SOUTHEAST SNAPSHOT, APRIL 2006

Miami Office Market

Within Miami’s CBD, dwindling supply due to ongoing renewal activity at trophy towers provided the basis for rent growth — expect this trend to continue into 2006. Photo courtesy of Smith Aerial Photos.

Both Miami and Broward Counties led the state and most of the country in job growth, with Miami recording its lowest unemployment rate in two decades. On the retail front, Bal Harbour Shops continues to maintain the highest per square foot sales in the U.S. ($1,421) and collectively, South Florida malls are “among the most productive in the nation”, according to the South Florida Business Journal.

The robust lodging industry now has 15 hotels slated for development over the next few years.  All will be waterfront, luxury product and include such noted operators as China-based Shangri-la, Canyon Ranch, W South Beach and St. Regis.  On-going residential condominium development resulted in Miami being named “first in the nation” in the number of units under construction, according to the Wall Street Journal.

Pricing Continues to Astonish

Central Business District (CBD) land on the Brickell side reached $9 million per acre at year-end while first quarter 2006 land pricing increased with a vengeance as Downtown posted a pending sale of two acres for $46.5 million. On the residential front, a recent condominium has begun marketing Element, a project north of Downtown with prices ranging up to $7 million.

The year could not have ended better for Class A building owners, with price concessions at an all time low and eliminated in many choice submarkets, landlords have been able to see their rental rates rise and can look forward to continued hikes — and increased occupancy — throughout 2006. 

Better Balance Anticipated between Supply and Demand

Excellent demand resulted in over 1.7 million square feet of absorption during 2005, a dramatic and much welcomed improvement over 2002 when that figure registered a negative 548,000 square feet.  Correspondingly, vacancy — including sublease — for the entire city dropped to single digits (8.8 percent) for the first time in  four years.

Suburban markets dominated activity by capturing 76 percent of Miami’s total 2005 absorption,  with the majority of submarkets posting overall single digit vacancy rates.  The bulk of new Class A product will not be delivered for another three years, and at the present rate of absorption, landlords can be expected to maintain command of the market over the near term with increasing asset appreciation and continued attention from eager investors.

— Christopher J. Wasko is international director of leasing and management for Jones Lang LaSalle.

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