New Buildings Drive Office Leasing in Miami-Dade Market
In the second quarter, there was 248,000 square feet of positive absorption, pushing the vacancy rate down 10 basis points.
The Miami-Dade County office market continued to attract new businesses in the second quarter. A new market report from Colliers shows the area recorded 248,000 square feet of positive absorption in the second quarter, pushing the vacancy rate down 10 basis points. Most new leases were completed in the central business district in newly delivered buildings.
The market has a construction pipeline of 3.7 million square feet, and 301,000 square feet of new supply delivered into the market in the second quarter. As a result, rental rates have also increased 11.9% to $43.44 per square foot, direct full-service. For class-A space, the rental rate is $50.11, and Colliers predicts rents will continue to growth through the end of the year.
Although Miami is seeing a surge in corporate relocations and population growth, the market has not recorded strong office absorption. In the first quarter, absorption was negative 354,900 square feet, and last year in the second quarter, absorption was down 434,000 square feet. However, the overall market vacancy is up 2% to 12% from the same time last year, illustrating the impact from the pandemic.
However, Colliers attributes the fluctuating vacancy rate to the new construction pipeline and new supply deliveries. Only 27,000 square feet of new office supply was added to the market in the second quarter 2020, but an additional 257,000 square feet delivered in the first quarter of the year and at the end of 2020, the market added more than 600,000 square feet.
As employees return to the office, Colliers expects the market to continue to recover. In addition, new construction starts are slowing down. Overall, this spells good fundamentals for office performance later this year. The report expects vacancy to continue to decrease with rising rents. A report from Marcus & Millichap also forecasts job growth in the market this year. 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%.
It isn’t only leasing activity that is picking up. Investors are also expanding. In July, a joint venture between CP Group, Rialto Capital Management and Sabal Capital Partners acquired One Biscayne Tower, a 38-story office tower with LEED Gold and Wired certifications and 65% occupancy. CP Group also owns the SunTrust International Center and Citigroup Center.