A recent study from the Miami Downtown Development Authority (DDA) about the recent trends in office markets in South Florida has shown a marked increase in business in the Miami-Dade County region. The study included in-depth research into the markets of Coral Gables, Miami-Airport, Boca Raton and the downtown region of Fort Lauderdale in addition to Miami-Dade County. In addition, the major markets of Atlanta, Georgia and Houston, Texas were looked at for comparative purposes in the Sunbelt Region while comparable international markets such as Sao Paolo, Brazil, Bogota, Colombia, Santiago, Chile and Panama City, Panama were also looked at to compare and contrast. The findings in the study are important to continue the support and expansion of the office market in the Miami DDA.
The market for office space in the Miami-Dade County area has been extremely viable in recent years and recent studies expect that trend to continue as office jobs are projected to increase through at least 2020. The region is projected to add as many as 23,500 office jobs between now and 2020, which means an increase in business for companies looking to procure space in office buildings in the area.
Over the past quarter of a century, the Miami-Dade County office market has grown even with the cyclical ups and downs that come within the real estate industry. Thanks to the growth in the rest of the industries in Dade County as a whole, the Miami-Dade County office market has been a major beneficiary; it currently stands as the largest market for office space in all of Dade County as it comprises 134 office buildings covering a total of 17.7 million square feet of space. That number is solely in private companies; buildings that are owned by the city, county, state or federal entities are not included.
It is estimated that almost two-thirds of the employment of office personnel in the Miami-Dade County area (demographics and economic data by Miami area zip code here) are provided by professional service industries; these include law firms, accounting firms, business management companies and other companies covering financial industries, insurance and real estate. The region is attempting to position itself as a centralized location for technology companies and as a forerunner in workplace innovation; the first Microsoft Innovation Center in the United States is expected to be a harbinger of future expansion and success in the Miami-Dade County office market.
The Miami DDA office market has recovered nicely from the previous recessions that hampered the market; recent studies show that the area has nearly doubled its normal share of total office development over the five year span from 2009 to 2013. Historically, the area is responsible for 19 percent of the office development in the Miami-Dade County area; between 2009 and 2013, that number spiked to 37 percent. This is a marked change after an extended period where the Miami DDA region was losing market share to other suburban markets within the county as companies elected to build and/or rent elsewhere.
Going hand in hand with the construction related to the office development share in the region, the Miami DDA has shown a solid absorption rate in the past few years. From 2000 through 2013, it is estimated that nearly 100 percent of the absorption in the area is through Class A space. From Q1 of 2012 through Q4 of 2013, the Miami DDA recorded a net absorption of 675,000 square feet over those two fiscal years. In the time frame between Q4 of 2011 and Q3 of 2013, that number improved even further as the area posted a net absorption of 750,000 square feet. Over the past five years, the Miami DDA has put together a stellar 31 percent of the net absorption in the county in that time frame.
One issue that the Miami DDA has had to contend with is the lack of major tenants taking up large volumes of space in office buildings. The area has the highest percentage of tenants that utilize 5,000 square feet or less of space in the entire region; that covers Broward and Palm Beach counties in addition to Houston and Atlanta. The large percentage of tenants using small spaces makes it difficult to fully develop large office buildings as there are no signature or anchor tenants to rely on in the development of the building. The lack of major tenants gives some flexibility in negotiating terms relating to their rent; this is also related to the high vacancy rents in some of these buildings.
In recent years, the vacancy rate, while still elevated, has come down considerably from their peak marks in both the Brickell and CBD areas. In late 2011, it was estimated that Brickell had a 24.6 percent vacancy rate; that number has dropped down to 15 percent in recent studies. Accordingly, the CBD was operating at a 23 percent vacancy rate less than three years ago but has seen that number shrink to less than 20 percent at this point in time. Rents have not bounced back to their peak numbers from 2008 but they’ve increased over the past eight quarters; they now have surpassed the numbers that were in place during 2006 and 2007.
Considering the recent trends in the Miami DDA office area, it is expected that the area should be able to support expanded growth regarding office space. It is expected that the area can handle all of the expansion over the next four to five years, including developing office space that is already under construction at this time.