The Miami Area’s Office Market as 2023 Ends: Cooling, But Still Hot (Coral Gables: sales, real estate)

[CXT2000]

Not sure if anyone on here is also truly into office stats like I am, but even then, here is an interesting read on the office market for 2023. Lots of interesting info and cool information. The stats provided are from Cushman & Wakefield, so vacancy rates will vary compared to other brokers (ex: Wynwood to them has 19% vacancy, others have it up to 30%)

Some snippets

“The surge in new-to-market leasing that occurred between 2020 and 2022 has slowed down in 2023, with 257,000 square feet of new-to-market transactions, year to date,” the brokerage reported in third-quarter research on the Miami area office market. “This is 75 percent down from record 2022 levels and approximately 50 percent down from the five-year historical average.”

Meanwhile, office building sales volume in the Miami area plunged during the first nine months of 2023 to $430 million from $1.2 billion during the same period in 2022, a 66 percent drop, according to a report by the Miami Association of Realtors.

On Brickell

The Brickell Avenue area had an office vacancy rate of 7.5 percent in the third quarter of 2023, according to office market research by Cushman & Wakefield (CWK). That rate is much lower than in several other major Miami office submarkets, including Downtown Miami (21.7 percent), the Wynwood area (18.9 percent) and Coral Gables (15.9 percent).

“The nature of the demand in Brickell is relatively inelastic. It is the epicenter. It is ground zero. When a company is looking to relocate or set up an office in Miami, that’s where they start,” said Jeff Fronek, managing principal and president of Manhattan-based Tourmaline Capital Partners. “That’s what they read about in the papers. Everyone wants to be on Brickell.”

On Wynwood

Colliers reported that the Miami area’s second-largest office lease in the third quarter of 2023 was in the Wynwood submarket, a former industrial area north of Downtown Miami. Sony Music Entertainment signed a lease for 44,742 square feet at 545 Wyn, Colliers said. The 10-story, mixed-use building opened in 2020 with 298,000 square feet of office space and 26,340 square feet of retail space.

[elchevere]

From a full article available on Commercial Observer, the interesting thing to note is that overall Miami’s office vacancy rate is nearly 1/2 that of the national average. As pointed out, varies by area of Miami but the overall number is quite impressive.

https://commercialobserver.com/2023/...leasing-sales/

“With an October unemployment rate of 1.6 percent — about half the national jobless rate — the Miami area is drawing the attention of real estate investors and developers by outperforming the U.S. office market. The nationwide office vacancy rate hovered at 16.7 percent in the third quarter of 2023, up 30 basis points from the second quarter and above the previous record of 16.3 percent during the 2007-2009 recession, according to research by brokerage firm Colliers (CIGI). But the vacancy rate in Miami-Dade County — including suburban markets — was 9.6 percent in the third quarter, down 50 basis points from the second quarter, according to Colliers.”

[CXT2000]

Originally Posted by elchevere

From a full article available on Commercial Observer, the interesting thing to note is that overall Miami’s office vacancy rate is nearly 1/2 that of the national average. As pointed out, varies by area of Miami but the overall number is quite impressive.

https://commercialobserver.com/2023/...leasing-sales/

“With an October unemployment rate of 1.6 percent — about half the national jobless rate — the Miami area is drawing the attention of real estate investors and developers by outperforming the U.S. office market. The nationwide office vacancy rate hovered at 16.7 percent in the third quarter of 2023, up 30 basis points from the second quarter and above the previous record of 16.3 percent during the 2007-2009 recession, according to research by brokerage firm Colliers (CIGI). But the vacancy rate in Miami-Dade County — including suburban markets — was 9.6 percent in the third quarter, down 50 basis points from the second quarter, according to Colliers.”

Oh lord, I forgot to add the link lol... thanks for that.

So Colliers has it at 9.6%, but Avision Young has MDC total vacancy at 15.9% as of Q3, 2023. I'll have to check others, but it shows the discrepancy between brokers.

