South Florida’s office rents continued climbing in the third quarter, as landlords remained confident tenant demand justified the hikes, according to a recent report.
A booming state economy coupled with continued migration and expansions by out-of-state firms to the tri-county region has led to a bonanza for owners of class A trophy buildings in commercial business districts, especially in downtown West Palm Beach, Cushman & Wakefield’s report found.
South Florida’s office market is on such a strong trajectory that even former Google CEO Eric Schmidt and his real estate partners are launching a Miami Beach office project with unprecedented asking rents for that city. Schmidt, Sumaida + Khurana and Bizzi & Partners are building The Fifth Miami Beach, a five-story building where asking rents are starting at $150 a square foot.
Overall asking rents rose in Miami-Dade to $47.85 square foot, a nearly 8 percent increase compared to $44.35 a square foot during the third quarter of last year, the report shows. In downtown Miami and Brickell, asking rents hit more than $60 a square foot for the first time in history, Cushman found.
Miami-Dade’s overall office vacancy rate dropped to 17.4 percent in the third quarter, compared to 18.2 percent during the same period of last year. Brickell was the primary beneficiary, as tenants gravitated to trophy office assets with prime amenities. The Brickell submarket also did well due to strong pre-leasing at 830 Brickell, a 55-story office tower currently under construction by developers Vlad Doronin’s OKO Group and Cain International.
Landlords in Broward drove up asking rents by nearly $2.00 to $37.84 a square foot in the most recent quarter compared to $36.00 during the same period last year, the report states. Rents rose as a result of new Class A space available for lease in downtown Fort Lauderdale and suburban office submarkets in Broward.
Broward’s overall vacancy rate remained relatively flat, year-over-year. In the most recent quarter, office vacancy hit 17 percent, compared to 16.9 percent during the third quarter of last year, the report states. One building mainly contributed to keeping Broward’s vacancy rate stagnant. The recently completed Optima Onyx Tower in Hallandale Beach was 70 percent vacant when the third quarter ended, the report states.
Palm Beach County
The office market in Palm Beach continued its hot streak of outperforming Miami-Dade and Broward. The overall asking rent shot up by more than $3.00 to $42.84 a square foot during the most recent quarter, compared to $39.71 a square foot during the same period of last year. With a limited supply of new buildings, like Related Companies’ 25-story One Flagler project in West Palm Beach, landlords of Class A buildings are pushing rates to historic levels, the report states. At One Flagler, asking rents have reached between $140 and $180 a square foot.
The overall vacancy rate in Palm Beach County is at the lowest level since 2007. In the most recent quarter, the vacancy rate hit 11.8 percent, compared with 14.7 percent during the same period of last year, Cushman found. Developers like Related Companies, led by Stephen Ross, want to capitalize on demand for high-end office spaces, the report states.