Is it Time for New Office Construction?

MIAMIWere not at the bottom any more. South Floridas largest urban office markets are not only reporting increased leasing activitysome cities are pushing all-time pricing records. So says JLLs Spring 2014 Skyline Review.

Following four consecutive years of significant absorption, premium office space in Miamis Central Business District (CBD) are dwindling. At the same time, JLL is reporting five-year-low vacancy rates among Ft. Lauderdales premier properties. Further north, top-tier trophy assets in West Palm Beach are posting 13.1% vacancy rate, as suburban companies seize the opportunity to enter the class A downtown market without breaking the bank.

An influx of new-to-market tenants, scarcity of premium space, and an overall lack of new construction planned are contributing to a shift towards a more landlord-favored market. The bottom line: its a good time to own a trophy office building in South Florida.

Miamis CBD office market, which includes Downtown and Brickell submarkets, is flirting with some of the highest asking rents quoted since 2008, ranging in the neighborhood of $51 to $60 per square foot for premium office space. There are relatively few options for high full-floor offices with unobstructed views. Only four penthouse options remain. Strong leasing dynamics are helping to fuel sales activity, with 781,659 square feet of skyline inventory trading hands in 2013.

Its really a perfect storm for high quality office buildings in downtown Miami right now, says Scott Strickland, executive vice president for JLL in Miami. A combination of new corporate users entering the market and expanding here, a strengthening economy, and an overall dearth of high quality new space with desirable views on the immediate horizon is putting upward pressure on rents, downward pressure on landlord concessions, and leaving large tenants with few premium options to choose from.

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Is it Time for New Office Construction?