As South Florida became a magnet for out-of-state companies in the past four years, Miami Beach emerged as a budding office market.
The city landed major leases at record rents during the influx of financial firms, family offices, hedge funds and other businesses. Developers seized on the boom, with plans for new Miami Beach projects. In all, six buildings are on tap, one more is nearly finished and two existing buildings are slated for modernization into Class A offices.
Yet, the additional square footage is coming just as South Florida is off the gold rush. Data shows that the influx of out-of-state companies to the tri-county region has slowed this year, and Miami Beach’s office market has recorded negative absorption. At the same time, some longtime South Florida companies are shaving their office space due to remote and hybrid work, and others are holding off expansion plans due to inflation and elevated interest rates that make capital more expensive.
All this raises questions as to whether the planned Miami Beach offices will get preleased or fill up with tenants soon after they are completed.
Wayne M. Boich plans a six-story mixed-use building with offices at 1920 Alton Road in the Sunset Harbour neighborhood.
Also in South Beach, Michael Shvo has approvals for two projects: The Alton, a six-story building with 170,000 square feet of offices and five apartments on the northwest corner of Alton and Lincoln roads; and One Soundscape Park, a five-story, 62,500-square-foot building at 1665 and 1667 Washington Avenue, near Soundscape Park (rendering above).
Meanwhile, the Giller family is betting on Mid-Beach. The family plans 28,200 square feet of offices on the top three levels of a seven-story building on the southeast corner of Alton Road and West 41st Street.
Confident that their offices will lease up, developers point to their projects’ designs, leasing activity at buildings completed in recent years and preleasing at projects already underway. Mainly, they cite Deco Capital Group and RWN Real Estate Partners’ soon-to-be finished mixed-use Eighteen Sunset in Sunset Harbour, where nearly all the office space is spoken for.
But whether this momentum continues for projects on tap remains to play out. Some areas of Miami Beach are better suited to offices, compared to other areas where projects are planned. And South Florida traditionally hasn’t been big on office preleasing, brokers said, as tenants usually only sign up for space once a building is nearing completion.
The preleasing seen in Miami Beach in recent years has been somewhat of an anomaly.
“That was extremely unheard of,” Bijaoui said. A lot of what is planned is more of a “build it and let’s see if they come.”
The only project aside from Eighteen Sunset to score preleasing so far is The Fifth Miami Beach.
New York-based hedge fund J. Goldman signed up for about 13,500 square feet, representing nearly 25 percent of the building’s 54,500 square feet of offices, a source said. New York’s high-end Italian eatery Sant Ambroeus preleased more than 7,000 square feet of the retail space, meaning a third of the building is preleased.
“The announcement of the Sant Ambroeus and the construction of the superstructure recently reaching the third floor has resulted in a significant uptick in inquiries by tenants,” Amit Khurana, founding partner at New York-based Sumaida + Khurana, said in a statement.
The Fifth’s construction is expected to be completed in less than a year, according to Khurana.
But one source familiar with the market, who isn’t involved in The Fifth’s development or leasing teams, and requested anonymity, expressed “surprise” that the project “has not had more tenants to announce by this stage in the construction process and how long they have been marketing it.”
Preleasing hasn’t yet launched at Sumaida + Khurana’s second building, which will consist of 76,000 square feet of offices and 11,000 square feet of retail. Construction of the project is expected to start next year, according to Khurana.
Shvo, led by Michael Shvo, also is yet to launch preleasing at its two fully approved projects.
“We have received interest from tenants who are impressed with the design of the buildings,” said a Shvo spokesperson. “While we have received unsolicited offers, we are still very early in the process.”
Construction is expected to begin next year, according to the spokesperson.
Boich is partnering with Bruce Beal, president of Related Companies; and Andrew Mathias, former president of SL Green, on his project. Beal and Mathias are partnering on the development individually. The developers scored approval last year for a six-story building with 25,200 square feet of offices and 8,300 square feet of restaurants, as well as three condos.
Boich hasn’t disclosed whether office preleasing has launched or the level of tenant interest.
Some Miami Beach office brokers expressed doubt about Shvo’s two projects.
“Shvo is building a lot, so the exposure to it sitting not preleased during or after construction is pretty high, given the scope of how big it is,” said Newmark broker Jeremy Hakala.
One Soundscape Park likely will score leases as it gets close to topping off, said Clay Sidner, also of Newmark. “After that, at least a 24-month lease up to get the building above 75 [percent] to 80 percent leased up,” Sidner said.
