MIAMI—Will Miami see another round of overbuilding? Are there still lessons to be learned from the last downturn as we continue walking through a Miami office market recovery?
GlobeSt.com caught up with JLL senior vice president Donald Cartwright to get his take. Cartwright and his team turned around the Southeast Financial Center, leaving him with strong opinions on the state of the market and what it takes to succeed in this environment—and what happens next. You can still read part one of this exclusive interview: How JLL Pulled Off a Downtown Office Turnaround.
GlobeSt.com: You and ownership took a very aggressive stance with the tower and property, including implementing more than $20 million in capital improvements. Were you concerned?
Cartwright: J.P. Morgan Asset Management – Global Real Assets took full ownership of Southeast Financial Center in late 2008, when the beginning of the recession was becoming known. Since that time, ownership took the bold approach to invest more than $20.5 million on capital improvements into the asset, exclusive of tenant improvements.
During an uncertain economy, we remained entrepreneurial by driving forward in maintaining Southeast Financial Center as the benchmark for class A office space in Miami. We made large investments in infrastructure, technology, 17,000 square feet of complete lobby renovations, and human capital necessary to maintain and grow tenant relations.
JP Morgan is a very sophisticated investment manager that understands that you must continue to enhance even the most venerable buildings to adjust to the demands of the market and the changes in America’s workplaces. The makeover of our east lobby to cater specifically to our tenants with comfortable seating areas for conversation, relaxation, informal meetings and receptions was a direct result of a mandate directed by the JP Morgan. It has been wildly successful and appreciated by the tenant base.
GlobeSt.com: With it said that commercial follows residential markets, do you believe that we’ll go through another round of what could be called overbuilding?
Cartwright: Miami’s residential market in Downtown and Brickell is definitely unique and breaks the mold for urban residential development because the demand is not driven by the local employment market. If what the developers are saying is true and that all cash buyers are putting up non-refundable deposits of 50%, then we may not have the glut of unsold condos like we saw in the last downturn.
As far as office development is concerned, available sites are becoming limited because of the residential frenzy. But, the threat of overbuilding could emerge if developers put up new structures without substantial preleasing.
It still amazes me that product can be built and huge sums invested based on speculation. One lesson I have never forgotten over 40 years in the real estate business is that you cannot create demand by building product. Only jobs create demand for office space and if you cannot secure a reasonable amount of tenants for a large building before construction you should wait until you do before commencing construction. Office developers need to take a lesson from the new residential condo playbook and secure commitments before starting construction.
GlobeSt.com: What is the state of the market, and the property, today and what was the single biggest lesson you’ve learned?
Cartwright: Over the past few years, Southeast Financial Center has been very successful in attracting and retaining high-caliber national and global corporations seeking to commit long-term to the building and expand operations in Miami. Recent transactions inked at the building are indicative of the economic improvement that has been taking place as professional services firms and financial firms—the sectors leading leasing activity in Miami—have expanded market over the years and continue to experience healthy growth.
A timeless lesson I’ve learned throughout my career, applicable to all types of businesses: It takes believing in the quality of the brand and motivating others to believe in it also to reenergize and reaffirm that brand for decades to come. It’s important not to lead your team to operate based on what was happening at the moment, but rather to continue to prepare for the future. And, I’m excited and optimistic about the future for Miami’s signature office tower.