Miami-Dade Office Market Sees Healthy Leasing, Net Absorption

MIAMI-The Miami-Dade County office market was characterized by strong leasing activity and healthy net absorption in the second quarter, according to new market reports by Grubb & Ellis and Cushman & Wakefield.For the quarter, net absorption was 245,000 sf, compared with negative 53,600 sf at mid-2003, the Grubb & Ellis report states. That report puts year-to-date net absorption at 496,333 sf. Also that quarter, the overall vacancy rate improved 60 basis points to 15.4%, representing the lowest rate since two years ago.The Cushman & Wakefield report shows 1.5 million sf of space was leased in the first six months of this year. Overall net absorption in the county, according to this firm, was 730,790 sf, up from just 24,478 sf at the middle of last year. The market’s overall vacancy rate fell 2.6 percentage points, from 18.6% in mid-2003 to 16% currently. The biggest drop, 2.1 percentage points, was in the direct vacancy rate, while the sublease rate fell 0.6 of a percentage point.Despite healthy leasing activity, the overall vacancy rate in the central business district changed little, to 17.8%, just 0.8 of a percentage point higher than the 17% at mid-2003. This is attributed to new space being added to the market recently and being leased. Two significant buildings have been added to the market recently: Espirito Santo Plaza at 1395 Brickell Ave., which experienced a fast pre-opening lease-up, and the Offices at Four Seasons Hotel and Tower, a 70-story, mixed-use tower at 1441 Brickell Ave.”There have been some lateral moves” to these buildings, says Jonathan Kingsley, managing director and executive vice president for Grubb & Ellis in South Florida. “That’s a real positive in terms of momentum in the market. When tenants are not ‘healthy,’ it’s difficult” for them to relocate.Pete Harrison, senior director of Cushman & Wakefield of Florida, says, “You had about 450,000 sf delivered into the Brickell market, the vast majority of which was leased. Four Seasons Tower is virtually 100% leased, and Espirito Santo is doing quite well,” at more than 80% leased. “I think that probably represents a hefty percentage of the absorption.”All in all, the markets are in pretty good shape–Coral Gables, Downtown. The Airport West [submarket] seems to be improving, which really has been lagging behind the other markets,” he adds.Condo office space is coming in as a fairly new option in the market, he notes. “That’s a new animal in the last 12 months.” For example, he and his partner are marketing Latitude One, Boston-based EA Fish’s 230,000-sf, class A, freestanding office condo project planned for the Brickell area. “It’s [the addition of office condos] being discussed in Coral Gables, Downtown and Aventura. There’s a lot of discussion.”Harrison also forecasts a healthy second half of the year. “I do see vacancies decreasing,” he says. “You’re not going to see much in the way of deliveries, other than Hines’ project in the Gables, which probably will be 50% leased. I think that’ll be absorbed in six to nine months” after the project is delivered.Likewise, Kingsley predicts a “very positive” second half. “Many of the tenants we’ve been speaking to … the trend is toward expansion, growth. … We see absorption continuing to go in the right direction in all markets. In South Florida in general, we’re seeing good signs.”