After Pandemic Rush, South Florida Office Market Sees Steady Demand

For years, Angelo Bianco, a Florida developer, drove past the enormous, wooded IBM corporate campus off Interstate 95 in Boca Raton, Fla., without paying it much heed. But his interest was piqued when a broker informed him that the property was for sale.

IBM designed the secluded 550-acre site in the 1960s because it “didn’t want people in their secret development lab space,” Mr. Bianco said. It was there that its engineers produced the first personal computer, as well as the prototype for the first smartphone.

Nearly 10,000 workers were employed on the complex in its heyday, but after IBM moved its operations to Raleigh, N.C., and eventually sold the property in 1996, the site became something of a white elephant. A series of owners struggled to successfully recast it, selling off tracts and ultimately renaming it the Boca Raton Innovation Campus.

The site was acquired five years ago for a reported $179 million by a group of buyers led by the CP Group, a commercial real estate firm where Mr. Bianco works as a managing partner. After studying contemporary corporate campuses belonging to Apple, Google and Nike, Mr. Bianco said, the company decided to open it up to the community rather than keeping it shrouded from view.

As hybrid work models continue to evolve and transform the workplace, owners of commercial real estate have been rethinking how the corporate office should look — even in a market like South Florida, which has proved better insulated from the downturn in office space that has hobbled other metro areas like New York and San Francisco.

Office vacancy rates topped 19 percent nationally in the third quarter of this year, close to their record in 1991, according to Moody’s Analytics. Cities with ample new construction, like Dallas and Austin, Texas, showed higher vacancy rates. But Miami is among the markets where vacancies declined.

After an initial rush to the suburbs during the height of the pandemic, tenants in Florida are again searching for space downtown and in central office districts, said Jonathan Kingsley, a vice chairman of Colliers International, a real estate advisory firm. And they are looking for a more robust experience as they try to lure workers back to the office.

“They need to have fitness centers or wellness rooms, access to restaurants and maybe some retail,” Mr. Kingsley said.

But incorporating new amenities that will appeal to today’s workers is an expensive prospect for developers, who are also facing limitations on access to public transportation and continuous competition for space, particularly in the South Florida market.

Hedge funds and technology companies that relocated to the area during the pandemic, or expanded there, have snatched up real estate. The billionaire Kenneth C. Griffin turned heads with his purchase of office buildings in Palm Beach and Miami’s trendy Brickell district, where he intends to build a skyscraper that will house Citadel, his hedge fund.

The rush over the past three years has leveled out, but demand has remained relatively steady in the three counties that make up South Florida: Miami-Dade, Broward and Palm Beach. Since the start of 2023, newcomer tenants account for 21 percent of the 3.8 million square feet of active deals in Miami-Dade, said Tere Blanca, chief executive of Blanca CRE. Rents have held steady, and in some of the hottest neighborhoods, like Brickell, they have risen.

A key reason for the sustained strength, Ms. Blanca said, is that the region attracts a diverse array of industries, rather than relying on one or two sectors. Typically, businesses open regional headquarters or smaller offices — some hoping to tap into the swell of new talent that has migrated to the area.

Another draw are the investments by well-capitalized owners aiming to build community by creating what they call the “tenant experience” with updated amenities and events that often involve food trucks or 5-kilometer races.

The Y-shaped, one-story office building at the heart of the Boca Raton Innovation Campus was designed by Marcel Breuer and Robert F. Gatje and is the largest in the state. To update it, CP Group added skylights, courtyards, entrances and amenities, like a convenience store, a beauty salon, coffee shops and art displays, which are open to the public, as are the walking trails and the lake at the property’s center.

“We want people, when they come here, to feel like they’re getting more than an office,” Mr. Bianco said. “People don’t want to work in an environment that’s separated from the world anymore. They want energy and excitement and stuff near them.”

Office space, like its retail counterpart, can thrive if it is relevant and in a good location, said Scott Sherman, founder and principal of Torose Equities, a Miami developer. In August, Torose closed on a 222,000-square-foot office building built in 1972 in pedestrian-friendly Coral Gables, Fla., for a reported $54.4 million. His firm intends to update the building with fresh amenities to draw tenants.

“More and more companies are saying you have to come to the office three, four, five days a week,” Mr. Sherman said. “The more the office environment is enjoyable, the easier to get people back in.”

When Andrew B. Hellinger, a co-founder and principal of Urban-X Group, a developer in Coral Gables, started construction in 2018 on River Landing, a shopping center, rental apartments and a dock along the Miami River, the top floor had been promised to AMC Entertainment. Then the pandemic came, and the theater chain, in deep financial distress, was happy to give up the space.

In its place, Mr. Hellinger and his partners turned the three stories on top of the complex into 150,000 square feet of office space. Now, he said, the offices are 75 percent leased.

“The marketplace is starting to understand work is not just a place to go to the office and leave,” Mr. Hellinger said. Even for those who commute, “you might want to hang out and not fight traffic.”

Commuting challenges are a main reason that more companies are putting a priority on proximity to public transportation, said Mr. Kingsley of Colliers. Prospective tenants want to “make it easy on employees, make them want to come to work,” he said. For example, a British-based design firm looking to open an office in South Florida detailed clear needs to him: a “cool, funky space” near public transit.

The newly expanded high-speed rail line in Florida, called Brightline, is a “game-changer,” said Andrea J. Heuson, a professor of finance and an academic director of real estate programs at the Miami Herbert Business School. The train service will allow much more accessibility to the northern part of South Florida, where rents are lower, which she said might ultimately hurt Miami-Dade in favor of Broward and Palm Beach.

Indeed, Mr. Bianco’s top price per square foot in his Boca Raton building commands about half of the highest rents to the south. The property’s proximity to Tri-Rail’s Boca Raton station, the busiest stop in the 70-mile-long commuter rail line, is a draw — one that he hopes makes the campus even more attractive.

The Boca Raton City Council recently voted to rezone the property so his firm can move forward with plans to add 1,250 apartments, a grocery store, restaurants, a hotel and a performance venue.

As Mr. Bianco guides prospective tenants through the building and shows off what is purported to be the world’s longest hallway — at 907 feet — he points to a collection of photographs from the dawn of the computer revolution.

“I tell them when IBM was here, that was like Google and Apple in the same company,” Mr. Bianco said. Perhaps that lineage is part of the lure. The building is now 90 percent leased, up from 70 percent when his group took ownership.