In a Win for Offices, Miami-Dade Draws More Businesses

Local initiatives to attract new businesses to Miami-Dade County have the potential to boost office occupancy.

Marcus & Millichap projects that the Miami-Dade job total will rise 4% in 2021 after losing 105,600 positions last year. Office-using headcount should increase by 4.3%.

Boosting this growth will be the Follow the Sun campaign, which incentivizes business relocations via annual payments of up to $50,000, according to M&M. While companies like Subway, Blackstone, Royal Caribbean and Starwood Capital have made space commitments to the area, nearly 1.8 million square feet arriving in 2021 could be a limiting factor in the near term.

As market inventory increases by 1.8%, M&M says that annual additions will rise above the trailing-five-year average of 865,000 square feet and delivery volume will hit the highest mark since 2021. At the end of 2021, M&M projects the vacancy rate to rise to 70 basis points to 15.5%, which is about 130 basis points below the U.S. average.

At the end of Q1, vacancy was at 15%. Class A vacancy rose 540-basis-points year-over-year, while Class B/C was up150-basis-points. The suburbs had an annual vacancy increase of 280 points, while the CBD rose 290 basis points.

In Q1, 945,000 square feet of space was completed in Miami-Dade. From Q1 2020 to Q1 20201, delivery volume was twice as large as the total recorded during the previous year. Both the Coral Gables and Miami Airport submarkets added more than 200,000 square feet. By April 2020, about 3.2 million square feet was under construction.

As of May, 46% of this space was without a tenant. M&M points to Gateway at Wynwood (all 229,000-square-feet is unleased), the Strata near the Wynwood (60,000 square feet of available space upon completion) and the Plaza Coral Gables-South Tower (101,000 square feet of unclaimed space) as additional space coming into the market.

Even with this additional supply, rents should rise 2.1 basis points to $34.80 per square foot in 2021. This will be the tenth straight year of rent growth. M&M says rates have advanced 3% in the last year. In March, Miami-Dade’s average asking rent hit a 14-year-plus high of $34.22 per square foot, with Class A rates rising 3% over the past 12 months to $42.21 per square foot. Brickell, Coral Gables and Downtown Miami posted the highest rent growth among the top five markets by inventory, according to M&M.

Office isn’t the only sector that will benefit from the population influx around Miami. Colliers’ first quarter market report showed the retail vacancy rate remained flat in the first months of the year, while rents increased.

The market vacancy rate landed at 4.6% at the end of the first quarter. This is flat from the previous quarter and only 30 basis points below the pre-pandemic vacancy rate. Rental rates increased an impressive 1.9% quarter-over-quarter to $36.99. While an improvement, rates have not returned to the pre-pandemic rate of $38.35. Rental rates increased despite new construction deliveries totaling 91,916 square feet—a total of three buildings all under 40,000 square feet and a construction pipeline totaling 2 million square feet.