STATE of the MARKET REPORT 2021 | 2Nd Quarter South Florida
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STATE OF THE MARKET REPORT 2021 | 2nd Quarter South Florida Office Market Report 2021 | 2nd Quarter Market Conditions Tri-County Summary Welcome to “Wall Street South”, many new to SFL - Unemployment Rate market tenants are fleeing or diversifying their footprint from the Northeast to the warm beaches 16.0% and favorable tax climate of South Florida. 14.0% Leasing activity showed a strong uptick, with many 12.0% 10.0% tenants signing long term leases and reaffirming 8.0% confidence that tenants value working from an 6.0% office. 4.0% Rental rates continue to increase slightly, highlighted 2.0% by the delivery of new office developments that are 0.0% commanding rent premiums. Broward County Miami-Dade Palm Beach United States Market conditions will continue to improve County County throughout the end of the year as the vaccine has 2020 Q2 2021 Q2 become more readily available and employees are beginning to return to the workplace. South Florida Absorption 2021 YTD Highlights - Related Companies Purchased (100,000) CityPlace Tower for (200,000) $174,000,000 or $569/sf (300,000) Monarch Capital Purchased (400,000) Citigroup Center for Miami-Dade Broward Palm Beach $270,000,000 or $332/sf County County County Class A (383,862) (234,210) (7,598) South Florida has Class B (221,424) (129,194) (9,896) welcomed many new Net Absorption (605,286) (363,404) (17,494) companies due to its superior quality of life, strong international ties, Average Asking Rates and business-friendly tax structure. Class A Class B South Florida - Under Construction $50.70 $46.84 (1.759,828 sf) $39.96 $35.12 Miami-Dade County 5% $30.02 (1,676,828 sf) $27.06 Broward County (0 sf) 95% Palm Beach County Miami-Dade County Broward County Palm Beach County (83,000 sf) Tower Commercial Real Estate / 1 Miami-Dade | Insights 2021 | 2nd Quarter Miami | Historical Comparison Supply | Speculative Suburbs Y-O-Y Q2 2021 Q1 2021 Q2 2020 2850 Tigertail, a 180,000 SF office development by Related CHANGE Group, delivered this quarter at an impressive 100% leased Direct Vacancy % 17.3% 17.2% 12.4% -4.9% which demonstrates strong tenant demand for space in the Coconut Grove submarket. Related Group will relocate Asking Rents (FS) $45.50 $44.71 $43.62 $1.88 from their office in Downtown Miami and occupy the top two floors of the project, other notable tenants include D1 YTD Absorption -605,286 -486,320 37,539 -642,825 Capital Partners, Knight Foundation, and Ratzan Law Group. Demand | New Neighbors 1 Southside Park, a mixed-use development encompassing Direct vacancy in the overall office market increased 10 bps 190,000 SF office by JDS Development Group, began over the span of a quarter and increased 490 bps year-over- foundation work this quarter. The massive mixed-use year to 17.3%. Cano Health, one of the country’s largest senior project will consist of 190,000 sf of office space, 1,175 health providers, has cemented its headquarters at Flagler apartments, 200-key Treehouse hotel by Barry Sternlicht’s Station by expanding from 29,834 sf to 115,358 sf. SG Group, 10,000 sf retail, 1,400 parking spaces, and a new fire station. The project is located in west Brickell in close Welcome to Miami. In the 2nd quarter Thoma Bravo, a Chicago proximity to Brickell City Centre and Mary Brickell Village. based firm which invests primarily in software and technology companies, inked a 36,500 sf lease to occupy the top two floors Supply increased, absorption for the quarter was negative of 830 Brickell. D1 Capital Partners, the New York City based 118,966 sf with the Airport West submarket accounting for hedge fund, signed a 25,000-sf lease at 2850 Tigertail in 122,585 sf of the supply increase. Amadeus, a leading Coconut Grove. travel software company, is vacating its entire North American headquarters at One Park Square in Airport Bitcoin Bonanza. The Bitcoin 2021 conference was hosted in West, placing the entire 84,110 sf on the market for Miami this year at the Mana Wynwood Convention Center. The sublease. conference kicked off with opening remarks from Miami Mayor Francis Suarez, a technology industry cheerleader who has been bullish about Bitcoin and its potential to attract innovative Rental Rates | Relative Discount businesses to Miami. Many business announcements were made, both Blockchain.com and Borderless Capital announcing Miami-Dade’s average gross asking rents were reported at they are moving their U.S. headquarters to Miami with plans to $45.50/sf, a $0.79 