Office Insight

Miami . Q3 2013

35,684,219 sf

Direct vacancy rate

17.2%

Total vacancy rate

17.9%

Under construction (% preleased)

183,298 sf (19.3%)

Leasing activity 12 mo. % change

-56.6%

YTD net absorption

447,406 sf

12-month overall rent % change

Pricing

Outlook
Numerous cranes now dot the CBD horizon. On the ground, large swaths of
the urban core and parts of the outlying Midtown market resemble virtual
construction sites. Intense growth of commercial and residential product is
well underway with at least 40 projects in various stages of development.
Under construction office product remains confined to the suburbs at less
than 200,000 square feet. Near-term (late 2015) planned deliveries with
announced completion dates of new office inventory will be located in the
CBD, also totaling 200,000 square feet. Overall absorption has maintained
a positive motion for almost four years. Largely attributed to Class A
buildings, vacancy within this segment of the market has declined
consistently for the past 3.25 years. Among Class B assets, a slower trend
has decreased vacancy consistently for only the last 1.5 years. The pace of
leasing activity has subsided since 2011. For those known transactions now
under negotiation as of this writing, the volume of square footage is
anticipated to increase leasing activity levels. However, with a large
percentage comprised of renewals, relocations within existing submarkets
and/or space downsizing, this will not translate into positive absorption.

Demand

-1.6%

Class A overall asking rent

$35.13 psf

Class B overall asking rent

$25.12 psf

Net new supply, net absorption and total vacancy

Net new supply

s.f.

Market conditions
Year-to-date absorption was virtually evenly divided between the CBD and
the suburbs with the Class A sector dominating Miamis new occupancy by
a wide margin. The majority of Miamis inventory is comprised of Class A
buildings. The CBDs Class A vacancy was reduced by 2.1 percentage
points since year-end 2012. As such, both the Brickell and Downtown
sectors (which combined make up the CBD) are positioned to move into
more balanced/landlord favorable conditions sooner than their suburban
counterparts. During the same time period, the suburbs Class A vacancy
fell by 1.4 percentage points. Overall vacancy for every submarket,
however, remains in the double digits with the metro area still facing nearly
6.4 million square feet of direct and sublet vacant space.

Supply
Supply

Economy
National and statewide employment figures were below expectations with
the unemployment rate rising in the majority of states. Florida, however,
was not one of those states and at a seasonally adjusted 7.1 percent was
down from 8.7 percent 12 months ago. Miamis rate was likewise down, to
8.4 percent from last years 9.7 percent. Labor force participation in the
metro area, however, was down during the same period by 2.0 percent or
nearly 27,000 people. In terms of absolute numbers, Miamis top industry
gainers over the year were trade, transportation and utilities, retail trade and
leisure and hospitality. The highest percent increases were posted among
retail trade, leisure and hospitality and the financial activities sectors at 4.1,
4.0 and 3.1 percent, respectively. Constructions specialty trade contractors
subsector also posted a notable increase at 3.2 percent during this time.

12-month
forecast

Key market indicators

Net absorption

total vacancy

1,500,000

25%

1,000,000

20%

500,000
15%
0
10%
-500,000
5%

-1,000,000
-1,500,000

0%
2008

2009

2010

2011

2012

Q3 2013

Leasing
Historical
activity
asking
vs. sublease
vs. effective
vacant rents
available space
YTD Leasing Activity

s.f.

Despite lower leasing levels, new

occupancy gains lift most markets

Sublease space

4,200,000
3,500,000
2,800,000
2,100,000
1,400,000
700,000
0
2008

2009

2010

2011

2012

Q3 2013

Jones Lang LaSalle Americas Research Miami Office Insight Q3 2013 2

Tenant perspective
Landlords remain confident with concessions mildly tightening. For the
best positioned buildings/spaces, rates are shifting upwards. However,
overall pricing levels still remain favorable for the largest, crme of the
crop credit tenants. Within the CBD, challenges persist for the biggest
occupiers with high quality demand space requirements i.e., the waning
volume of large contiguous offices with premium views.

Class A tenant improvement allowance

CBD

$50

CBD

Suburbs
$ p.s.f.

$ .p.s.f.

Class A overall asking rents

Landlord perspective
Quarterly tour activity points to tenant expansion movement with a desire
to trade up to better quality space. Tenants opening new business lines,
at least from national users, indicate a desire for shorter terms i.e., two to
three year commitments. Landlord confidence momentum continues in
the Brickell, Downtown and increasingly the Coral Gables market. While
most pricing increases have been in place for the last year, bumps in
asking rates continue to implemented quarterly by both Trophy and Tier
II Class A landlords.

$45
$40
$35

Suburbs

$40

$30

$30
$25

$20

$20
$15

$10

$10
$5
$0
2009

2010

2011

2012

2008

Suburbs

CBD

2011

2012

Q3 2013

8
6

2
0
2009

2010

2011

2012

Suburbs

26

14
20,000 50,000 s.f.

45
40
35
30
25
20
15
10
5
0

8
2

2
3

0
> 20 0,000
s.f.

10

Full floor and larger

2010

100,000 200,000
s.f.

CBD

2008

2009

Class A blocks of contiguous space

# of blocks

months

Class A free rent

12

$0

Q3 2013

50,000 100,000
s.f.

2008

Q3 2013

Includes selected vacant existing blocks and available UC/UR blocks

Jones Lang LaSalle Americas Research Miami Office Insight Q3 2013 3

Submarket leverage market history and forecast

Property clock current market conditions

2013

Submarket*

2014

2015

2016

2017

Downtown - CBD
Peaking
market

Brickell,
Downtown
(CBD)

Rising
market

Tenant leverage

Landlord leverage

Brickell - CBD

Falling
market

Bottoming
market

Coral Gables - Suburban

Miami Airport - Suburban
*Major markets
Landlord-favorable
conditions

Balanced
conditions

Tenant-favorable
conditions

Miami Airport (Suburban)

Coral Gables
(Suburban)

Completed lease transactions

Tenant

Address

Submarket

s.f. Type

VITAS Innovative Hospice Care

Miami Center

Downtown CBD

31,000 Relocation

Resorts World Bimini/Miami (Genting)

The Omni Offices

Downtown - CBD

30,000 New

Molina Healthcare

Westside Plaza

Airport Suburban

27,000 New

Magellan Health Service

Airport Corporate Center

Airport Suburban

24,000 Relocation

Cable & Wireless

Columbus Center

Coral Gables Suburban

19,500 New

Regus (business centers)

Leroy Collins Building

Miami Lakes Suburban

15,000 New

Sedgwick Law Firm

One Biscayne Tower

Downtown CBD

14,000 New

Marcum

SunTrust International Center

Downtown CBD

10,000 Renewal

VS Brooks, Inc.

255 Alhambra

Coral Gables Suburban

8,300 Expansion

Completed sale transactions

Address

Submarket

Buyer / Seller

s.f.

$ p.s.f.

Coconut Grove Bank HQ

Coconut Grove
(Suburban)

Terra Group JV Related Group/

Coconut Grove Bank

75,000

$733

Atrium at Coral Gables

Coral Gables
(Suburban)

Baptist Health Enterprises/

TA Realty

161,000

$273

Four Seasons Office Tower

Brickell (CBD)

Jamestown Properties/
Millennium Partners

258,767

$200
*Partial interest
(23.62%)

Methodology: Inventory includes all Class A and Class B office properties > 30,000 square feet,
excluding most condo and all medical, government owned and owner occupied buildings

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