Despite record office vacancy rates across South Florida, average asking rents hit new highs in the third quarter, according to a newly released report.
Miami-Dade had the highest average asking rate, at $41.68 per square foot, according to the report from Colliers International, which only tracks office buildings of 10,000 square feet and larger. Broward had the lowest average asking rent, at $33.59 per square foot.
The report shows shorter-term and more flexible leases are on the rise, due to uncertainty caused by Covid-19 and the adoption of remote working. Subleasing activity has increased, and tenants have expressed interest in office space in the suburbs, where larger office space is available at more affordable rates.
Palm Beach County saw available sublease space increase 43.1 percent quarter-over-quarter, the highest jump among the three counties, according to the report. Miami-Dade’s available sublease space increased 42 percent and Broward’s grew 13.4 percent during the same period.
Here are other insights from the report:
Miami-Dade
Miami-Dade saw the lowest vacancy rate among the three counties, at 10.7 percent. Still, it was a record high rate, up from 9.6 percent the prior quarter and 9 percent in 2019’s third quarter.
Downtown Miami saw some of the highest office vacancy rates at 21.5 percent, driven by 25.6 percent vacancy among class B buildings. Some of the lowest vacancy rates were in the West Miami area with a 2.3 percent vacancy rate.
Miami-Dade had the most new construction delivered, 348,000 square feet. Most of that, or 299,000 square feet, was class A space delivered in Miami. Miami-Dade also had the most office space under construction, 3.6 million square feet. Of that, 674,000 square feet is office space in Miami.
As a result, Miami-Dade experienced the largest negative absorption in South Florida, at 837,000 square feet. That’s compared to a negative absorption of 526,000 square feet the quarter prior. During the third quarter of 2019, the county saw a positive absorption rate of 388,000 square feet.
Brickell saw the highest negative absorption, at 135,000 square feet, driven by a negative absorption of 102,000 square feet of class A office space. In the suburbs, the Miami Airport area saw a negative absorption of 154,000 square feet, again driven by class A office space.
Miami Lakes, South Dade and West Miami, however, saw positive absorption. Miami Lakes saw the highest amount, 46,000 square feet, driven by class B office space.
Miami-Dade’s highest office asking rent was $57.36 per square foot in Brickell. Class A was $63.49 per square foot, and class C was $29.86 per square foot. The lowest asking rent was $24.39 per square foot, in south Dade.
The largest office sale in Miami — and in all of South Florida during the third quarter — was $163 million for Brickell City Centre Two and Three. The county saw two class A and two class B buildings among its top sales. Only one of the top five sales was in the central business district.
Miami-Dade’s top lease signed during the third quarter was 40,000 square feet for Southeastern College at 5875 Northwest 163rd Street. Other notable leases signed include 30,000 square feet for Crown Castle in Flagler Corporate Center; 26,000 square feet for Lydecker Diaz at 1221 Brickell; 23,000 square feet for Kozyak Tropin & Throckmorton at 2525 Ponce De Leon Boulevard; and 21,000 square feet for Regus at 6303 Blue Lagoon Drive.
Broward
Among the three counties, Broward saw the largest lease signed during the quarter. Law firm Greenspoon Marder renewed a lease for 62,000 square feet at 200 East Broward.
Despite this, third quarter leasing square footage was half that of the same period in 2019.
Other large leases signed in Broward include 31,000 square feet for the Department of Juvenile Justice at Lakeshore Business Center; 19,500 square feet for Kawa Capital at Optima Towers; 19,000 square feet for Regus at Arcade I Building; and 12,000 square feet for Kubicki Draper at 110 East Broward Boulevard.
The largest office sale in Broward was $82.5 million for Bayview Corporate Tower at 6451 North Federal Highway in Fort Lauderdale, which equates to $199 a square foot. Only one of the top sales was in a suburban market and only one was a class A building.
Broward saw the lowest negative absorption in South Florida, at 487,000 square feet. That was higher than the 444,000-square-foot negative absorption of the previous quarter. The third quarter of 2019 had a positive absorption of 307,000 square feet.
The highest average asking rent was in Hallandale, at $52.69 per square foot, driven by $54.61 per square foot for class A. By comparison, class B was $28.38 per square foot, and class C was $28.88 per square foot.
Palm Beach
Palm Beach County saw the highest office vacancy rate among the three counties, at 11.4 percent. That’s a record high for the county since at least the first quarter of 2017. The rate was higher than the 10.6 percent rate in the second quarter, and the 10 percent rate of 2019’s third quarter.
The highest vacancy rate was in West Palm Beach’s central business district, at 15.3 percent, driven by a 17.7 percent vacancy in class A buildings.
The lowest vacancy rate in the county was in Jupiter, at 4.8 percent, driven by a 6.1 percent vacancy among class B buildings.
Palm Beach County’s top lease was 12,000 square feet of space for Media Direct in The Park at Broken Sound in Boca Raton. In July, a headquarters facility at the Park at Broken Sound sold for $51 million.
Other top leases inked during the third quarter include 9,000 square feet for an insurance company at 1401 Forum Way in West Palm Beach; 7,000 square feet for Humana at 2900 North Military Trail in Boca Raton; and 6,000 square feet for GenPsych LLC at 2505 Metrocentre Boulevard in West Palm Beach.
The largest office sale in Palm Beach County was $80 million for DiVosta Towers. Three of Palm Beach County’s top sales were class A buildings and three were in the central business district. According to the report.