Appetite For Office Buildings in Miami Is Taking A Turn
While there is still appetite for CRE deals in Miami, the volume of office transactions is decreasing, according to Real Capital Analytics. First came the condo market correction and now the office market is experiencing a step back. Case in point: the volume of deals for properties in the price range of $2.5M to $20M is down 63 percent to $112.4M since January 2016, compared to the same period last year. The factors impacting the volume of deals are many. A strong dollar is causing some foreign investors to pause and rethink their acquisition strategy in the US. However, the slowdown in transactions can also be attributed to a disconnect between buyers and sellers’ expectations over property values. Investors expect values to be stabilizing by now and aren’t willing to pay a premium for less than a trophy asset. Yet, you have sellers who believe the market will continue to outperform and are asking unrealistic prices. We will get to the point where buyers and sellers will find a middle ground and more deals will happen.
Most offices deals in Miami-Dade County involve properties of less than 50,000 square feet. For example, of the total number of office transaction last year, 216 deals involved offices of up to 50,000 square feet. On the other hand, only 18 deals involved office buildings ranging in size from 50,000 to 249,000 square feet and only 3 office buildings ranging from 250,000 to 499,000 square feet, according to CoStar.
Because over 90% of all the office deals involved office buildings smaller than 50,000 square feet, the volume of deals in the $2.5M to $20M range is a good indicator of the estate of the Miami office market.