It’s the time of year when everyone does a mid-year report on the state of the office market. Folks, we are still are not doing as well as the rest of the country. Let’s start with unemployment. We lag behind the State of Florida (9.8% to 8.5%) who lags behind the country (7.9%). High unemployment means that office space will continue to sit empty.
In terms of vacancy, Miami trails behind the national averages at 14% compared to the national average of 12%. The good news is that we are slowly but steadily absorbing the vacant space. The U.S. is showing positive absorption of office space both in Central Business Districts (CBD) and the suburbs and Miami is on the same trend. Interestingly enough, this quarter all the large transactions were renewals (with some expansions). An argument can be made that tenants are hesitant to make bold decisions this year or perhaps their landlord is cognizant of the fact that retaining a tenant is far easier and more affordable than finding a new one.
Average rents for Miami are higher than the national average, but that’s to be expected. You cannot really compare Miami’s office buildings to those in smaller metropolitan areas. Average asking rent for Miami’s Class A buildings is $35.33. Class B is $24.91 and Class C is $21.35. The national averages are $27 for Class A, $19.38 for Class B and $15.55 for Class C.
So what does this mean? On the surface it looks like the obvious answer is the reason our office space sits empty is that rents are too high. However, with unemployment still trending above the national numbers, it’s really about jobs. Office space is only filled up when unemployment subsides, so until our community creates more jobs, we will have empty office space no matter what price it is being leased at.
On a positive note, we are outperforming Sacramento, Las Vegas, Phoenix and our very own Palm Beach County. Locally, we still see individual buildings out-performing their competitors because the landlord and leasing team have developed an aggressive leasing strategy. Is your lease coming up for renewal? Now is the time to act – don’t wait until the last minute to begin developing your own aggressive renewal strategy. Call me today for a free lease analysis.