Miami’s Business-Friendly Environment Continues to Fuel Office Demand
Investors are looking at opportunities in the Northeastern portions of Miami-Dade
Office employers are continuing to increase staffing and make new leasing commitments after national expansion and local firms drive up vacancy recovery.
That’s according to Marcus & Millichap’s Q4 Miami-Dade Office Market Report, which says there’s an increase in mom-and-pop firms leasing lower-tier properties in more affordable submarkets such as Northeast Dade, as opposed to big-name employers targeting amenity-rich buildings in Brickell and Miami Beach.
Recruitment will continue as an additional 15,500 jobs are expected to be added, which will expand Miami-Dade’s employment base by 5.1% this year. With Microsoft and Blockchain.com among some of the upcoming move-ins, the metro’s office fundamentals are expected to see an additional boost in the tech sector.
As the economy grows, that will translate into a solid property performance, the report says. Increased demand resulted in vacancy declines of over 100 basis points across all tiers. Available in mid and lower-tier buildings fell to their lowest levels since 2007. However, there was a 12.9% increase in upper-tier asking rents due to Class A vacancy elevation and leasing activity over the past year. The growth tied Miami and Palm Beach County for the most rapid marketed rate growth on an annual basis compared to other major markets in the country.
There are many investment opportunities in Miami as leasing activity increases. Transaction velocity rose from the first two quarters of the year, producing an all-time high for trends.
Although the rise in interest rates will pose a challenge for the rest of the year, investors are looking at opportunities in the Northeastern portions of Miami-Dade. The report says trades feature lower-tier assets in the sub-$10 million tranche that gives buyers with first-year yields above 7%.
Over the past year, the metro’s average price per square foot rose 12% to $430, with a 30-basis-point decline making the average cap rate 5.3%.
This year, developers are expected to add the second-largest amount of square footage in more than 10 years with 50% of the space stemming from a single tower scheduled. So far, roughly 818,000 square feet have been completed. 80% of space was delivered in Kendall, Miami Beach, or Miami City submarkets.