Class A demand in Miami’s Brickell and West Palm Beach propped up South Florida’s office market in the first quarter.
Landlords experienced positive signs, such as rising average asking rents, and vacancy rates ticked down even as the tri-county region experienced a glut of new inventory, a JLL report shows. Some developers are pulling back by either canceling or pausing planned office projects, according to CoStar data.
Brickell represented the “epicenter of move-ins” during the first quarter, with billionaire Ken Griffin’s Citadel and Canadian investment firm CI Financial taking occupancy at 830 Brickell, the recently opened 55-story supertall by Vlad Doronin’s OKO Group and Cain International, the report states. The two firms accounted for nearly 150,000 square feet of positive absorption in South Florida.
“Brickell remains one of the hottest markets down here,” JLL’s Steven Hurwitz said. “You can’t get into a strong Class A building for under $120 a square foot.”
Close behind is West Palm Beach, with tenants moving into recently completed projects, Banyan & Olive and Steve Ross’ One Flagler, representing 76,600 square feet of positive absorption, the report shows.
“Momentum has been pretty strong in [commercial business districts] due to positive absorption. [Asking] rents are pretty stable, and vacancy rates are coming down,” Hurwitz said. “Finance, private equity and top 100 law firms are continuing to move here.”
Miami-Dade County
Landlords in Miami-Dade County experienced a slight drop in the vacancy rate to 15.9 percent, compared to 16.3 percent during the same period of last year, the report shows. In addition to 830 Brickell coming online, the 266,000-square-foot office building at the mixed-used project Wynwood Plaza also opened in the first quarter, increasing the amount of vacant inventory.
“Despite healthy absorption, vacancy rates remain elevated,” The report states. “This paradox is largely attributable to the preleased space in both 830 Brickell and Wynwood Plaza that is slated for occupancy later this year, as tenants finalize build-outs.”
The average asking rent in Miami-Dade rose to $64.78 a square foot in the first quarter, compared to $60.37 a square foot during the same period of last year. However, new construction tailed off to 971,849 square feet during the first three months of this year, compared to 1.9 million square feet for the same period of last year.
The first quarter’s notable lease signings include New York-based cybersecurity firm Varonis taking 17,900 square feet at 801 Brickell Avenue in Miami.
Broward County
The first quarter was a sluggish start for Broward County office landlords, even though the vacancy rate ticked down to 15.6 percent, compared to 17 percent during the same period of last year, the report states.
The county experienced a negative absorption of 112,500 square feet, as a result of Comcast vacating offices at Sawgrass International Corporate Park in Sunrise and Enhance Health relinquishing its space at 1550 Sawgrass Centre, which is also in Sunrise.
Still, Broward’s average asking rent also jumped to $46.88 a square foot in the first quarter, compared to $39.95 a square foot during the same period of last year, the report shows. In the first quarter, developers built roughly the same amount of new space, 389,940 square feet, as in the first three months of last year, when they added 353,790 square feet of new space.
Palm Beach County
Downtown West Palm Beach is still sizzling with new tenants, but it’s gotten too hot to keep longtime office renters. Move-ins at Banyan & Olive and One Flagler were offset by the departures of West Port Capital, Romano Law Firm and other tenants from West Palm Beach that created 10,366 square feet of negative absorption for the county, the report states.
As a result, the vacancy rate jumped to 14 percent in the first quarter, compared to 12.4 percent during the same period of last year. The average asking rent experienced a 17 percent increase to $63.50 a square foot in the first quarter, compared to $54.13 a square foot during the same period of last year, the report states.
New construction of 778,000 square feet in the first quarter slightly outpaced the 695,649 square feet added during the first three months of last year, the report shows.