At The Alton, Shvo had been in discussions with JP Morgan Chase to open a private wealth management office on two floors, but the bank opted for a space in Brickell, Bisnow reported, citing documents reviewed by the publication. Shvo Head of Design Jerry Piro denied JP Morgan was expected to lease space.
Shvo, which also plans a restoration of Miami Beach’s Raleigh hotel and the addition of a 17-story condo, recently laid off several of its South Florida employees, Bisnow reported. The move, which leaves four full-time staff members, was made as the firm moves past design and into the construction phase of some of its Miami Beach projects.
Some brokers said both of Shvo’s projects will be in an area that doesn’t command the high rents of Sunset Harbour to the north and South of Fifth to the south.
“Location is really, really important, and the only locations in Miami Beach that can support Class A rent is South of Fifth and then Sunset Harbour,” Bijaoui said.
Others agreed. At Sunset Harbour’s Eighteen Sunset, half a floor remains unspoken for, though a prospective tenant is expected to finalize a lease soon, according to a source. The project has commanded rents at $170 per square foot, triple net, according to the source. That’s more than $200 a foot, gross rent. Another source said South of Fifth’s The Fifth project also is asking $170 a foot, triple net.
The Giller family’s Mid-Beach project is expected to start in January, with completion expected in mid-2026, Ira Giller said.
The family is betting on demand from both new-to-market and longtime South Florida tenants, as well as on the proximity to Mount Sinai Medical Center. The hospital is developing an adjacent cancer center, slated to open next year.
The Gillers’ building will be elevated in anticipation that the city will eventually raise the stretch of Alton Road along the project, as part of its efforts to buffer against sea-level rise, Giller said.
In the planned building revamps, Shvo in 2022 filed plans to redevelop the 13-story “clock tower” at 407 Lincoln Road, though it’s unclear whether the firm has purchased the building yet. Also, Robert Rivani’s Black Lion plans to turn the six-story The Lincoln at 1691 Michigan Avenue into a class of its own, dubbed Class X. The building has about 120,000 square feet of offices and is 80 percent leased, according to Hakala, who was part of the Newmark team that handled the sale.
Once renovated, the “clock tower” and The Lincoln could pose competition for tenants at the planned projects.
Brokers who remain confident in Miami Beach’s growth as an office market often point to Bausch + Lomb taking 8,300 square feet this year at Starwood Capital Group’s headquarters building at 2340 Collins Avenue. But the firm actually took over a space vacated by venture capital firm Andreessen Horowitz, meaning it did not result in an increase in leased office space.
According to CBRE, Miami Beach had an 11.5 percent vacancy rate in the second quarter, amid construction of 334,000 square feet of offices. The city’s office market recorded a negative absorption of 15,000 square feet during that period.
Not All Roads Lead To Brickell
As a whole, the planned new projects would add over 400,000 square feet of offices.
“That’s generally less than one office building in Brickell,” said Lyle Stern, a longtime Miami Beach broker who co-founded Vertical Real Estate last year, adding that the new space will be delivered over time. “It’s not like it all has to be absorbed now.”
Yet, Newmark’s Hakala said the sooner a project is finished, the better.
“Whoever delivers first is going to benefit from the momentum of the past couple of years more than people who wait,” he said. “Who knows what the world will look like in the next five years?”
Miami Beach has carved out a niche, attracting family offices and small private firms, leasing from 2,500 square feet to 10,000 square feet, with many company executives also buying a mansion in the city, brokers said.
The Gebbia family, once linked to “The Real Housewives of Beverly HIlls,” moved their financial planning firm Siebert Financial’s headquarters to a building they purchased in South Beach in 2022. Also that year, David Gebbia bought a Palm Island home for $5.8 million, and Richard Gebbia paid $6.4 million for a house on Hibiscus Island.
Last year, Boich, who made his fortune in the coal mining industry, dropped $11.6 million for a Miami Beach teardown adjacent to a mansion he owns on North Bay Road.
Boich’s planned office project will be next to his recently completed headquarters for Boich Investment Group at 1910 Alton Road. Mathias’ family office, Bruce Beal and Turnbridge Equities have offices there. Ross + Kramer Art Gallery also leases space.
Although Miami’s Brickell has been the prime recipient of the new-to-market rush, those who hype Miami Beach say the city has a place in South Florida’s office market.
“You still have many people that are moving here and have family businesses and are buying the high-end homes” in Miami Beach,” Giller said. “Some of these people are tired of fighting traffic and going to Brickell.”
Source: The Real Deal