[MiamiLIFE]

Originally Posted by elchevere

From a full article available on Commercial Observer, the interesting thing to note is that overall Miami’s office vacancy rate is nearly 1/2 that of the national average. As pointed out, varies by area of Miami but the overall number is quite impressive.

https://commercialobserver.com/2023/...leasing-sales/

“With an October unemployment rate of 1.6 percent — about half the national jobless rate — the Miami area is drawing the attention of real estate investors and developers by outperforming the U.S. office market. The nationwide office vacancy rate hovered at 16.7 percent in the third quarter of 2023, up 30 basis points from the second quarter and above the previous record of 16.3 percent during the 2007-2009 recession, according to research by brokerage firm Colliers (CIGI). But the vacancy rate in Miami-Dade County — including suburban markets — was 9.6 percent in the third quarter, down 50 basis points from the second quarter, according to Colliers.”

Miami office product outperforming cities like LA, DC, NY, Chicago where office building sales are generally comprised of distressed transactions. One just went down in DC. Look at the PSF. Yikes! https://commercialobserver.com/2023/...-sale-for-30m/


And another in LA. https://commercialobserver.com/2023/...e-covid-price/.

Miami's challenge in the office sector is that much of the inventory is older. Look at 830 Brickell, which was 100% leased on a spec bldg. The demand is there for office in Miami if functional product is available. Also, tenants want to be in locations where the city is committed to staying open. NY, DC, Chicago, LA, etc. shutdown offices during COVID. Those cities never recovered. The workers refuse to return to the office. 2024 you're going to see a lot more distressed office sales as owners bite the bullet and exit these office positions. Doesn't make financial sense to invest capital in these buildings considering the original investment basis of these owners. These deals are negative IRR investments now regardless of how much capx you throw into them. Miami, on the other hand, is a much better location if you're inclined to take office investment exposure.

[CXT2000]

^ not a lot of workers returning to offices either in Miami as well, I think that rate is still in the 60% range.. 830 Brickell was leased in full since Miami desperately needed a triple class A office space with amenities. But even then, it won't guarantee all workers will be there 5x a week at 100% capacity. I'd still consider it a risk to add more office towers in Miami.

Another interesting thing is developers building like crazy in Miami just to have an asset, flip it, and finance projects elsewhere. Smart move.

[CXT2000]

MSC group moving HQ to Miami, their office will be in Overtown. No brainer move, IMO. 130k sq ft, ~ 250 jobs

[MiamiLIFE]

https://www.cbsnews.com/colorado/new...id=CNR-01-0623

"95 million square feet of vacant office space in New York City- enough to fill 30 Empire State Buildings."

[gixxer1000]

Originally Posted by CXT2000

^ not a lot of workers returning to offices either in Miami as well, I think that rate is still in the 60% range.. 830 Brickell was leased in full since Miami desperately needed a triple class A office space with amenities. But even then, it won't guarantee all workers will be there 5x a week at 100% capacity. I'd still consider it a risk to add more office towers in Miami.

Another interesting thing is developers building like crazy in Miami just to have an asset, flip it, and finance projects elsewhere. Smart move.

As someone who develops in both Miami and NY I can 100% equivocally say this is nonsense. My NY clients have shifted to more business in Miami because they simply can't get deals done there right now. There is just more opportunity for development in Miami then the rest of the country.

[gixxer1000]

Yet, despite these headwinds, the Miami area office market is still propelled by a microscopic unemployment rate and little new office development beyond boutique projects.

The professional and business services sector in Miami is up 5.8%. I work in development and I'm constantly meeting with Architects, Attorneys, Contractors, Engineers, etc. Everyone in Miami is back to work. We do a lot more meetings remote but that is only to increase productivity.

Go out any day during rush hour and 95 is packed with people going into downtowns in the morning and leaving them after work hours. Just because an employer may let a worker work from home 1 day a week doesn't really change the office dynamic.

On the development side it has become increasingly hard to build new projects due to supply chain issues, increased constructions cost and zoning requlations (city also cant keep up with permitting).

This has slowed new supply even though the demand is there. We will continue to see growth in Miami for years to come.

[CXT2000]

Originally Posted by gixxer1000

As someone who develops in both Miami and NY I can 100% equivocally say this is nonsense. My NY clients have shifted to more business in Miami because they simply can't get deals done there right now. There is just more opportunity for development in Miami then the rest of the country.

Mhm... except what I said is happening lol. It's smart, demand is there, NY developers have sold some assets in Miami to finance larger flagship projects in NYC and elsewhere.