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Miami Office Leasing Slows Further, But Rents Keep On Rising

The average office rent in Miami is nearly 17% higher than it was a year ago, according to a fourth-quarter market report from Savills, a spike that is pushing more tenants out of prime markets in search of more affordable alternatives.

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A lack of high quality office space could hold back leasing in 2024, including in Brickell.

Every major submarket in Miami experienced positive rent growth after remaining relatively stable at the end of 2023, according to market reports from major brokerages like Savills, CBRE and JLL.

But leasing in the market has slowed, totaling 847K SF in the fourth quarter, down from 911K SF in Q3, according to Blanca Commercial Real Estate. 

About 1.5M SF of new leasing activity occurred in all of 2024, a 29% decrease from 2023, according to CBRE, which attributed the dip to the tight supply environment as vacancy in Miami dropped to 14.5%, its lowest since before the pandemic and far below the national average.

Tere Blanca, founder and CEO of Blanca Commercial Real Estate, said slower leasing is typical during an election year, and more interest in the market began to trickle back in after the election.

“Typically, if a decision doesn't have to be made immediately, right there and then, it gets delayed a little bit,” Blanca said. “So what we're seeing is that many of the lease transactions that were finalized last year accelerated post-election. It has nothing to do with party wisdom, it has to do with, ‘OK, there's no further uncertainty.’”

Miami-Dade rents have grown by 51.2% since the onset of the pandemic, making it a far more expensive market to enter than before Covid, according to Savills.

The increase has been most acute in Brickell, where asking rents are now $101.76 per SF after rising another 6% last year, and Wynwood, where rents are 9.1% higher than 2023 at $89.14 per SF, according to CBRE.

Landlords of Class-A space, eager to lock in deals at top-of-the-market rents, are increasingly offering concessions like periods of free rent and tenant improvement allowances to offset the sticker shock.

“Those tenant improvement dollars have beefed up, especially last year, and I do suspect that they will remain elevated for some time,” Blanca said. “Even with those allowances increasing, tenants are having to invest significant capital themselves to relocate into this space.”

While the conversations around concessions have become more frequent, JLL Senior Managing Director Steven Hurwitz said concessions still aren't keeping pace with the continued growth in rents, a sign that Miami is still among the most desirable office markets in the U.S.

“In other parts of the country, you can easily see a much more significant amount of free rent to attract and lure tenants,” Hurwitz said. “I think that you're seeing incentives sort of flatten, if you will, and if they are growing, they're not growing at the same rate as rents are.”

Miami's status as a magnet for corporate relocations is part of the story behind office rents that have become among the nation's most expensive, with construction costs also a major contributing factor. Inputs for commercial construction are up 40% since February 2020 after rising another 1% in 2024, according to the Associated Builders and Contractors.

“Land is expensive,” Blanca said. “Building costs have not come down significantly in any way, and therefore rates have to be at a certain level to support the new development.”

The run-up in rent prices has begun pushing some tenants to search for more affordable options, typically gravitating toward Coral Gables or Coconut Grove, Hurwitz said.

Miami’s central business district accounted for most of the move-outs in Q4, and most of the tenants that have vacated remain in Miami, according to JLL's Q4 report.

In December, global media and advertising giant WPP left Brickell Key Centre, where rents are over $100 per SF, Bisnow reported. It downsized its office by more than two-thirds from close to 75K SF in Brickell to a 25K SF WeWork building in Coral Gables.

Podhurst Orseck vacated its 18K SF space in One Downtown and relocated to 2525 Ponce in Coral Gables, expanding its space to almost 25K SF.

The reason for this, Hurwitz explained, is because new-to-market activity in Miami’s CBD is causing longtime tenants to get priced out.

“Your core CBD tenants are coming over the bridge downtown, and then another significant amount of tenants are, I call it, going home to Coral Gables,” Hurwitz said.

Even as leasing slowed, new-to-market tenants are still looking to gain traction in Miami's sought-after submarkets, Hurwitz said. After big announcements like Citadel, Microsoft and Amazon opening offices in Miami, the momentum seemed to slow in the last year.

But Hurwitz said while the deals aren't as big as the peak of 2022 in-migration, tenants are still decamping to Miami. 

“So generally speaking, the tenants that we're tracking right now new-to-market are smaller in size than in the last couple of years,” Hurwitz said. “But this story is very much still alive.”