Presented at CREW Miami's Luncheon Meeting, February 12, 2020
Business and Visual Arts Editor, Miami Herald
Senior Vice President, CBRE
Vice Chairman, Blanca Commercial Real Estate
Vice Chair, Cushman and Wakefield Florida
In this month’s CREW luncheon, our panel of experts discussed the state of new office space demand in South Florida. Enjoyably wry and candid throughout, the panelists shared their knowledge on the changing nature of this asset class, which has reached a level of demand unseen in Miami since 2009.
At a macro level, the general trajectory of new office properties appears to reflect a growing desire to integrate offices into their tenants’ out-of-office lifestyles. The ambitious vision for the upcoming One World Center project exemplifies this; it will feature ground floor retail, Class-A office space, and several floors of residential units alongside convention facilities, fitness facilities, and top-notch food and beverage components. Throughout the panel, the presence of premier amenitization in office buildings was ubiquitous, a reflection of the increased sophistication of office tenants entering our local market. While the programming for this building has been replicated in other office projects, Kurtz
categorized One World Center as possessing “amenities on steroids,” a not-unreasonable hyperbole considering the $4 billion going into the overall Miami Worldcenter master-plan development. In fact, the amenity package at One World Center even includes an integrated childcare center, an innovation that Kurtz hopes will appeal strongly to the workforce in Miami’s central business district (CBD).
Despite the impressive nature of these projects, there are some emerging issues when evaluating the potential for leasing activity. No matter how skilled a developer may be at internally segmenting a property’s mixed office, commercial, and residential uses from others, the risk of an office tenant “seeing a college student as he leaves the pool” is a real concern for leasing agents according to Brian Gale
. It appears that despite the ultra-amenitization of office properties, sometimes a workplace just needs to be a workplace. Nonetheless, these differentiated properties in the Miami CBD still command a premium, as shown by Brickell’s Class-A office market trading at a $15/foot spread over Downtown’s comparatively mundane Class-A office segment. The difference in surrounding attractions between Brickell and Downtown (“the difference of one bridge,” as put by one panelist), can radically alter the economic viability of a new office development in the CBD. However, with the aforementioned projects on their way to eventual prominence in the Miami CBD, a few spillover effects emerge as the Class-A office market in Miami continues to develop.
Outside of the Miami CBD, The Plaza Coral Gables was highlighted by the panel alongside 3850 Tigertail and the Cocowalk redevelopment as notable upcoming office projects, the first of which features a significant residential, retail, hospitality components. While these Coral Gables and Coconut Grove projects are just as polished as the offerings in the Miami CBD, the proximity to suburban residential neighborhoods of South Miami-Dade County, at a more affordable price point than Brickell/Downtown, makes a strong case for the competitive viability of these upcoming properties. Amidst the “flight to quality” endemic to Miami’s Class-A office market, Coral Gables is excluded from the historically-high lease rate environment of the Miami CBD.
As the Downtown and Brickell office markets prepare to take a quantum leap in terms of differentiation, non-core office markets are keeping up with the times.