The office market continues to improve with increasing occupancy which pushes rental rates and lowers concessions such as free rent and tenant improvement allowances. These improved fundamentals trigger investment sales activity in turn. Just recently we have seen some large Class A suburban office buildings sales. DRA Advisors out of New York bought a 750,000 sq ft portfolio in the Miami Airport submarket for $132 million from Flagler Development. CBRE Investors is under contract to purchase Airport Corporate Center for another $132 million price tag. Airport Corporate Center is just over a million square feet of Class A and B office buildings as well as some flex buildings.
777 Brickell and 550 Biltmore are anticipated to hit the market soon. We are also tracking some off-market deals that are in the works. Why should tenants be concerned? Sure, their rent check will go to a different address and perhaps they get a new management team plus the property gets spruced up, but otherwise, everything remains the same, right? Not necessarily and particularly if your lease is expiring in the next 12-18 months.
New owners have purchased a property based on certain leasing assumptions. These assumptions typically include increasing the rental rates on renewals and new leases. If you have a lease renewal within the first budget year of a new owner, good luck. You will need a skilled expert (me) to guide you through the process because it will potentially be frustrating and expensive.
For tenants with a couple of years of lease term, watch your operating expenses. You may have increases resulting from the sale. The building’s property taxes and insurance could increase due to the sale. The new owner may change certain services that lead to an increase as well.
If your office lease is expiring in the next 12-18 months, give me a call for a free consultation. If you have an empty office building, call me so we can offer you a unique solution. We are looking for opportunities to help folks. Will you be one?