The office market in South Florida, particularly in Miami’s Brickell and West Palm Beach, showed resilience in the first quarter of the year despite facing an influx of new inventory, as reported by JLL.
Landlords witnessed positive developments, such as rising average asking rents and decreasing vacancy rates.
However, the tri-county area is experiencing a surplus of office space, leading some developers to halt or cancel planned projects, according to CoStar data.
Brickell was noted as the focal point of activity, with major firms like Citadel, led by billionaire Ken Griffin, and Canadian investment firm CI Financial moving into 830 Brickell, a newly opened 55-story tower developed by Vlad Doronin’s OKO Group and Cain International.
These two firms contributed nearly 150,000 square feet of positive absorption to South Florida’s office market.
“Brickell remains one of the hottest markets down here,” Steven Hurwitz from JLL stated, emphasizing the high demand, where tenants now find it challenging to secure Class A office space for under $120 per square foot.
West Palm Beach is closely following Brickell, with tenants occupying new projects such as Banyan & Olive and One Flagler.
These two developments have resulted in a combined positive absorption of 76,600 square feet, further demonstrating the area’s commercial momentum.
Hurwitz pointed out that the positive absorption trends reflect stability in asking rents and declining vacancy rates across commercial business districts.
Ongoing relocations by firms in sectors such as finance, private equity, and top law firms further support this growth.
In Miami-Dade County, landlords reported a slight reduction in the vacancy rate to 15.9%, down from 16.3% a year ago.
Despite the recent openings, including 830 Brickell and a 266,000-square-foot office building in the Wynwood Plaza mixed-use project, the overall vacant inventory has increased.
The report indicates that this paradox is largely driven by preleased space in both new developments that is not yet occupied, as tenants await the completion of their build-outs.
The average asking rent in Miami-Dade saw an increase to $64.78 per square foot in the first quarter, compared to $60.37 from the same period last year.
However, the pace of new construction slowed significantly, with only 971,849 square feet being added in the first three months of this year, compared to 1.9 million square feet in early 2022.
Among significant lease agreements during this quarter, cybersecurity firm Varonis signed for 17,900 square feet at 801 Brickell Avenue.
In Broward County, the office market faced a sluggish start, although the vacancy rate decreased to 15.6%, down from 17% during the same period last year.
However, the county recorded negative absorption of 112,500 square feet mainly due to Comcast vacating its space at Sawgrass International Corporate Park and Enhance Health leaving its location at 1550 Sawgrass Centre, both in Sunrise.
The average asking rent in Broward County did see a notable increase, climbing to $46.88 per square foot in Q1, up from $39.95 a year earlier.
New construction trends remained relatively stable, with about 389,940 square feet completed this year, compared to 353,790 square feet in the first three months of 2022.
Palm Beach County’s downtown area continued to attract tenants, but there are signs of strain as longtime office renters began departing.
Although new projects like Banyan & Olive and One Flagler contributed to positive absorption, the withdrawal of firms like West Port Capital and Romano Law Firm resulted in a loss of 10,366 square feet in the county, leading to an increase in the vacancy rate to 14% from 12.4% a year ago.
The average asking rent in this region surged by 17%, reaching $63.50 per square foot, up from $54.13 in the same timeframe last year.
Palm Beach County also saw a slight uptick in new construction, with a total of 778,000 square feet completed in the first quarter compared to 695,649 square feet from the previous year.
Overall, South Florida’s office market displays a complex landscape with pockets of success amid challenges, reflecting ongoing changes in work trends and corporate relocations.
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