Miami Office

MarketView

CBRE Global Research and Consulting

Q3 2014

TOTAL VACANCY
15.1%

ASKING RATE
$30.84 FSG

NET ABSORPTION
269 K sq. ft.

CONSTRUCTION
330 K sq. ft.

COMPLETIONS
0 sq. ft.

UNEMPLOYMENT
7.3%

*Arrows indicate change from previous year.

MIAMIS SUBURBAN SUBMARKETS TAKE THE LEAD IN

ABSORPTION, MORE THAN DOUBLING THE CBDS
PERFORMANCE SO FAR IN 2014
Hot Topics

Flagler Station/Doral Concourse, the

largest business park in South
Florida, was sold for $131.7 million
at the end of Q2 2014 by Flagler
Real Estate Services, LLC to New York
Based DRA Advisors. The office
portion of the six-building portfolio
sale included four office buildings
and totaled approximately 648,000
sq. ft.
Gebr Heinemann, a new-to-market
duty-free and travel retailer, opened
an 8,300-sq.-ft. office at 550
Biltmore Way in Coral Gables to
serve as its Americas region
headquarters. Heinemann has
revenues of $3 billion per year and is
located in over 100 countries around
the world.
Several existing tenants expanded
their space in Waterford, including
Sunbeam Products, now occupying
over 21,000 sq. ft.; Airbus, which
now occupies 11,600 sq. ft.; and
Havas North America and
MoneyGram Payment Systems, which
expanded to 12,000 sq. ft. and
7,000 sq. ft., respectively.
Developer Solution Group
announced Offizina 1200, a
97,000-sq.-ft. luxury office building
in Coral Gables, which will include
47 office suites. They are one of
several developers catering to Latin
American buyers with a focus on
investment opportunities in office
condominiums.

Figure 1: Total Vacancy -vs- Average Direct Asking Lease Rate (FSG)
Total Vacancy
Average Direct Asking Lease Rate

15.1%
$30.84

Total
Vacancy

Asking
Lease Rate

20%

$32

18%

$31

16%

$30

14%

$29

12%

$28

10%

$27
2009

2010

2011

2012

2013

2014 YTD
Source: CBRE Research, Q3 2014.

Leasing Activity
The vacancy rate continued to move
towards a landlords market in Q3 2014,
declining 70 basis points (bps) quarter
over quarter and 180 bps year over year to
15.1%. Suburban submarkets such as
Coral Gables, Airport/Doral and the
Biscayne Corridor have taken the lead so
far this year with 73% of total absorption
year-to-date.
Joining the ranks of other new-to-market
multinationals moving into suburban
submarkets recently is Beacon Health
Strategies LLC, occupying 17,217 sq. ft. at
Two Alhambra Plaza in Coral Gables.
Spectrum Brands, a multinational
consumer products company, opened a
15,095-sq.-ft. office at 15450 New Barn
Road in Miami Lakes, and the Student Aid
Center, an organization dedicated to
lowering Federal student loans through
forgiveness and consolidation programs,
moved into 13,000 sq. ft. at 2500 NW
79th Avenue, in the Airport/Doral
submarket.

In the CBD, TotalBank moved into 55,006

sq. ft. in the Miami Tower at 100 SE 2nd
Street after closing their Coral Way
branch, and Vitas Innovative Hospice Care
moved into 33,929 sq. ft. in the Miami
Center at 201 South Biscayne Boulevard,
relocating from One Bayfront Plaza.
Leases executed during Q3 2014 totaled
423,217 sq. ft., with over 100
transactions. Of the total leases executed
this quarter, 34% were in the CBD and
66% were in suburban areas by square
footage. There were several noteworthy
leases in the CBD. Corporate Suites Miami
Florida, a New York-based company,
leased 25,472 sq. ft. and is making its
debut in Miami at One Biscayne Tower.
DLA Piper LLC signed a renewal and is
expanding by an additional 22,547 sq. ft.
for a total of 45,094 sq. ft. at Southeast
Financial Center in late 2015. Stroock &
Stroock & Lavan LLP renewed its 14,465sq.-ft. lease at the Southeast Financial
Center as well.

2014, CBRE, Inc.

Q3 2014

Figure 2: Market Statistics

Submarket
Airport/Doral

Building sq. ft.

