6 Signs the Miami Office Market Is Back
A combination of growing demand spawned by new and expanding tenants and subdued construction point to another year of declining vacancy and rising rents in the Miami-Dade office sector, according to Marcus & Millichap research.
The market finished last year with the highest amount of occupied space on record. This represents all-time highs in professional and business services as well as financial services staffing.
1 – Additional hiring in key office-using employment sectors will generate new needs for larger layouts in the coming months, raising the amount of occupied space and spreading demand into a wider range of properties. Space in the county’s newest buildings is consistently filling and has accounted for more than half of all space absorbed during 2015. At the same time, space-demand for pre-2000 construction is also mounting a comeback.
2 – Competition for tenants from new properties is minimal as many desirable development sites in the county have been acquired by residential developers or surveyed for multiple uses that may not include offices.
3 – Miami-Dade County’s lengthy upswing in property operations continues to drive a liquid and vigorous investment market. Considerable gains in transactions and dollar volume were recorded last year, pushing down the average cap rate to the high- 5 percent range and providing significant momentum heading into 2016. Private capital dominates the transaction marketplace, sustaining substantial flows of equity into the $1 million to $10 million price tranche, according to Marcus & Millichap research.
4 – Brand-name submarkets including Coral Gables, Kendall and Northeast Dade remain the primary targets for these investors due to the depth of inventory and liquidity. In all of these submarkets, and in Coral Gables especially, a more rigorous pace of rent growth is taking hold, offering potential upsides for investors acquiring assets with leases soon to expire.
5 – Redevelopment and repositioning opportunities are also emerging for private capital in the Biscayne Corridor, an older area in the urban core that continues to gain in popularity for potential tenants and investors.
6 – 2016 Market Forecast Above-average rent gains and job growth helped propel Miami-Dade’s ascent into the NOPI’s top five markets. Staffing in Miami-Dade will expand 2.1 percent, or by 23,700 jobs, in 2016. The total surpasses last year’s gain and includes 8,500 office-using posts.
In 2016, developers will place 600,000 square feet of office space in service, primarily in buildings measuring less than 100,000 square feet. An additional 412,000 square feet is underway and slated for delivery next year. The vacancy rate will tumble 70 basis points this year to 12.8 percent, representing a moderation from the 100-basis-point plunge posted during 2015. Lower vacancy will support a 4.7 percent bump in the average effective rent to $31.58 per square foot in 2016, compared with an increase of 4.0 percent in 2015. A large buildup of multifamily stock both in and surrounding the Miami Airport office submarket will attract prospective office employers. Recent deals in the area offer price transparency and will further encourage additional owners to list assets.