South Florida Office Market Keeps Ascending To New Heights

South Florida's office market continues to defy gravity, with leasing records falling from Miami to Palm Beach.

The epicenter of the activity remains Brickell, Miami's financial hub, where asking rents hit $88.83 per SF in the fourth quarter, a 33% increase year-over-year, according to Blanca Commercial Real Estate data provided to Bisnow. Miami saw 1M SF of leasing activity in the quarter and a record-breaking 4.3M SF in 2022, of which 811K SF consisted of new-to-market tenants.

“I don't expect a slowdown in Miami,” Blanca CRE CEO Tere Blanca said. “There's a lot out there in terms of the impending recession. There are layoffs happening at global companies. We are fortunate to be in an environment where we're not necessarily controlled by one industry. There's a lot of diversification and we do have smaller footprints, generally, than other gateway cities in terms of some of these global enterprises that are operating out of Miami or coming to Miami.”

Asking rents in Miami were up 6.6% year-over-year, according to JLL, while vacancy dropped 60 basis points.  

The most sought-after markets' lack of supply, and the continued pipeline of demand from new-to-market tenants, could lead to demand spilling over into other submarkets, Blanca said. Direct vacancy in Brickell sat at 7.9% compared to Downtown Miami at 19.7% and Wynwood at 29.5%, according to JLL.

“The Brickell market is very tight. There's still some inventory, but not significant blocks or new product in Brickell for another four to six years,” Blanca said. “Downtown may be a beneficiary of great activity this year for financial services and some of the professional legal services firms that are coming here, because there is inventory still in a couple of trophy assets that are older that have been renovated.” 

In Palm Beach, office vacancy dropped below 9% for the first time since 1999, according to JLL, while asking rents were up 3.4% year-over-year. Direct vacancy in Palm Beach's central business district ended the year below 6%. 

Miami Beach asking rents climbed 12.7% year-over-year to $60.53 per SF, according to Colliers, while Coral Gables saw a 7.1% increase and Wynwood saw a 16.8% rise in asking rents to $69.37 per SF.

The types of tenants taking space are indicative of the projected sustainability of this market. While Miami was a darling of tech firms early in the pandemic and Mayor Francis Suarez courted tech and crypto companies like now-bankrupt FTX, law firms made up a third of new-to-market leases in 2022, and professional services made up 10%, compared to less than 6% the previous two years, according to Blanca's report.

Law firms like Kirkland & Ellis, Winston & Strawn and Baker McKenzie, as well as finance giants like Citadel and Thoma Bravo, all signed office leases in Brickell last year.

That momentum is already carrying forward: Boston-based law firm Mintz announced last week that it is opening up a Miami office, and BNP Paribas announced Wednesday that it has leased space at 801 Brickell Ave. for its first South Florida space, which it plans to open in the fourth quarter of this year.

“It still feels very vibrant in Miami," Blanca said. "It almost feels like we're an anomaly.”