Since the beginning of the 20th century, when developers cleared away vegetation and alligators from a sandbar just off the coast of Miami, Miami Beach has been a retreat for the wealthy wishing to escape cold winters.
But now the wealthy don’t want to just play in Miami Beach; they want to work there, too. More wealthy executives, including those who arrived during the Covid-19 pandemic, are bankrolling buildings and leasing office space close to their sprawling mansions and luxury condominiums. It’s a burgeoning trend that could help change the perception of Miami Beach as a place just for fun and sun.
The city is poised to welcome its first top-of-the-line Class A office projects in years as officials are eager to fast-track office development to diversify the municipality’s economy beyond hospitality.
Stephen Rutchik, executive managing director of office services at Colliers, said the demand for Class A office space is driven by principal decision-makers and their employees who live in Miami Beach and want to avoid commuting on South Florida’s congested roads.
“Living and having an office on Miami Beach is a quality-of-life decision,” he said.
There are 4.9 million square feet of office space in greater Miami Beach – which includes Surfside, Bal Harbour, Bay Harbor Islands and Sunny Isles Beach – according to Colliers’ 2021 fourth quarter office market report. However, only 1.3 million square feet of that are the Class A spaces sought by companies hoping to encourage remote workers to spend more time in the office.
By comparison, downtown Miami has 5.1 million square feet of Class A space available, and the Brickell Financial District has 4.8 million square feet, the Colliers report stated.
Lyle Stern, co-founder of Miami Beach-based commercial brokerage Koniver Stern Group, said billionaires, technology and investment companies have been opening offices in Miami Beach for years, but that pace has quickened during the pandemic. However, hardly any Class A office space has been built since the early 2000s, he said.
“The vast majority of [wealthy] folks who moved down here during the pandemic want an office here; they just cannot find office space,” Stern said. “We are not just talking about someone sitting at home with a computer, but someone who has six, seven, eight, nine, 10 analysts working for him, as well.”
With vacancies at a considerable low in the city, some billionaires have sought to build offices of their own.
Barry Sternlicht, president and CEO of Starwood Capital Group, an investment firm overseeing $100 billion in assets, moved his company’s headquarters out of Lincoln Place at 1601 Washington Ave. after completing a new 144,430-square-foot building at 2340 Collins Ave. And energy investor and Miami Beach resident Wayne Boich is constructing a 15,997-square-foot office at 1910 Alton Road that will include a penthouse for him on the fifth floor.
Colliers’ Rutchik said he is negotiating per-square-footage rents in the low to mid-$100s for Eighteen Sunset, a mixed-use office project at 1733 Purdy Ave., which is slated for completion in 2023. The project is being developed by Marc Rowan, CEO of New York-based Apollo Global Management (NYSE: APO), and Bradley Colmer, managing partner of Miami Beach-based Deco Capital Group.
Colmer said he originally planned to build a residential building in Sunset Harbour. But he opted to build a Class A office project when he noted older office buildings in Miami Beach were snaring premium rents “for product that you would typically call Class B,” leaving money on the table for any developer willing to offer more amenities.
“We thought there was an opportunity there,” he said.
Diversifying The Economy
The Miami Beach City Commission already increased the height limits of office buildings to 75 feet on Terminal Island, western segments of Alton Road, and within the Sunset Harbour Overlay district. On Collins Avenue between Sixth and 16th streets, where height for new construction is maxed out at 50 feet, an urban plan designed by architect Bernard Zyscovich would include 75-foot-tall Class A office structures. The city also issued a request for proposals for developers interested in turning three city parking lots and the municipality’s 17th Street parking garage into Class A offices.
Rickelle Williams, Miami Beach’s director of economic development, said encouraging more Class A office development is part of a strategy to attract businesses in industries that employ a high-wage workforce. That includes technology and financial services firms, as well as companies willing to relocate corporate or regional headquarters, or expand existing offices. That mostly leaves out hospitality businesses, known for paying lower wages.
The city’s strategy includes expediting the permitting process for office projects and giving up to $60,000 a year for the next four years to companies with more than 10 full-time jobs that pay more than $69,385 a year. (The exact amount awarded depends on the number of jobs.)
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