(This story, in slightly different form, originally appeared in ALM’s Daily Business Review.)

MIAMI-Landlords of existing local office buildings are going on the offensive. Faced with a glut of new space and the continuing effects of the recession, managers and owners of buildings in the Downtown and Brickell financial districts are scrambling to maintain occupancy levels by fast-tracking building upgrades and offering more generous rental deals.

More than 1.2 million square feet of space are on the way. The Rilea Group’s 576,379-square-foot 1450 Brickell project is to be completed in the first quarter of 2010, while MDM Development plans an April 2010 completion for the 750,000-square-foot Met 2 Financial Center project.

To keep their properties competitive, the owners of the Wachovia Financial Center, Bank of America Tower at International Place and 800 Brickell are pumping millions of dollars into improving their buildings. They hope tenants place more value on improved office buildings with name recognition and stability than the allure of a new tower.

“Existing building [representatives] are working hard to reemphasize the attributes their building offers,” said Don Cartwright, director of leasing at Wachovia Financial Center for Cushman & Wakefield. “Quality, security and stability sells.”

Wachovia, the tallest office tower in Florida, is in the midst of an $8.3-million capital improvement project, Cartwright said. The outdoor plaza of the 55-floor Wachovia building is being renovated to attract new restaurants and retailers; the public bathrooms are being improved; and new escalators will be installed. The improvements are expected to be finished by April 2010.

Owner JPMorgan Chase is applying for Leadership in Energy and Environmental Design gold certification for the tower. Gold certification has already been awarded to 1450 Brickell.

The Wachovia building, which is 98% occupied, will lose two tenants next year: the accounting firm Deloitte, which is moving to Met 2, and law firm Bilzin Sumberg Baena Price & Axelrod, which signed a lease at 1450 Brickell in September.

Closer to Interstate 95, Wealth Capital Management is putting between $1 million and $2 million into Bank of America Tower at International Place, says leasing director Tony Puente, senior vice president of Fairchild Partners. Improvements are being made to the fitness center, Sky Grille restaurant, public bathrooms and common areas.

Occupancy at the Downtown Miami tower is expected to drop to the mid-80% range when Bank of America’s lease expires in December 2010. The bank is consolidating offices into 80,000 square feet at its offices at 701 Brickell Ave.

For now, Wealth Capital is more focused on retaining existing tenants than replacing the bank, Puente says. Law firm Carlton Fields, financial services giant UBS and Thomson Reuters, a financial news and information provider, renewed their leases at the tower earlier this year.

“We have been proactively communicating with tenants who even have two or three years left on their leases,” Puente says. “Our position is that we are a mature, stable building with solid ownership in a good financial position.”

Stiles is in the midst of enhancing 800 Brickell by renovating its outdoor plaza. The firm lured TotalBank from 1101 Brickell. The bank opened a branch on the ground floor at 800 Brickell.

There was one bit of good news for landlords recently: Construction of a third major office development in Miami, Foram Group’s 600,000-square-foot Brickell Financial Centre, has slowed to a crawl with no financing and no planned delivery date. That reduces the amount of office space coming to market in the middle of an economic downturn.

Meanwhile, tenants are taking advantage of a favorable office market by increasing pressure for substantial rent reductions, concessions and improvement allowances. The challenge for landlords is to determine how far to go with rent reductions and concessions, brokers say.

Gross rents in class A office buildings in Miami averaged $48 per square foot in the third quarter, according to Cushman & Wakefield. But landlords are actually offering rates substantially less than the market average, says John Marshall, a senior director at Cushman & Wakefield who represents several tenants in the central business district.

Bank of America Tower at International Place is quoting gross rents between $34 and $39 per square foot. By comparison, Flagler Real Estate Services is advertising space at 1390 Brickell for $32 per square foot. While terms of the leases signed by 1450 Brickell and Met 2 were not disclosed by the landlords, the deals are believed to be as much as 30% lower than initial projections, according to Marshall.

“It is typical in a new building to have the first few deals be loss leader deals,” he says. “It remains to be seen whether or not our economy improves quickly enough for landlords to get rates back up to where they need to be.”

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