MIAMI’S OFFICE SECTOR: A TALE OF TWO MARKETS
The volume of office investment sales in Miami remains high but essentially unchanged from a year ago. Yet, if we dissect the nature of the deals, we find that institutional investors were behind many of those transactions, according to Marcus & Millichap’s 2H Miami Office Report. On the other hand, trades in lower price tranches declined, as the bid/ask spread gets wider. Overall, the dollar volume rose substantially in the second half of 2016, reflecting the greater number of institutional players in the market. Other market highlights include:
- Properties sold over the past year carried an average price of $283 per square foot, or 14 percent more than the average price registered in the preceding year. Although the average price has increased substantially since 2010, it remains about 3 percent less than the prior peak.
- The average cap rate in all deals in Miami-Dade resided from 7.5 percent to the low-8 percent range. Disparities persist based on buyer objective, property size and class.
- We expect that low interest rates and access to debt markets will sustain steady deal flow.
- Employment growth and leasing rates place the local office market in a position to build up supply, more so in the tight Class B/C segment.
- Projects totaling 937,000 square feet will be placed in service this year; only 213,000 square feet was completed in 2015. Robust development in the Downtown Miami, Brickell and Miami Airport submarkets over the next 18 months has the potential to drive sales in these areas.
Read Marcus & Millichap’s 2016 Second Half Report here