April 2024 Office Update: Workers Keep Returning to Offices

We have been saying it for years and it is happening: Workers are returning to their offices. As of February, foot traffic at offices was up 18.6% year over year, according to data from Placer.ai, which tracks cell phone data and visits to 1,000 office buildings nationwide. 

Nationwide, office visits were still down 31.3% from February 2020, but the gap has been narrowing and particularly so in Florida. For instance, Placer.ai’s data says visits to Miami buildings in February 2024 were off just 9.4% compared to February 2020 — and up 23% year-over-year.

A range of major employers, including Boeing, UPS, IBM, Google and JPMorgan Chase, have begun requiring workers to return to offices. The new trend is yet another tailwind for office markets – and particularly for desirable office buildings in thriving areas such as Florida.

Florida’s economy remains a bright spot nationally. The labor market is creating new jobs and the state keeps attracting new residents and new employers. Job creation and population growth are crucial ingredients for a robust office market, and Florida has continued to outperform the rest of the country on all counts. With the first-quarter 2023 results in, here is a tour of some of the state’s key markets.

Tampa: Rents hold steady

Rental rates keep rising in the Tampa Bay region. In the first quarter, they were $29.79 per square foot, according to Cushman & Wakefield. Vacancy rates were 20.6%, reflecting new construction.

Significant lease transactions included a 128,264-square-foot deal by Masonite in Ybor City, and 48,253 square feet for Immunologix in the Westshore submarket. In early April, JLL, the commercial real estate brokerage, moved into 20,000 square feet in downtown Tampa.

Meanwhile, there is a distinct gap between amenitized downtown assets and cookie-cutter suburban buildings. In the urban core, vacancy rates have been low. For instance, the St. Petersburg central business district had a 7.4% vacancy rate in the fourth quarter, while downtown Tampa was at 12.8%, Cushman & Wakefield reports. By contrast, some of the Tampa Bay area’s suburban submarkets had vacancy rates north of 30%.

Miami: Class A rents top $100 on Brickell

Overall rental rates in Miami-Dade County rose to an average asking of $53.53 per square foot in the first quarter, up 9.1% from a year earlier, commercial real estate brokerage Cushman & Wakefield reported. Brickell and Miami Beach were the county’s most desirable office submarkets, with annual asking rents topping $74 a square foot.

The trends on Brickell are especially eye-popping. In the Class A market there, vacancy was just 5.7%, and average rents were $102.39 per square foot, up 21.1% from a year ago.

Overall leasing volume in Miami-Dade County was 467,733 square feet, up 3.2% from a year ago. In Miami-Dade County, vacancy was 15.4 % in the first quarter, down from 15.5% from a year earlier.

Palm Beach County: Record-high rents

In Palm Beach County, the average rental rate for office space was $46.29 per square foot, up 3.6% from the first quarter of 2023, according to Cushman & Wakefield. The most attention-catching submarket there was the town of Palm Beach, where Class A rental rates remained at $108.20 per square foot, unchanged from a year ago.

In Palm Beach County, office vacancy rose to 11.7%, up from 11% in the first quarter of 2023, Cushman reported. And leasing activity was off 40% from a year ago, to 221,269 square feet.

Downtown West Palm Beach is undergoing a building boom – Related has several towers under construction in the submarket.

Orlando: A notable office lease

The Orlando office market experienced 437,000 square feet of leasing activity during the winter months. One notable deal was a 57,300-square-foot lease in Maitland. The tenant is Charles Schwab. Orlando’s overall vacancy rate was 15.7% at the end of the first quarter, and overall asking rents were $26.89, Cushman & Wakefield reported.

The Florida success story

Population inflows and job growth are important drivers of office demand. As employers and employees gravitate toward amenitized buildings in bustling downtowns, Feldman Equities remains locked and loaded on our target: We reposition struggling office space, and we build 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 flocking to Florida. The Sunshine State added 211,100 jobs from March 2023 to March 2024, a 2.2% growth rate that was among the strongest in the nation, according to the U.S. Labor Department.

These numbers are yet another illustration of Florida’s value proposition. People are attracted to Florida’s combination of warm weather, low taxes and common-sense regulation. And once they are here, they want to work in vibrant downtowns, in Class A buildings with lots of amenities, and with plenty of access to restaurants and entertainment.

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