Office vacancy rates are rising in downtown Miami: report

Q1 report noted a negative absorption rate as rents flatline in the city’s CBD

 Alan Kleber

Alan Kleber

The downtown Miami office market took a beating in the first quarter, despite the opening of new state-of-the-art buildings like the office portion of the Virgin MiamiCentral train station.

According to a JLL report prepared for the Commercial Industrial Association of South Florida, downtown Miami experienced a negative absorption of nearly 18,000 square feet during the first quarter, mostly due to the departure of two law firms that occupied a total of 10,300 square feet at 19 West Flagler Street.

As a result, the vacancy rate jumped to 27.2 percent, a four point increase compared to the first quarter of 2018. Asking rents stagnated, hovering at $41.52 a square foot, a 0.3 percent increase over 2018 first quarter rates.

A trio of lease deals at one of the MiamiCentral office properties is softening the blow to the downtown office market, said JLL managing director Alan Kleber, a panelist during CIASF’s May 16 office report event. Viacom is taking 23,700 square feet at 2 MiamiCentral, which is 86 percent leased. The other new tenants are law firm Carlton Fields, which signed up for 50,000 square feet, and coworking firm Spaces, which is leasing 19,500 square feet.

The two office buildings at MiamiCentral, 2 MiamiCentral and 3 MiamiCentral, sold in May to San Francisco-based Shorenstein for $159.4 million. 

While the downtown Miami office market is hurting, Kleber said major corporate tenants are gravitating to office buildings like 2 MiamiCentral because of the amenities packages and the close proximity to mass transit hubs. “The definition of Class A in this market used to be a handful of buildings where you have unobstructed ocean views,” Kleber said. “From a user perspective, the tier one market class is no longer defined by what you see out the windows.”

Viacom is relocating from a sixth floor space at the Herzog & De Meuron-designed 1111 Lincoln Road building in Miami Beach to a new Class A building that does not offer a similar view. “They are bringing 500 people and growing their space by 4,000 square feet,” he said. “That is mind-blowing.”

Carlton Fields shareholder Yolanda Strader said her law firm has been headquartered at the Miami Tower at 100 Southeast Second Street for two decades. “It’s all glass and offered unobstructed views,” Strader said. “We had to think long and hard on where we wanted to transition. This building stood out because of the amenities, the transit and the access to the highway.”

The CIASF report also shows the Miami office market is becoming heavily reliant on co-working firms. The largest tracked lease in the Brickell office market during Q1 was a 35,800-square-foot expansion by Regus at 801 Brickell. On the same block, WeWork signed a lease for 146,000 square feet at 830 Brickell, an 80-story building with 550,000 square feet of office expected to be completed in 2022. WeWork will account for 27 percent of the building.

In the first quarter of this year, the Brickell office market had a 12.5 percent occupancy rate and average asking rents increased 6.7 percent year-to-year to $48.10 per foot.

In other submarkets, Coconut Grove experienced a positive absorption of 7,660 square feet, the vacancy rate is at 6.5 percent and asking rents are averaging $46.51 a foot, an 18 percent year-over-year increase. The Gables submarket had a positive absorption of 92,460 square feet, but the vacancy rate inched up to 10.9 percent from 9.4 percent. Asking rents jumped from $39.64 in the first quarter of 2018 to $45.73 per square foot.

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Maurice A. Ferré Park to remain green space with no commercial development

Commissioner Joe Carollo sought bids to build a mixed-use waterfront facility at the park

Maurice A. Ferré Park and Joe Carollo (Credit: Wikipedia and Twitter)

At least one large Miami public park will not see any new large-scale commercial development.

In a meeting that drew pleas from residents of downtown and even former Miami Mayor Maurice Ferré, Miami commissioners voted unanimously on Thursday to keep the 30-acre Maurice A. Ferré Park in downtown Miami as a public park.

The vote came after commissioner Joe Carollo sought bids to build a mixed-use waterfront facility so that the city could earn income from the property. The move spurred fears among residents that one of Miami’s largest public spaces would be engulfed with new luxury condos and new development.

During a meeting on Thursday afternoon, Carollo removed his request for proposals, but said he still wants to fill in a deep-water slip at the edge of the property, called the Florida East Coast Slip, to expand the park. He said covering the slip would give the park 9.5 more acres, which the commission will reconsider at a later date.

Last year, a European developer proposed to Carollo building a yacht club and upscale restaurant that would generate $5 million per year, according to the Miami Herald. That prompted the request for proposals.

The park sits next to the the Pérez Art Museum Miami and the American Airlines Arena, overlooking Biscayne Bay and across the street from luxury condo developments including Zaha Hadid’s 1000 Museum.

Speaking at the meeting, Ferré called the park Miami’s “crown jewel.”

Commissioner Manolo Reyes said he was concerned that other public parks in lower income neighborhoods would not be protected like Ferré park. He requested to include an ordinance for a future date that all parks in Miami remain parks and free of commercial development.

Reyes’ comments comes amid concerns that the city of Miami was too willing to give up Melreese country club, a public golf course near the Miami International Airport, to the Beckham-Mas Group. The group plans to build a Major League Soccer stadium along with at least 750 hotel rooms, and a minimum of 1 million square feet of office, retail and commercial space.

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New Yorkers have spent $586M in one square mile of downtown Miami

New York buyers are in blue and all other investment is in red.
New York City’s sixth borough is earning its nickname.
New Yorkers have spent a combined $586.5 million in property concentrated in one square mile of downtown Miami, commercial broker Mika Mattingly told The Real Deal. Mattingly’s team looked at property sales between the Miami River to Northeast Sixth Street and east of I-95 to Biscayne Bay from the past two years.
In total, New York buyers acquired 1.28 million square feet of buildings and 1.1 million square feet of land. In dollar amounts, they represent about 56 percent of investment in that area. The remaining 44 percent of buyers spent more than $460 million on 1.3 million square feet of buildings and 563,000 square feet of land.
The area is in the beginning stages of a renaissance. A $13 million improvement plan for Flagler Street is underway, which will include expanded sidewalks, more trees, new benches and bicycle racks. The beautification project broke ground earlier this year and has installed drainage structures and pedestrian signage, according to a weekly update released on Monday.
Moishe Mana represented roughly 30 percent, or about $170 million, of the New York investment, according to a list of sales provided to TRD. Mana, of New York and New Jersey, has been in Miami since 2010 assembling property in Wynwood and in downtown Miami. He has spent more than $200 million on properties in downtown Miami as a whole with plans for retail and residential redevelopments, according to county records and TRD archives.
The map also includes properties purchased by New York-based Edens Investment Trust, Ashkenazy, Brickman and KAR Properties. Last week, Brickman closed on the Courthouse Tower at 44 West Flagler Street for $27.5 million.

Source: The Real Deal Miami