Florida’s Office Forecast Remains Surprisingly Sunny

Across the U.S., the office market is in tough shape. Sales volumes are down, and new construction has slowed to a crawl. The 18.8% national vacancy rate in April 2024 was a full 210 basis higher than a year earlier, according to data firm CommercialEdge.

In San Francisco, office vacancy was up an eye-popping 650 basis points in 12 months. It’s not just expensive coastal markets that are struggling – St. Louis, Atlanta and Chicago are struggling to fill downtown office space.

And then there’s Florida. The Sunshine State’s office market continues to show strength. In Feldman Equities’ core market of Tampa, employers are moving in, and demand remains strong for well-positioned, recently updated buildings in the central business district.

Other markets across Florida are doing well, too. In Miami, for instance, strong demand and rental rates above $100 in some submarkets are sparking sales activity. Miami’s office market boomed during the pandemic. And while office owners in other parts of the country are sitting on their hands, some Miami property owners are looking to cash in.

In one example, Nuveen Real Estate has put the 701 Brickell office tower in Miami on the market, hoping to get as much as $500 million for the 1.1 million-square-foot property, according to news reports. The 32-story building is 90% leased to tenants that include financial titans BlackRock and Apollo Global Management. Last year, law firm Holland & Knight renewed its 121,000-square-foot lease.  

In October, Nuveen sold another building, 801 Brickell, for $250 million. And Aimco has put the 32-story Brickell Bay Office Tower and the adjacent 31-story Yacht Club Apartments on the market, seeking a combined $650 million.

Farther up the coast in Palm Beach County, the office market is firing on all cylinders. In Boca Raton, tech company Innovative Solutions this spring announced its expansion from Rochester, New York. While the company has just 13 employees in 2,600 square feet for now, Innovative Solutions expects to expand to 100 employees – and to take additional space to accommodate them.

A bit farther north, in downtown Delray Beach, Pebb Capital reports strong demand for office space at Sundy Village, its redevelopment of a site that includes a historic inn and restaurant. Tenants are drawn in part by Atlantic Avenue’s rich offerings of restaurants.

Moving up the coast, downtown West Palm Beach is booming. Related Companies’ One Flagler project is a new building with water views, and it’s charging rental rates of more than $100 per square foot – and getting them. In May, Related announced leases at One Flagler with financial firms Bessemer Trust, HighPost Capital, Paulson Capital, Baron Funds, Lancer Capital and the Johnson Family Foundation. Reflecting the wealth migration to Florida, Paulson Capital’s West Palm Beach office will be its first in the Southeast.

And keeping with the theme of amenities as a crucial feature of a successful office property, the 25-story One Flagler includes 4,100 square feet of retail space, 10,000 square feet of indoor and outdoor dining, an Equinox-designed fitness center and a posh terrace overlooking the Intracoastal Waterway.

Elsewhere in West Palm Beach, Related Companies says a recent deal with JPMorgan Chase means its 360 Rosemary tower is now “105% leased.” That sounds like hyperbole, but there’s an explanation – Related had so much demand for the building that it converted the top floor of the parking garage into additional workspace. And at Esperante, another Related-owned building in downtown West Palm Beach, a recent lease with a health-care firm means the building is 100% full for the first time since it was developed in the 1980s.

Florida’s sunny office market

In any office market, demand is driven by population growth and by a robust job market. Florida continues to lure employers and employees, and they’re particularly gravitating to amenitized buildings in thriving urban districts. At Feldman Equities, we’re laser-focused on our mission of repositioning struggling office space and developing new space in downtown markets.

Florida’s winning combination — warm weather, reasonable regulations and a modest tax burden — is luring employers south. Financial firms from New York and Chicago and tech companies from California have been streaming into the Sunshine State. Florida added 240,500 jobs from April 2023 to April 2024, a 2.5% growth rate that topped Texas, California and other large states, according to the U.S. Labor Department.

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