The office market continues to show upward momentum with rents rising while vacancies and unemployment falling. These market fundamentals have landlords finally smiling ear-to-ear because they can finally rein back on the free rent and ample construction allowances.
I doubt that we will see a tremendous influx of new office development for a couple of reasons. First and foremost, residential developers are driving land prices so high that office developers have thrown up their hands in defeat for now. You add in the rising construction costs (up to 20% increase over the past year) and the rental rates for new office buildings would be in the $50-$60 per sq ft range. With average CBD Class A rental rates hovering around $42.00 per sq ft, the market doesn’t justify new office buildings.
Another interesting dynamic in my world is that we are seeing some premier assets being sold or on the market. Douglas Entrance was the largest office sale in the county for the first quarter. Airport Corporate Center is on the market and should trade in the second quarter. What does this mean for tenants? The good news: typically the new owner will make improvements to the property. The bad news: your rent will increase.
Here are the top five office leases in Miami for the first quarter.
|Tenant||Sq Feet||Submarket||Transaction Type|
|Miami Childrens Hospital
|Arnstein & Lehr LLP
Clinical Trials & Research
|12,231||Coral Gables||Renew/ Expansion|
If you are faced with a lease renewal and need advice on how to navigate these choppy waters, give me a call. I have closed over 600 leases during my career. My solutions are creative and uniquely tailored for each individual tenant.