4 Trends That Will Affect Miami's Office Market
From capital and tenant office demand to parking and the cool factor, there are many factors shaping the future of Miami offices. Here are the four biggest.
1. Rents Could Pass $50/SF
Office rents are hitting the $50/SF mark again, The Allen Morris Co. CEO Allen Morris said.
“But it has gone above that in the past,” Morris said. "And it's going above that again."
In 2008, he said rents he negotiated on one deal were hitting $55/SF.
“It's been a long time since I have seen the office absorption exceed the delivery of supply.”
2. Capital Markets on Pause in Miami
“The capital markets in Miami are taking a little bit of a breather,” Crocker Partners managing partner Angelo Bianco said.
The main reason: Miami is now considered a gateway city, yet its office market only absorbed 200K SF this past year.
“When you're flying in from other markets, that seems paltry,” Bianco said. “The gross number of square feet that's been absorbed has been relatively small versus other gateway markets, which is what we've been kind of becoming.”
Bianco and Morris were part of a panel lineup at Bisnow's State of Florida Office event this month, along with Cushman & Wakefield vice chairman Brian Gale, Banyan Street Capital CEO Rudy Touzet, Stantec Architecture & Design principal Barbara Savage and IP Capital Partners chief investment officer Josh Procacci.
Part of the pause has to do with a lack of office product for sale that makes sense to some investors, Procacci said.
“It's been just trying to find inventory,” he said. Touzet echoed those sentiments, and said being in the latter part of the economic recovery has made investors more cautious on purchases.
3. The Future of Parking Garages
For office developers, they are struggling when it comes to parking. Right now, office tenants demand it. But in a decade, that stodgy parking deck could become a relic of times past, Morris said. That will in large part be due to the changing technologies with autonomous vehicles and walkable environments.
“We're a 'tweener right now,” he said. "We're between the old paradigm and the new paradigm. And you can't build a building with zero parking in most locations. But you've got to keep it to a minimum and make sure it's potentially converted to other uses."
Morris referenced a talk he heard from Ford Motor Co. CEO Mark Fields, who said owning a private car could become an oddity for people in a decade. So Morris is designing his new parking garages to eventually be reconfigured for other uses.
Bianco said Crocker owns a parking deck next to a building it owns in Downtown Miami, so the landlord could offer three to 1,000 parking ratios to tenants. That turned about to be too much parking relative to demand, with the average tenant using a one per 1,000 SF parking ratio.
“When we bought the building, we thought that was going to be great,” he said. "We're going to crush the market. We're going to go out there and we can have all your parking needs met. It hasn't mattered. Really, I was shocked. I still am today. It seemed such an easy stretch that people would come to your building for parking."
4. MIAMI'S COOL FACTOR
“If you think about it, Miami is one of the few cities in the United States that's cool,” Bianco said. We have that flair that I think that actually draws younger people."
The market has been especially important as a bridge for international companies from Latin America, he said. Gale said Downtown Miami has even gained a gloss of that cool factor, taking some of the glow from South Beach.
“It used to be that South Beach was the trendy place to go,” Gale said. “It's not trendy to necessarily be on South Beach. It's trendy now to be downtown.”
