Florida’s office market continues to defy the bleak national picture for the sector. Throughout the state, asking rents are holding strong, leasing activity is robust, and values are holding steady.
The sunny outlook for Florida rental rates and activity stands in contrast to the clouds looming over office markets in much of the nation. Work-from-home trends have reduced office occupancy to the extent that $54.7 billion in office properties nationwide were in distress as of the first quarter, according to MSCI Real Assets.
But the idea that office is dead isn’t accurate in Florida. In one dramatic illustration of that trend, Travel + Leisure signed a new lease for more than 182,000 square feet in Downtown Orlando during the second quarter. And developers are building trophy towers in Miami and in Downtown West Palm Beach that will open with a number of tenants paying north of $100 a square foot.
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 key ingredients for a robust office market, and Florida continues to outperform the nation. With the second-quarter 2024 results in, let’s take a quick tour of some of the state’s key markets.
Tampa: Rents hold steady
Rental rates keep rising in the Tampa Bay region. In the second quarter, they were $31.25 per square foot, according to Avison Young. Vacancy rates were 18.2%, unchanged year-over-year. Portfolio wide, our vacancy rates are only around 7%.
Significant lease transactions included a 50,756-square-foot deal by Cooley Law School, and 25,000 square feet for Tower Radiology. In another sign of life, Prudential sold the building at 100 North Tampa to Prudential for $151.3 million, or $264 per square foot.
Meanwhile, there’s a distinct gap between amenitized downtown assets and cookie-cutter suburban buildings. In the urban core, vacancy rates have been low. For example, the St. Petersburg central business district had a 6.8% vacancy rate in the second quarter, while downtown Tampa was at 8.7%, Avison Young reports. By contrast, some of the Tampa Bay area’s suburban submarkets had vacancy rates near 30%. The I-75 Corridor, for instance, had total vacancy of 29.0%.
Miami: Class A rents top $100 on Brickell
Overall rental rates in Miami-Dade County rose to an average asking of $60.08 per square foot in the second quarter, a new record, Avison Young reported. Brickell and Miami Beach were the county’s most desirable office submarkets.
Brickell trends are especially strong. Vacancy stood at 12.4% in the second quarter, down from 13.2% year-over-year, and average rents were $93.73 per square foot – some of the highest prices south of Manhattan.
Chart by Avison Young
In another sign of Brickell’s surging fortunes, an office building at 888 Brickell sold for more than $1,150 per square foot in the second quarter. And 830 Brickell, the building that’s buoying the business district’s office markets with rents of $150 a foot, in July announced that it had secured $565 million in financing ahead of its delivery this fall. When that 55-story trophy tower is completed later this year, it’s likely to be 100 percent leased.
In a sign that South Florida continues to attract out-of-state employers, 450,000 square feet of space at the 638,000-square-foot 830 Brickell will be filled by new-to-market tenants. That roster includes Citadel, Microsoft, private equity firm Thoma Bravo and prominent law firms.
According to a separate report by JLL, overall leasing volume in Miami-Dade County in the second quarter was 855,000 square feet. In one notable second-quarter lease, tech firm Kaseya took 76,000 square feet in the Wells Fargo Center in Downtown Miami.
Overall Miami-Dade County vacancy was 15.5% in the second quarter, down from 15.7% from a year earlier, Avison Young data shows.
Palm Beach County: Record-high rents
In Palm Beach County, the average rental rate for office space was $50.59 per square foot, up 30.6% over the past five years, according to Avison Young. The most attention-catching submarket there was the town of Palm Beach, where overall rental rates are at $85 per square foot.
In Palm Beach County, office vacancy fell to 12.5% in Q2 2024, down from 12.7% percent in the second quarter of 2023, Avison Young reported. Downtown West Palm Beach is undergoing a building boom – Related has several towers under construction in the submarket. But for now, vacancy is just 11.0%
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.
For decades, Florida’s winning combination — warm weather, reasonable regulations and a modest tax burden — has been luring employers south. That trend accelerated during the pandemic, and it continues in these post-pandemic times. Financial firms from New York and Chicago and tech companies from California have been relocating to the Sunshine State. Florida added 196,900 jobs from June 2023 to June 2024, a 2.0% growth rate that was among the strongest in the nation, according to the U.S. Labor Department.
These numbers stand as a persuasive proof of concept for Florida’s value proposition. Business owners and workers continue to be attracted by Florida’s combination of warm weather, low taxes and common-sense regulation. And once they’re here, they want to work in vibrant downtowns, with plenty of access to restaurants and entertainment.