For the first time in history, the average asking rent for office space in Miami skyrocketed to more than $50 per SF in Q2.
Brickell is dominating the market — its 42% year-over-year rent increase surpassed Manhattan and Los Angeles, according to a JLL report.
Migration of America’s top talent to Miami is the main factor driving high rents and making Miami’s office market the hottest it has ever been, Blanca Commercial Real Estate founder and owner Tere Blanca told Bisnow.
“[Miami] is a place where you can attract talent, and the talent has migrated in big numbers during the pandemic and today,” Blanca said. “With a very diverse, educated workforce and population, companies are excited to be in a city that is growing in many ways [and experiencing] a business expansion.”
Florida added 10,522 new tech jobs last year, the second most in the country, according to the Computing Technology Industry Association. CompTIA ranked the Miami metro fourth in the U.S. for net tech jobs added, and LinkedIn reported a 30% year-over-year increase in IT and software jobs in Miami in 2021.
Blanca CRE has been a player in the industry for over 35 years. According to the firm, office development is being spurred in Brickell and Wynwood by remote work and zoning improvements.
“Brickell and Downtown have experienced a lot of this dynamic … of new people moving and choosing to live in the urban core,” Blanca said, adding that the pandemic accelerated a workforce migration that industry leaders “felt would happen sooner or later.”
The Wynwood Rezoning project, approved in 2015, led to an explosion of interest from developers. As office buildings joined residential, corporate users and investors began flocking in.
Blanca CRE was the agent when Blackstone purchased two office buildings in Miami in 2021, and Blanca said its acquisition spurred more office activity.
“That unleashed an activity that was unprecedented in terms of companies coming here, many in the financial services sector and then later the tech industry and fintech industry,” Blanca said.
Heavy hitters such as Apollo, Babylon and Citadel have come to Brickell in recent years.
Other blue-chip, out-of-town tenants moving in include Microsoft Corp. and Marsh, a subsidiary of Marsh & McLennan Agency, which both moved into 830 Brickell. For coworking firms like WeWork and Industrious, the demand is at an all-time high.
“They have waiting lists, so there are many companies that have entered into licensed agreements with WeWork, IWG, Industrious and so on because they are recruiting talent, they are growing their accounts here and waiting for their permanent spaces to be delivered,” Blanca said. “We expect there is going to be tremendous demand for space on a longer-term basis as each company expands and as the executives choose where they are going to reside.”
As that happens, office demand may spill into other neighborhoods, she said.
For WeWork, this has meant finding new ways to maximize its “inherent flexibility” to accommodate the surplus of out-of-town tenants.
“We continue to see strong demand in Miami where, as shared in our Q1 2022 earnings report, we saw over 90% occupancy and accounted for 9% of commercial office leases despite representing approximately 1% of the market stock,” WeWork Territory Vice President Suzie Russell told Bisnow via email. “As a result, we have waiting lists in most of our Miami locations.”
Russell said demand is broad-based across company sizes and industries, including tech and finance.
Initial Q2 key findings provided to Bisnow by Blanca Commercial Real Estate show that the flight-to-quality trend is positioned to continue into the foreseeable future, especially in Brickell, Wynwood, Miami Beach and the Miami Design District. That will continue driving pricing up and vacancy down.
Asking rents at 830 Brickell, considered the top-tier building in Brickell, are between $125 and $150 per SF, a $25-per-SF increase over Q1.
“This trend is extremely prominent in Tier 1 Brickell office buildings where rents increased 7.2% from the previous quarter with some landlords increasing rents between $5.00 – $7.50 per SF,” Blanca CRE said in a report. “This growth will be especially prominent in Miami’s CBD where 40% of new to market tenants are looking for space.”
Miami’s office vacancy rate is at its lowest level in eight quarters.