South Florida Office Asking Rents Tick Up

South Florida office landlords are still riding high following the influx of businesses during the early part of the pandemic. 

In the third quarter, owners of office buildings in Miami-Dade, Broward and Palm Beach counties pushed up the average asking rents by 5.5 percent, nearly 1 percent and 0.3 percent, respectively, compared to the same period of last year, according to Colliers reports. 

Economic uncertainty due to higher interest rates and inflation has gripped much of the U.S.. But South Florida’s office market generally stayed stable in the third quarter, with some exceptions. 

Miami-Dade and Palm Beach counties experienced a drop in vacancy rates and positive net absorption, but Broward had an uptick in vacancies, albeit a slight 0.3 percentage points, the reports show. 

The steady leasing activity is partly due to companies switching back to in-office work following the remote-work trend that started in March 2020. 

“Most companies are adopting hybrid work models, usually at least three days of

in-office work per week,” Colliers’ reports state. “However, certain employers are enforcing a complete return to the office.”

Miami-Dade County

In the third quarter, the average asking rent hit $52.06 per square foot, flat compared to the previous quarter, and up from $49.36 a square foot, year-over-year, according to the reports. It’s still a landlords’ market due to the 9.6 percent vacancy rate, less than the 10 percent rate recorded both last quarter and in the third quarter of last year. 

Nearly 3.8 million square feet were leased in Miami-Dade so far this year, leading to a positive net absorption of 383,000 square feet in the third quarter. 

Law firm Greenberg Traurig inked the biggest lease in the third quarter, renewing its 128,500-square-foot lease on five floors at the Wells Fargo Center at 333 Southeast Second Avenue in downtown Miami. 

Sony Music took the runner-up spot, leasing 45,000 square feet at 545 Wyn at 545 Northwest 26th Street in Miami’s Wynwood neighborhood. 

Investment sales, stymied over the past year due to higher borrowing costs, also picked up. In the biggest deal in South Florida, Princeton International Properties bought the 355 Alhambra Circle building in Coral Gables for $90 million from PGIM Real Estate. 

Torose Equities, Lndmrk Development and Terranova paid $54.4 million for 255 Alhambra Circle, according to records, marking the second biggest deal for the quarter. 

Broward County 

The average asking rent in Broward hit $37.32 per square foot, up from $37.16 a square foot in the previous quarter, and $36.98 during the third quarter of last year, according to Colliers. 

Broward is the only South Florida county that recorded a negative net absorption, of roughly 181,000 square feet, resulting in an uptick in vacancies. In the third quarter, the vacancy rate hit 11.7 percent, up from 11.4 percent in the previous quarter, and 11.2 percent, year-over-year. 

Tenants leased more than 500,000 square feet in the third quarter. Tech firm UKG, or Ultimate Kronos Group, expanded to 155,000 square feet at Weston Pointe at 2250 North Commerce in Weston, marking the biggest lease for the quarter.

Investment sales activity was devoid of deals over $10 million. The biggest deal was investor Ruth Shamaev’s purchase of the building at 1776 East Sunrise Boulevard in Fort Lauderdale for $6.7 million, records show. 

Palm Beach County 

Palm Beach experienced South Florida’s biggest quarter-over-quarter bump in average asking rent. Rates hit $40.26 per square foot in the third quarter, up from $39.47 a square foot in the previous quarter and $40.13 a square foot in the third quarter of last year, according to the reports. 

The vacancy rate was 8.8 percent, a hair down from 8.9 percent in the previous quarter, and up from 7.9 percent in the third quarter of last year. 

Tenants leased more than 550,000 square feet, contributing to a positive net absorption of 44,000 square feet, though the biggest deals were renewals. 

Law firm Cole, Scott & Kissane renewed its 63,600-square-foot lease at the Esperanté Corporate Center at 222 Lakeview Avenue in downtown West Palm Beach. The Office of Attorney General Ashley Moody renewed its 32,600-square-foot lease at 1515 North Flagler Drive, also in West Palm. 

Investment sales activity also was muted, with one exception. Billionaire Ken Griffin, founder and CEO of Citadel, paid $83 million for the nearly 50,000-square-foot office building at 125 Worth Avenue in Palm Beach.