Brickell Office Market Sees Strong Leasing, Lower Vacancies

MIAMI-The desirable Brickell office submarket of Miami-Dade County is experiencing strong leasing activity and lower vacancy rates, as the percentage of sublease space has declined dramatically, according to a new CB Richard Ellis report.The area has seen 363,140 sf in leasing activity year to date, mostly class A space, which has contributed to positive absorption of 200,837 sf year to date, the report states. The vacancy rate, which held steady at 16.8% the last quarter of 2003 and the first quarter of this year, started to drop in the second quarter, to 16.5% in the second quarter. Declining vacancies are expected to continue.”With no new construction and strong leasing activity, we expect vacancies to decrease,” says Calum Weaver, CBRE. “As such, average asking rates may gradually start to increase.”Less sublease space also should have a positive impact on asking rates. In the past 18 months, the percentage of sublease space has dropped from approximately 34% to 9% of all available space in the Brickell submarket. Companies such as BDO Seidman, Sterling Financial, Pacific Credit, Squire Sanders and Guggenheim Investments have taken discounted sublease space there, and they are “saving significant amounts of money by having the sub-landlords underwrite a portion of the lease cost,” Weaver says.”The lower subleases also means the submarket does not have to absorb any significant underutilized sublease space, and any future expansions and relocations will have an immediate affect on the submarket,” he says. “Though not a panacea, the decrease in sublease offerings reduces any potential downward pressures on average direct asking rates.” Since asking rents typically lag behind market trend changes by three to six months, “with the amount of sublease space decreasing, it may possibly lead to higher average asking rates in the coming months.” Sublease space has been popular also because in some cases, the space includes significant tenant improvements, CBRE adds.With vacancies and rental rates, Weaver says he doesn’t “anticipate any great change overnight, but all indications are for a very positive and dynamic submarket.”