Office Vacancy Drops as Rents Increase in Miami

The national outlook for the U.S. office sector does not look bright, with the grim reality setting in that a nationwide vacancy rate of 20%—or worse—is likely to prevail for the foreseeable future.

According to Moody’s, the 20.1% office vacancy rate notched in the U.S. in Q2 2024 is the overture of a swan dive that will see office availability continue rise through the end of 2026.

Here’s the good news: in Miami, they still know how to turn the beat around.

In the second quarter results for Miami’s office sector, you can hear the loud percussion of a vibrant market where demand is hot, space is tight and the vacancy rate is going down.

Here’s the rat-tat-tat: following about 90K SF of move-ins, total vacancy in Miami ended Q2 at 15.8%, a 50 bps decrease quarter-over-quarter and a 90 bps drop in a year-over-year comparison, according to JLL’s latest market report.

Leasing activity picked up in Q2, with more than 855K SF of transaction volume, a total might have been higher if not for the limited availability of large blocks in prime assets. There also has been “unprecedented preleasing activity” in developments that are being delivered, JLL reported.

“Miami is emerging from the frenzy of post-pandemic demand and is settling into a vibrant new normal,” JLL’s report said. “While the market remains a top destination for new-to-market tenants seeking world-class office space, renewal activity is also steady.”

The new normal in Miami includes new office projects that are arriving with tenants already booked.

Half of the space in the 2.1M SF of offices under construction in the city has been preleased, with 75% of the impending deliveries concentrated in the CBD submarkets of Brickell, Downtown and Wynwood, JLL said.

The gleaming glass-sheathed 55-story office tower at 830 Brickell, encompassing more than 1M SF in Downtown Miami’s Financial District, is 93% pre-leased. New-to-market tenants account for almost 450K SF of leasing in the project, which is set for delivery later this year, the report said.

Class A direct asking rent for offices rose to $72.32 per SF in the second quarter in Miami, with overall direct asking rent notching $63.49 per SF, a 12.7% increase in a year-over-year comparison.

“Many tenants continue inking short-term deals as they further assess their workforces, as well as potential new construction options,” JLL said. “Miami’s constantly evolving skyline amid an array of ongoing and proposed developments is a testament to its continued growth trajectory.”