increase over the $44.71/sf reported at hire hundreds. The former American Airlines Arena in the end of the Q1 2021. Rental rates continue to increase downtown was also recently renamed the FTX Arena after the as new to market tenants seem less price sensitive San Francisco based cryptocurrency exchange. considering the relative discount from New York and other major markets. Wynwood ($62.69) and Airport West Under Construction - Submarket ($38.55), were the submarkets respectively reporting the highest and lowest Class A asking rents. SF % Pre-Leased Premium Rent. We predict that rental rates will continue 600,000 80% to increase for the foreseeable future as Miami developers 500,000 60% will capitalize on the new to market trend and build 400,000 premium office product that’s suitable to the high 300,000 40% 200,000 standards of new to market tenants. New to market 20% tenants have shown to be less price sensitive as the rental 100,000 rates are still a relative discount to what they are 0 0% accustomed to in other markets. Brickell Coral Wynwood Aventura Miami (CBD) Gables Beach 19.1% 1.5M SF 34.33M SF $45.50/SF/FS Total Under Total Office Average Direct Vacancy Construction Inventory Asking Rate Tower Commercial Real Estate / 2 Miami-Dade | Statistics 2021 | 2nd Quarter Existing YTD Under Direct Vacancy Total Q2 2021 2021 YTD Average Gross Class Inventory Completions Construction % Vacancy % Absorption Absorption Asking Rent Brickell A 5,519,681 0 552,301 13.8% 15.6% 9,561 (106,977) $63.00 B 953,538 0 0 24.6% 24.7% 1,017 (19,060) $36.31 Totals 6,473,219 0 552,301 15.4% 17.0% 10,578 (126,037) $59.07 Downtown Miami A 5,171,193 0 0 23.6% 25.2% (25,960) (52,485) $52.10 B 933,086 0 0 23.5% 23.8% 2,655 4,408 $34.25 Totals 6,104,279 0 0 23.5% 25.0% (23,305) (48,077) $49.37 Miami CBD 12,577,498 0 552,301 19.3% 20.9% (12,727) (174,114) $54.36 Airport West A 5,070,394 100,000 0 20.9% 26.4% (62,374) (235,519) $38.55 B 5,806,613 0 0 14.2% 15.4% (60,211) (194,189) $31.14 Totals 10,877,007 100,000 0 17.3% 20.5% (122,585) (429,708) $34.59 Aventura A 855,061 0 334,227 10.7% 11.2% 300 (4,204) $49.55 B 214,500 0 0 12.8% 14.7% 3,267 8,291 $45.01 Totals 1,069,561 0 334,227 11.1% 11.9% 3,567 4,087 $48.64 Coconut Grove A 523,493 180,000 0 7.7% 7.7% (5,108) 19,295 $59.22 B 647,581 0 0 9.8% 10.8% (2,356) (18,121) $44.23 Totals 1,171,074 180,000 0 8.8% 9.4% (7,464) 1,174 $50.93 Coral Gables A 4,496,581 0 163,741 15.6% 16.9% (5,985) (28,432) $44.45 B 1,654,316 0 0 10.9% 11.0% 10,031 (1,382) $38.09 Totals 6,150,897 0 163,741 14.3% 15.3% 4,046 (29,814) $42.74 Miami Beach A 666,750 0 144,430 11.7% 11.7% 1,593 9,475 $57.27 B 1,012,728 0 0 9.2% 9.4% 11,255 (3,191) $43.60 Totals 1,679,478 0 144,430 10.2% 10.3% 12,848 6,284 $49.03 Wynwood A 562,377 0 325,300 62.0% 62.0% 1,529 14,985 $62.69 B 238,119 0 0 0.0% 0.0% 1,820 1,820 $40.34 800,496 0 325,300 43.6% 43.6% 3,349 16,805 $56.04 Suburban Total 21,748,513 280,000 967,698 16.1% 18.1% (106,239) (431,172) $40.37 Miami-Dade Overall 34,326,011 280,000 1,519,999 17.3% 19.1% (118,966) (605,286) $45.50 Class A 22,865,530 280,000 1,519,999 18.8% 21.1% (86,444) (383,862) $50.70 Class B 11,460,481 0 0 14.4% 15.1% (32,522) (221,424) $35.12 Significant Investment Sales Citigroup Center One Biscayne Seller Seller 813,000 sf 691,980 sf CP Group Dow $270.0 M $225.0 M Chemical $332 psf $325 psf Buyer Monarch Buyer Downtown Miami Capital Downtown Miami CP Group & Significant Lease Transactions Rialto Capital 115,358 SF 49,379 SF 36,500 SF 25,000 SF Flagler Station River Landing 830 Brickell 2850 Tigertail Renewal / Expansion Relocation New to Market New to Market Airport West Airport West Brickell Coconut Grove Tower Commercial Real Estate / 3 Miami-Dade | In the Pipeline nd 2021 | 2 Quarter Highlights Development 830 Brickell – Brickell The Plaza (South Tower) – Coral Gables 552,301 SF Office | Delivers Q1 2023 163,741 SF Office | Delivers Q4 2021 Starwood Capital HQ – Miami Beach The Gateway – Wynwood/Design District 144,430 SF Office | Delivers Q3 2021 205,000 SF Office | Delivers Q3 2021 Strata – Wynwood 2850 Tigertail Ave – Coconut Grove 87,510 sf Office | Delivers Q3 2021 180,000 SF Office | Delivered Q2 2021 The Onyx Tower – Aventura Terminal Island – Miami Beach 334,227 SF Office | Delivers Q3 2021 140,000 SF Office | Proposed Tower Commercial Real Estate / 4 Broward | Insights 2021 | 2nd Quarter Supply | Flight to Quality Broward County | Historical Comparison Y-O-Y Q2 2021 Q1 2021 Q2 2020 1700 Plantation Pointe, a 145,000 SF office development CHANGE by Torburn Partners, delivered during the 2nd quarter of 2021.