretta Cockrum says the building is still expected to be delivered on schedule. “We have approximately, 320,000 square feet of prospects with several having signed letters of intent within the past 10 days and several more are expected to sign letters of intent within the next couple weeks,” she tells GlobeSt.com.
Competing building 1450 Brickell, being developed by Rilea Group, has 588,000 square feet of office space coming online without any signed tenants as of yet. “We are under a confidentiality agreement with roughly 250,000 square feet of tenants,” Rilea Group president and CEO Alan Ojeda tells GlobeSt.com.
Downtown’s third building under construction, Met 2, is currently 40% leased to multiple tenants including signed anchor Greenberg Traurig LLP, which is to occupy 150,000 square feet within the project’s 750,000 square feet of office space. Developers MDM Development Group and MetLife are close to signing another 100,000 square feet, says Mel Roth president of Parkland, FL-based International Mortgage and Equity Advisors, who arranged the debt and equity for Met 2.
Despite the positive attitude of the developers, there is much speculation in the market as to whether all three buildings will be completed in the original time frames, says Carter Hopkins, first vice president with CB Richard Ellis. “I don’t think any building owner would be satisfied with opening a building with 20% occupancy,” he says. However, he points out that Miami historically is not a preleasing town.
“People will have to walk through the buildings and see for themselves the quality and access each of them offer,” agrees Ojeda. He predicts that the region’s newest projects will not have a problem getting filled after they are delivered because they have a competitive advantage being the only downtown structures built under the new hurricane code.
“Tenants can stay in a 30-year-old building that has limited parking, or they can go to one of the new class A buildings that are green and high tech,” says Roth, adding that some tenants are still in expansion mode. John Sumberg, managing partner at Bilzin Sumberg, confirms that after ending its lease agreement at Brickell Financial Center, the firm is still seeking expanded space in Downtown Miami.
“We are looking at all of the options in the area that have 100,000 square feet, which include new buildings, old buildings or the building where we are,” he says of the company’s space at the Wachovia Financial Center at 200 S Biscayne Blvd., where it occupies 85,000 square feet. The firm needs to be in a new location by the end of 2010, and will probably make a decisions in the next four to six months, he reveals.
As for the future of the Downtown market, Sumberg says three new buildings is more than the region needed in good times. The state of financial institutions, which usually serve as major tenants in new buildings, isn’t helping the situation either.
“Regardless of whether or when any of these new buildings come online, we’re headed to a higher vacancy than we are now, and we’re already at 10%,” says Hopkins. And, on top of the nearly two million square feet in those three projects, don’t discount another 300,000 square feet coming online at the Omni Center just north of Downtown, adds Cushman & Wakefield senior director Alan Kleber.
“Every day that goes by, the market deteriorates,” Kleber tells GlobeSt.com, but it also gets closer to what he calls an “epic” tenant’s market. “There’s no better time than now to be a tenant as it relates to attempting to restructure leases in order to mitigate expenses.”