The Miami Herald had a front page article a week or so ago reporting how some of the big downtown tenants moving to new buildings. It was perfect timing with my previous blog about the reasons why tenants are moving.
As I wrapped up that blog and then read Elaine Walker’s article in the Herald, I was thinking, so how many elephants have moved? How does this compare to previous years? Are they really stampeding or are these rare situations?
First of all, how many elephants are in Miami-Dade County? There are about 100 companies that lease over 40,000 sf of office space. I chose 40,000 sf because that usually means the company occupies more than one floor of a building. The average size of these companies is over 70,000 sf with 16% being financial institutions and 14% being law firms. By comparison, the average tenant in Miami is about 2,500 sf.
Next I looked at what the large tenants have been doing from 2007 to 2010. In this 3-year period, 20 tenants renewed and 14 relocated. This tells us a couple of things:
- Of the 14 companies that relocated, 79% moved to new buildings.
- There was enough new construction to coax large tenants into moving.
- These 34 tenants were 6% of the total Miami office market. They occupy a whopping 2.8 million sf of office space.
- Landlords of older buildings with big tenants should not take renewals for granted. This is key because a successful office building typically renews over 75% of its tenants.
We also have to keep in mind the timing also. A large tenant begins its lease renewal process two to three years in advance. They have to because it takes about a year to construct the interiors of a new office and if the company prefers a free-standing, build-to-suit, then at a minimum the developer needs two years from start to finish. Also, the greatest leverage their existing landlord has is time. That’s a discussion for another blog on renewals.
Although about 40% of these large tenants moved over the past three years, we probably will not see the same volume in the next three years. This is due to the actual lease expirations and also because some of these transactions were early renewals.
Conclusion – yes, the elephants are stampeding. Each company’s leadership is making decisions that fit its unique situation. What will be your strategic direction? Call me and let me guide you through the process.