Miami’s top commercial brokers and developers say vacancy rates are down, lease rates are up and there is a growing lack of quality commercial real estate space — all signs that the once-battered commercial real estate sector is healthy again in South Florida. But some say high construction costs related to a boom in residential construction might have an impact on future growth.
Those were some of the findings discussed Thursday at the 2015 CIASF Office Market Report, hosted by powerhouse developer Armando Codina, executive chairman of Codina Partners, and his daughter, Ana-Marie Codina Barlick, CEO of the company, at their Downtown Doral town center.
The office market panel discussion reviewed the past year and current trends. Tony Puente, SVP at Fairchild Partners, who has been involved in Miami’s commercial sector for more than 20 years, noted that vacancy rates have now dropped from more than 25 percent to less than 10 percent for quality buildings. With Miami’s direct vacancy rates at 14.1 percent, the lowest recorded since 2009, he said there is a lack of quality space in the Miami market and that is where landlords will try and push rates up.
Noël Steinfeld, a senior vice president at JLL, said that in some quality buildings rent is above $50 per square foot, with average rents of $47 per square foot in quality buildings downtown and in the Brickell area, and average rates of $35 per square foot in outer areas near Miami International Airport like Doral.
Steinfeld noted, however, that leasing activity is actually down 47 percent over the past several months, something she attributes to several possibilities.
“It could be that inclement weather up north has limited the ability of people to travel down here and make decisions,” she said. “It could also just be we are a place in the cycle where you don’t have a lot of big tenants rolling.”
Steinfeld said Miami’s commercial sector has had four healthy years and no one is hitting the panic button, but the trend deserves notice.
Stephen Smith, vice president of the Hogan Group, which enjoys an enviable 94 percent occupancy rate at Waterford at Blue Lagoon complex, just across from Miami International Airport, said the days of free rent signings are long gone. He said his group is willing to not do deals at this point, saying it’s “not the end of the world” if a particular deal doesn’t make sense.
Smith said his group would like to build four new office buildings at Waterford or three buildings and a hotel, but plans are on hold in large part due to high construction costs.
“I think our biggest challenge is now we have to not give concessions to justify construction,” he said. “The struggle is the increase in construction costs. You start wanting glass and hard surfaces, you are going to have to pay for it.”
And that could push tenants further west to Doral where Codina Partners is building a new mixed-use 120-acre project with 200-thousand feet of retail and over a million square feet of office space. Codina Barlick said Downtown Doral tenants now want urban amenities, and the project is designed to feel like a campus with housing, shops and a planned new charter school.
“The school will allow you to have your child nearby. You have the option to walk down the street,” she said. “You never really have to leave.”
Source: The Real Deal