That was the theme for the CIASF Office Report today. I agree but I also want to add that the tenants are sitting right next to landlords on this rollercoaster. Here were three statistics that stuck out to me:
1) 75% of the Class A office buildings in the CBD (meaning Downtown and Brickell) are quoting over $40 psf.
2) Absorption of office space is down over 41% in the first quarter of 2015.
3) Rents have been increasing 5% year over year for the past two years and that trend is on track for this year as well.
JLL provided the statistics for this report. Their Miami researcher is well-respected and very experienced, so I trust her numbers. JLL is trending that the market is not peaking at this point so the rollercoaster is still climbing to the top of the hill.
Overall Miami has 14% vacancy which is healthy from the landlord’s perspective. Rents have increased 4% over the past year with Class A rents averaging $37.75 and Class B rents at $26.90 across the county. Free rent is becoming a four-letter obscenity to landlords. Construction costs continue to wreak havoc on financial models.
What’s on the horizon for the office market in Miami? More of the same. Big sales like the recent sale of 800 Brickell to RREEF for $112 million which equals about $584 psf. New office buildings are in the pipeline with two projects in Downtown Miami and TIAA getting the confidence to break ground in about two months on a new Waterford building. Downtown Doral keeps hinting at a new office building but with the new retail and residential components under construction they may pause a little to get those finished first.
If you are trying to figure out how to ride this rollercoaster, call me. I negotiate on behalf of both tenants and landlords, so I have a unique perspective.