(Crystal Proenza is associate editor of Real Estate Florida.)
MIAMI-Bilzin Sumberg Baena Price & Axelrod LLP and Brickell Holdings LLC have terminated a 10-year lease agreement for the law firm to occupy 115,000 square feet in the developing Brickell Financial Centre. The end of the $58-million deal signed last April comes as a shock to an already volatile Downtown Miami office market, local brokers tell GlobeSt.com.
Bilzin Sumberg was the only tenant signed at the 1.5-million-square-foot Brickell Financial Centre being developed by Miami-based Foram Group. The building owner "is in negotiations with several other major tenants and construction is continuing according to schedule," according to a statement issued by CB Richard Ellis late Thursday. Bilzin Sumberg and Foram Group could not be immediately reached for comment.
Sources speculate that many major law firms throughout the country are downsizing and the state of the economy had an impact on the potential demise of this agreement because the firm might have needed less space within the building. Bilzin Sumberg is currently headquartered at the Wachovia Financial Center at 200 S Biscayne Blvd. in Downtown Miami, where it occupies 85,000 square feet.
"The fact that both parties were willing to walk away from this deal represents the volatility of the Miami market," Alan Kleber, senior director with Cushman & Wakefield's Miami office, tells GlobeSt.com. "The news continues to upset the delicate balance of the market right now. You now have two buildings coming out of the ground on Brickell Avenue that have no tenants signed to date. That's significant."
Brickell Financial Centre was the first of the three new class A office buildings under construction in the Downtown Miami/Brickell market to land a major tenant. Rilea Group's 1450 Brickell has yet to announce any lease signings. MDM Development Group and MetLife's Metropolitan Miami project is 40% leased to multiple tenants including signed anchor Greenberg Traurig LLP, which is to occupy 150,000 square feet within the project's 750,000 square feet of office space. However, the fate of that deal may also now be called into question.
"This might not be the only shoe to drop," warns Kleber, who is not connected with the Bilzin Sumberg lease. "The only remaining anchor tenant for the new buildings happens to be a law firm similar to Bilzin." Undoubtedly, Greenberg Traurig has an agreement where certain critical dates must be met, and if they aren't it means they can terminate their lease at Metropolitan Miami, he explains. "Given the volatile environment we have right now, it wouldn't be far fetched that they would take a look at the obligations they've negotiated so far."
The terminated agreement at Brickell Financial Centre will surely deal a blow to the office sector, though not everyone loses out in such a market. "From a tenant perspective, it's a great opportunity to potentially relocate and possibly save money comparative to what they're paying now in A and even B plus buildings," especially for smaller tenants, says Kleber. "The mindset of the landlords is that the critical mass of smaller transactions will make up for larger tenants, so they may now be able to achieve deals similar to those offered to anchor tenants."
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