Miami’s residential boom is not the only red-hot segment of South Florida real estate market. While the world’s attention may be fixated on Miami’s next crop of “starchitect”-designed condo towers and their sky-high penthouses, the city’s commercial office sector is also surging.
Growing interest among domestic and multi-national tenants, coupled with diminishing supply and a lack of new office product set to deliver in the coming years, have given way to new confidence in Miami’s office market and initial talk about the need for future commercial development.
This would have seemed unlikely as recently as 2010, when three new Class A office towers prepared to deliver 1.9 million square feet of new space in downtown Miami.
The first of those buildings to deliver, 1450 Brickell, has been 100 percent leased and occupied since the first quarter of 2013 and is home to a number of global firms, including JPMorgan Chase, American Express, SAB Miller, H.J. Heinz Co. and BBVA Compass. The other two buildings are also experiencing positive absorption as demand for downtown Miami office space grows.
This activity is taking place as Miami’s urban core emerges as an international destination for commerce, investment, residential living and travel. What was once a 9-to-5 business district is now a thriving neighborhood with restaurants/shops, residential, commercial, hospitality and world-class arts and culture offerings. Downtown Miami’s population has nearly doubled during the past decade and that residential base will only grow as a function of the current development wave.
Major private sector developments like Brickell City Centre and Miami World Center, along with All Aboard Florida’s transformative mixed-use project including a privately-owned and operated intercity passenger rail service between South and Central Florida, are enhancing downtown’s appeal in the eyes of companies, retailers, residents, tourists and investors.
Public investments in the creation of new art and science museums and street-level improvements along major thoroughfares are also fueling downtown Miami’s rise as one of the nation’s most sought-after office markets.
Businesses from around the globe are seeing value in opening an office or a regional headquarters in Miami — a global city that can now offer executives and employees all the quality of life conveniences of any major cosmopolitan city, and at a comparatively lower price point.
Companies are catching on. Downtown Miami’s office market has experienced positive absorption dating back to 2011, driving Class A asking rates higher and limiting the options of major users in need of large swaths of contiguous space.
These leasing market dynamics have put Miami in the crosshairs of investors. We have seen a number of high-profile acquisitions by institutional owners in recent months, including the purchases of 1111 Brickell Avenue by Prudential Real Estate Investors (PREI) and Brickell City Tower by Banyan Street Capital.
The increase in leasing and sales volume stretches beyond the city’s urban center — Miami-Dade County’s major office submarkets are experiencing similar strength. In fact, the Airport West/Doral and Coral Gables markets are among the most active in all of South Florida.
These areas are drawing international trade users, Fortune 500 corporations and large media companies seeking a central location in close proximity to workforce housing, Miami International Airport and access to major expressways.
HBO Latin America, Hyatt Hotels, Diageo, Mondelez International Inc. (formerly Kraft Foods) and Tiffany & Co. have all taken space at the newly built 396 Alhambra office tower in Coral Gables. Meanwhile, big name companies like Amadeus and Harley-Davidson Motor Co. have moved their headquarters and Latin American sales division to One Park Square in Doral.
Miami’s office market is simultaneously cultivating and growing new companies in industries outside the traditional sectors of real estate, law, banking and finance. Targets include private equity firms, hedge funds, technology startups and life science companies.
Programs like the Miami Downtown Development Authority’s Finance Sector Initiative are making the case that Miami offers all the conveniences and connectivity of places like New York and California — without the steep tax rates and with an office market priced as much as 50 percent less than Manhattan and Los Angeles.
Meanwhile, universities, nonprofits, municipalities and private developers are investing heavily in nurturing a new technology and innovation sector through grant programs, new facilities, and entrepreneurship accelerators. Perhaps the most prominent example is Phase I of the University of Miami Life Science & Technology Park, which is home to dozens of companies from as far away as Europe and South America occupying offices and lab space.
To appreciate Miami’s global reach, look no further than Brickell Avenue’s evolution during the past decade. Long considered the Wall Street of the South, Brickell has expanded its influence beyond the U.S. and is now recognized as the Wall Street of the Americas. It’s no wonder why the world’s top office users now mention Miami and Manhattan in the same breath.
— By Tere Blanca, president and CEO, Blanca Commercial Real Estate. This article originally appeared in the May 2014 issue of Southeast Real Estate Business.