Spec Is the Name of the Game in Miami Office

Waterford at Blue Lagoon

MIAMI—South Florida’s economy performed strong in the first half of 2016. The region posted a sustained employment rate decline and a 110 basis points decrease from the previous year. Against that backdrop, speculative construction remained active yet restrained, according to Avison Young ‘s latest market report. And the Miami area continues to grow as a hub for international commerce and trade. Relatively quiet up until now due to rising construction costs and tight lending standards, Avison Young reports speculative construction has started ramping up in Miami as tenant demand continues to outpace supply. Brickell CityCentre saw Three Brickell City Center come online in the first half of the hear at 97% occupied. “The lack of supply, coupled with a high volume of sales for class A and B assets in the last 36 months, has caused a sharp increase in asking rates across the board,” Scott Goldstein , a principal at Avison Young, tells GlobeSt.com. “That said, there are a handful of class B buildings with below average occupancy, especially in downtown Miami, that still present a financially favorable alternative.” Two MiamiCentral and Three MiamiCentral are under construction in Downtown Miami, which will bring 312,000 square feet of class A space to the market in 2017. Another building is underway at 800 Waterford Way in Doral’s Blue Lagoon submarket. And build-to-suits are also under construction. Avison Young predicts investment sales activity will stay strong in the second half of 2016. “While there is a significant amount of space staged to be delivered within the next three years, most developments are multi-use projects, where the office component represents the smallest component of these projects,” Keith Edelman , a principal at Avison Young, tells GlobeSt.com. He points to Miami Train Station, Panorama, One Brickell City Centre as examples. “We expect that this will cause rates to stabilize for the class B-plus and higher assets while the less desirable assets will need to be aggressive to attract and retain tenants.” Wonder how Millennials are impacting office design? Check out my recent column .