Miami Absorbs Office Space as Developers Sit on Sidelines
By Jennifer LeClaire
MIAMI—Although a new wave of condo and mixed-family developing is well underway in Miami, office developers are slowing down. After two active years—years that contributed to the largest annual decline in vacancy since 2006—Miami office developers are sitting still.
So says a new report from Marcus & Millichap. The firm reports absence of competition from additional new buildings should make room for landlords to cut into the vacancy rates of the Brickell and Downtown Miami submarkets. Vacancy is expected to decline 90 basis points this year to 16.2%, erasing most of the 120 basis point surge in 2011.
“Office is desirable in core locations where there are high barriers to entry, but suburban locations are not having as much demand,” Jim Fried, managing director at Aztec Group, tells GlobeSt.com. “Just like other commercial products, office is split into core properties and everything else. Location and a stable rent roll goes a long way to make an office asset attractive to potential investors.”
Marcus & Millichap predicts rents will increase 2% to $30.73 per square foot. That uptick will come alongside a 3% rise in effective rents to $24.86 per square foot. Part of the fill up is thanks to job growth. About 6,800 new office jobs will come online this year.
“The investment market in the county is gaining traction with top-quality properties trading more frequently,” Marcus & Millichap reports. “Overall, investors remain focused on strong locations in established areas and the credit quality of large space users in multi-tenant properties.”
The company predicts that 2012 will mark an opportune time for investors to acquire properties while prices remain at low levels. What’s more, additional distressed properties, especially assets purchased at the height of the market, will continue to emerge for purchase.
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