11,416,212

Direct Vacancy (%)

14.7

Total Vacancy (%)

15.0

Q3 2014 Net
Absorption
8,616

YTD Net
Absorption
147,163

Under Construction
0

Avg Dir Asking Lease

Rate (FSG)
$24.75

Miami Office | MarketView

Aventura

1,386,017

8.4

8.7

18,487

44,957

40,724

$39.23

Biscayne Blvd.

1,584,204

20.1

20.1

8,366

71,356

$31.96

Brickell

7,151,802

13.0

13.5

15,029

126,341

178,580

$39.35

Coconut Grove

1,126,480

9.8

9.8

23,071

4,434

$30.99

Coral Gables

6,752,018

12.8

13.1

69,657

195,730

60,799

$34.70

Downtown Miami

7,537,092

20.2

20.5

47,633

67,142

$32.67

Kendall

3,521,936

10.3

10.3

19,288

(14,095)

50,000

$22.15

Miami Beach

1,959,034

9.2

9.2

(10,705)

(10,849)

$31.31

Miami Lakes

1,573,917

27.5

27.5

31,216

(4,808)

$22.97

North Miami

1,423,572

19.9

19.9

40,021

35,532

$22.03

Residual

1,162,850

7.5

7.9

(2,947)

6,607

$18.88

467,756

23.6

23.6

1,089

38,613

$25.18

CBD Total

14,688,894

16.7

17.1

62,662

193,483

178,580

$35.54

Suburban Total

32,373,996

14.0

14.2

206,159

514,640

151,523

$27.64

Overall Total

47,062,890

14.9

15.1

268,821

708,123

330,103

$30.84

Class A Total

21,281,819

14.0

14.3

178,440

514,890

330,103

$37.61

Class B Total

20,131,969

15.5

15.8

79,610

170,302

$27.03

Class C Total

5,649,102

15.9

15.9

10,771

22,931

$21.78

South Dade

Source: CBRE Research, Q3 2014.

In the suburban submarkets, HealthSun Health Plans signed

a lease for 16,117 sq. ft. at 3390 Mary Street in Coconut
Grove. Aetna Health Insurance signed a lease at 8200 NW
41st Street for 14,061 sq. ft., and Florida Vocation Institute
signed a lease for 13,339 sq. ft. at 7757 W. Flagler Street.
A sizeable transaction was confirmed early in Q4 2014,
which is worth mentioning. Akerman LLC signed a lease for
108,000 sq. ft. on more than six floors at Two Brickell City
Centre with signage rights. The current lease expires in
2018 at SunTrust International Center, and Akerman will be
exercising an early-termination option to occupy their new
space in Q4 2015.
Demand for office space is currently at 1.4 million sq. ft. of
space requirements to lease or purchase in Miami as of Q3
2014, with financial services demanding the most space of
any industry in terms of total square footage, followed by
healthcare services. Average asking lease rates were
$30.84, an increase of $0.01 quarter over quarter and
$0.63 year over year, with the average asking rate for the
CBD at $35.54 and $27.64 for suburban submarkets.
2

Development
The good news for development is that vacancy is declining.
However, it is nowhere near pre-recession levels, which
means office construction is and will remain conservative for
the foreseeable future. At the moment, there are 151,523
sq. ft. under construction in suburban markets and 178,580

sq. ft. in the CBD. The number of proposed projects is over

1.1 million sq. ft. of total rentable building area, the
majority of which are in suburban markets.
Brickell City Centres office tower is expected to deliver by
December 2015, with the retail mall opening in late 2016.
The Panorama Tower, a residential project at 1101 Brickell
Avenue, will include 50,000 sq. ft. of office space and is
scheduled to deliver in 2017. In the suburban submarkets,
the SoMi Building, located at 5966 S. Dixie Highway in the
Kendall submarket, will add 50,000 sq. ft. of office/retail
space and is expected to deliver in October 2014. One
Netanya, a new Class A office building with 40,724 sq. ft.,
is under construction on Sunny Isles in the Aventura
submarket and is scheduled to deliver in Q4 2014. Sunset
Office Center located at 1515 Sunset Drive in the Coral
Gables submarket is scheduled to deliver a five-story Class A
office building with 60,799 sq. ft. in Q4 2015.
Investment Sales Activity
Increasing demand and declining vacancies are pushing
rents higher, which is continuing to fuel investor interest.
Commercial real estate investment sales of office properties
in Q3 2014 totaled more than $110 million.
The largest transaction during this quarter by sales price was
the sale of Harbour Centre located at 18851 NE 29th
Avenue in Aventura, to San Diego-based Sovereign Capital

2014, CBRE, Inc.

