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October 10, 2023

Miami’s soaring office market coming out of the pandemic has come back down to earth, but new leasing data shows the city appears to have stuck a soft landing.
Miami saw 588K SF of leasing activity in the third quarter, keeping pace with the first half of the year, which saw a total of 1.1M SF of deals signed, according to Cushman & Wakefield data.
While the market has maintained a steady clip of deals in 2023, activity is down 39.8% compared to the first three quarters of 2022 as the flow of new-to-market tenants shifts away from headquarters relocations to the establishment of smaller corporate outposts.

The shift is evident among financial firms, which accounted for much of the pandemic-era boom in activity as companies like the hedge fund Citadel moved headquarters to the Sunshine State. Most of
this activity is now confined to companies looking to establish regional offices to chase the migration of wealth to the city.
“We have new ones coming into the market. Some of them are global enterprises that are leasing smaller footprints of 3K to 5K SF that have hired local candidate talent to launch their business here,” said Tere Blanca, the founder and CEO of Miami-based brokerage Blanca Commercial Real Estate. “We’re hearing consistently from these firms that they need to have Miami on their business card to serve their client base.”
New-to-market leases accounted for 11% of activity year-to-date, the lowest level since 2019, according to data from Blanca. The majority of deals are instead coming from tenants already in the market who are renewing or extending leases, according to a research note from Cushman & Wakefield.
Miami has been bolstered by an expectation among companies that employees will continue returning to work, said Vivian Gonzalez, a senior director at Cushman & Wakefield focused on tenant representation for the global tech industry and medical tenants.

A wave of sublease availability that many expected never materialized, and tenants renewing leases are returning little, if any, space. Sublease vacancy was at 1.8% at the end of September, down 20 basis points from the previous quarter, according to Blanca data. Overall vacancy also declined 40 basis points from the previous quarter to 17.3%.
“As far as demand goes, it’s kind of settled,” Gonzalez said. “The new-to-market tenants, that’s where I’ve seen a little bit of a correction. We still have some of those, and then we have the tenants renewing.”
The market’s relative stability is also reflected in rents. Asking rents were 8% higher than they were a year ago, although they only ticked up 0.7% from the second quarter, according to Blanca CRE.
“We don’t have these large blocks of space that are now being sublet [like] in Atlanta, for instance, by Microsoft or any of the big tech business or financial services companies that have [listed] a million square feet or 300K SF and all of a sudden you’ve got a market that’s really soft,” Blanca said.

The continued competitiveness of Miami’s office market can come as a surprise to tenants arriving from struggling markets like San Francisco, Gonzalez said. Vacancy in that market is at 30.4% and has increased for 15 straight quarters, according to JLL. Leasing activity is roughly 33% below the quarterly pandemic average, and effective rents have fallen 37% since 2020.
“The difficulty comes when we have tenants coming from, let’s say, California,” Gonzalez said. “They come to this market, and then we get compared to what may be happening in California. You have to go through that education of how this market is different.”

The mismatch between new-to-market tenant expectations and market realities is starkest in Miami’s most popular relocation destination. In the city’s financial district of Brickell, asking rents are up 16.6% year-over-year to $78.24, and direct vacancy sits at 7.2%, according to Cushman & Wakefield.

Landlords in Brickell “are not shy to come out of the box at higher rates for existing Class-A property,” Gonzalez said.
The submarket became a nexus for finance, law and tech relocations during the peak of the pandemic, and that has created knock-on demand in the area from companies that count those new tenants as clients. Brickell rents had already risen 42% between Q2 2021 and Q2 2022, according to JLL data, and there is little sign they will come down anytime soon.
At 830 Brickell, the only office tower that is under construction and nearing completion in the neighborhood, asking rents for the little remaining space are upward of $200 per SF, Gonzalez said.
“I’m not sure that we’ve seen the peak,” Gonzalez said. “As long as tenants keep paying, the landlords are going to keep pushing the rate.”
High rents in Brickell and other popular destinations — asking rents in Miami Beach were at $74.31 per SF at the end of the third quarter — are leading both existing and new-to-market tenants to explore other destinations that didn’t see the same rapid rent growth over the last few years.

The Greater Miami Convention & Visitors Bureau, Miami-Dade County’s official travel and tourism organization, announced in August that it would relocate from Brickell to Citigroup Center in Downtown Miami, where asking rents were $54.62 per SF at the end of the third quarter.

David Whitaker, the group’s president and CEO, said the decision was “purely an economic one,” as the bureau “opted to look for a more cost-efficient opportunity” when its lease came up for renewal.
Coral Gables, where direct asking rents sat at $50.90 at the end of the third quarter, has also emerged as an alternative for cost-conscious tenants.
The 299K SF of year-to-date leasing activity in the submarket was the fourth highest in the city, behind Brickell, Downtown and the area surrounding Miami International Airport, according to Cushman & Wakefield.
Blanca announced Tuesday it had leased nearly 90% of the 455K SF of office space at The Plaza Coral Gables, a mixed-use development completed 18 months ago by Agave Holdings, a development group that includes the family behind the Jose Cuervo spirits business.

Among the 65K SF of new leases announced at the property were two tenants relocating from Brickell: consulting firm Eisner Advisory Group and wealth adviser W.E. Family Offices.
FIFA also announced in late September that it would move more than 100 jobs from its Swiss headquarters to a recently opened office at 396 Alhambra Circle in Coral Gables. The deals followed the 38K SF lease for the new headquarters of the trucking company Ryder at 2333 Ponce de Leon Blvd., which was one of the largest leases of the second quarter.
Blanca said a limited pipeline of new office development — Miami has 1.3M SF under construction, including the 638K SF 830 Brickell tower — has positioned the city to maintain positive momentum even as the average lease size shrinks leases and the flow of new-to-market tenants retreats from pandemic-era highs.
“We’ve had huge growth, for instance on Brickell Avenue, but that didn’t immediately spill over into other submarkets in Miami-Dade County,” Blanca said. “As we go into next year, given the tight supply, I suspect that the submarkets that have not necessarily experienced huge rent growth will be experiencing rent growth because supply and demand dynamics are what they are in Miami now.”