Jobs Boost Miami, Orlando Office Performance

The Florida office markets are mostly healthy through Q3 2023, taking advantage of booming job markets, especially in Miami and Orlando, according to the Q3 2023 Florida Office Market Report by Avison Young.

As of the end of August, Miami’s unemployment rate decreased by 100 basis points compared to August 2022, reaching 1.9%, which is notably lower than the U.S. unemployment rate of 3.8%.

Its asking rates surged by 40% post-pandemic — the most among major U.S. cities.

Trophy office buildings were the place to be as tenants sought highly amenitized options, driving up occupancy and pricing, according to Avison Young.

“Trophy assets have experienced a 45% surge in pricing since the start of the pandemic with an average sale price of $451 per square foot,” the report noted. “At the end of the third quarter of 2023, the overall office pricing was $294 per square foot, reflecting a 22% decrease from the same time in 2022.”

Companies are starting to rightsize their space requirements, Avison Young said, and sublease availability rose by 32.4% year over year, amounting to 993,000 square feet.

The firm sees Miami’s asking rates stabilizing in the near future as companies shed their unwanted sublease space.

Orlando has maintained its strong job market with its unemployment rate at 3.1%, lower than the national unemployment rate of 3.8% as of August 2023. Orlando has experienced a 31% spike in office-using job postings since 2022.

Employers are clamoring for top-quality office space, which is needed to motivate employees to return to the workplace. The result is that now a mere 4.01% of available office space in Orlando are in buildings built after 2010, according to the report.

The overall vacancy rate is up by 170 basis points to 15.8% year over year as a result of tenants right-sizing space requirements, Avison Young said.

The influx of sublease availability has created only a marginal year-over-year increase of 1.8% in average direct asking rates.

Older buildings dominate Orlando’s office availability. Most are between 20 and 40 years old.

“In an environment where tenants are increasingly looking for top-quality spaces and buildings with amenities, landlords are actively exploring ways to modernize their properties to align with the demand,” Avison Young said, adding, “Subleases are accounting for a sizable percentage of all new leases being signed in 2023.”

Tampa’s unemployment rate, while good, increased to 3.2%, up from 2.9% in August 2022.

The professional and business services sector experienced the most significant employment growth, rising by 3.8% year-over-year, according to the report.

“Upcoming large lease expirations will pressure landlords due to a shift in leasing demand,” according to the report, “Since April 2020, 79% of office leases have been for spaces under 10,000 square feet.”

The firm said like Orlando, tenant improvement (TI) allowances have increased as high-end spaces and amenities continue to hold high importance for employers looking to incentivize employees to return to the office.

At least 7.4 million square feet of office leases are set to expire by the end of 2025, with 3.4 million square feet comprising spaces over 20,000 square feet.

“These expirations will result in an increase in larger, less desirable spaces, prompting landlords to reconfigure them into smaller floorplans to attract tenant demand,” Avison Young said.