Class A
Class B
Class C

$37.61
$27.03
$21.78

$35
$30
$25
$20

Demetree Real Estate Services, Inc. sold 21/22 Center at

2103 Coral Way, a 74,471-sq.-ft. office building to
NETZ USA, LLC for $13 million. The property recently
underwent $2 million in capital improvements and was
92% occupied at the time of sale.

$15
$10
$5
$0
2009

2010

2011

2012

2013

2014 YTD

Source: CBRE Research, Q3 2014.

Figure 4: Net Absorption

YTD

708K sq. ft.

000s of sq. ft.

1,000
800
600

Miami Office| MarketView

The 107,000-sq.-ft. Class A building at 901 Ponce de

Leon Boulevard in Coral Gables, which houses American
Airlines as its anchor tenant, sold for $22.5 million to
TMS Altis 901 LLC, a company tied to Canadian
investment firm TMSA Florida Real Estate. It was sold by
Research Management Corporation, who purchased the
building for nearly $28 million in 2006.

$40

Economic Influence
The expanding residential real estate market has
significantly contributed to the creation of office-using
jobs in such industries as mortgage brokerage, financial
services and international banking. The steady job
growth in these sectors is generating demand for new
office space. With very little office space under
construction, the result has been robust positive net
absorption and declining vacancy.
As of August, 2014, Miami-Dade Countys nonseasonally adjusted unemployment rate decreased by
130 bps year over year to 7.3%, according to the U.S.
Bureau of Labor Statistics. The number of non-farm jobs
increased by 34,700, a 3.3% increase year over year.
The biggest gains in job creation were in construction,
manufacturing and other services.

400
200
0
(200)
(400)
2009

2010

2011

2012

2013

2014 YTD

Source: CBRE Research, Q3 2014.

Figure 5: Under Construction and Completions

Under Construction
YTD Completions

330 K sq. ft.

80 K sq. ft.

000s of sq. ft.

2,500

Outlook
The economy continues to boost occupancy and increase
rents. With little to no development in the pipeline,
landlords are enjoying a strong position when
negotiating leases. Job growth is creating higher demand
for quality space, another contributing factor to the
landlords prime spot in the market. However, vacancy is
still high in relation to the all-time low reached in 2007
of 7%, and it will be a few more years before office
construction becomes widespread.
The office sector is expected to progress from recovery to
expansion over the next few years according to global
economists, and Miami is no exception. The multifamily
market is currently in the expansion phase, as evidenced
by over 4,800 condominiums and 3,200 apartments
units under construction in the CBD alone according to
the Miami Downtown Development Authority. The Miami
Office market, which typically lags behind the residential
market, is still moving out of the recovery phase but is
projected to expand over the next three years.

2,000
1,500
3

Management Group for $61 million. The prior owners of

the 217,056-sq.-ft. building filed for Chapter 11
bankruptcy in 2013.

Q3 2014

Figure 3: Average Dir Asking Lease Rates (FSG)

1,000
500
0
2009

2010

2011

2012

2013

2014 YTD

Source: CBRE Research, Q3 2014.

2014, CBRE, Inc.

Q3 2014
Miami Office | MarketView

CONTACTS

Market Coverage: Includes all competitive office buildings 30,000 sq. ft. and greater in size in Miami-Dade County.

For more information about this Local MarketView, please contact:

Miami Research
Ana M. Gonzalez
Research Coordinator
Miami Research
CBRE
777 Brickell Avenue
Suite 900
Miami, FL 33131
t: +1 305 381 6432
e: ana.gonzalez@cbre.com

Kyle Kujala
Research Coordinator
Miami Research
CBRE
777 Brickell Avenue
Suite 900
Miami, FL 33131
t: +1 305 428 6336
e: kyle.kujala@cbre.com

Ken Krasnow
Managing Director
South Florida
CBRE
777 Brickell Avenue
Suite 900
Miami, FL 33131
t: +1 305 428 6342
e: ken.krasnow@cbre.com

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