Downtown Office Vacancy Rates Rising

MIAMI-Overall asking rental rates have dropped and vacancy rates have started to rise in the Downtown office submarket, according to CB Richard Ellis’ recently released April report on area real estate market conditions.While this submarket has seen just 81,000 sf of leasing activity in the past six months–resulting in soft market conditions temporarily–the firm calls the long-term outlook “promising as new Downtown developments will contribute to a 24-7 neighborhood.” Class A rental rates are stable, though, the report states.Declines are not being felt in the company’s class B properties, says Randy Olen, senior vice president in CBRE’s local office. CBRE has a building Downtown and one in the Brickell submarket.”We are seeing very good activity,” as much or more than typical, Olen tells GlobeSt.com. “We’re seeing more tenants in the marketplace.” Although the tenants are smaller overall, he says, the company is busy showing space and making deals. The company had 14 leases at the 100 N. Biscayne building in the first quarter, he says. “And we’re seeing more activity at 777 Brickell.”There may be a little cloud over class A,” he says, but class B space may be creating a niche, Olen says. “There has been some moving around from Downtown to Brickell” by law firms and other tenants.”I think we’re coming out of a recession. … I see a lot of activity,” says Keith Graves, vice president in CBRE’s Fort Lauderdale, FL, office. Some submarkets are doing better than others, and each submarket has its nuances, he says, but overall, the market looks strong, he says.In the Brickell submarket, also in Miami-Dade County’s central business district, companies have been taking sublease space, reducing what was a high amount of space. Companies that have signed long-term subleases include Mellon Bank, BDO Seidman LLP, Pacific Credit, Sterling Financial and Guggenheim Partners. Also, direct vacancy rates are expected to drop in the near future.In Coral Gables, Hines’ new development at 2525 Ponce “continues to attract strong pre-leasing activity,” the report states. Also in that submarket, direct vacancy rates have declined, and strong leasing activity is occurring, especially in class A product.The Airport submarket is seeing a high number of tenants renewing leases at their existing locations, the report points out. Again, the most new leasing activity is being seen in class A space.In the county’s other submarket, Coconut Grove, vacancy rates have increased significantly, from 5.5% at the start of 2003 to 16.8% in the first quarter of this year. Sublease space here recently has declined, though. The soft market conditions have not kept many tenants from the views and quality space in the submarket, according to the report.