Levy Public Relations
November 8, 2023
When FIFA, soccer’s international governing body, was searching for office space in Miami, it didn’t search in the city’s downtown, the financial hub of Brickell or the creative hot spot of Wynwood.
FIFA instead aimed squarely for Coral Gables, the suburban city southwest of Downtown Miami where it opened a 60K SF office that will be home to more than 100 employees relocating from the soccer organization’s Switzerland headquarters.
Coral Gables is at the confluence of real estate trends in Miami. High office rents in Brickell and Wynwood have caused companies to explore lower-cost buildings, while an influx of wealthy residents has boosted demand for the city’s luxury homes and provided fuel to a burgeoning restaurant scene.
“You’re going to see a lot more really significant companies coming into the market in the next couple of years,” said Danet Linares, executive vice chairman at Blanca Commercial Real Estate. “Between price, quality of buildings and amenities, Coral Gables offers that good middle ground.”
Average office rent in Coral Gables was $50.90 per SF at the end of the third quarter, according to Cushman & Wakefield, more than $20 per SF below rents in Brickell and Miami Beach and less expensive than other office hubs like Downtown Miami, Biscayne and Coconut Grove.
The neighborhood has found success peeling away tenants from other areas as well as attracting new entrants to the market, who have been drawn to its walkability, tree-lined streets and Miracle Mile retail district.
Coral Gables saw 299K SF of office leasing activity this year through the third quarter, ahead of every other Miami submarket except Downtown and the business district adjacent to Miami International Airport.
The 455K SF Plaza Coral Gables office building is nearly 90% leased less than two years after it delivered. Six tenants totaling 65K SF signed on in October alone, including two who are planning to relocate from Brickell.
“The economic backdrop has really caused things to slow down a bit. Companies aren’t making the same kind of quick moves as they did before, but they’re still looking for value,” said Donna Abood, a principal at Avison Young and managing director of the firm’s Miami office. “That still allows the Gables to meet that value at a healthy rate because those rates [tenants] are leaving are so high.”
The neighborhood’s growth has also spurred office investment, with buyers looking to acquire properties underwritten at today’s rents with the expectation that the area has a long runway for rent growth.
Three office buildings in the neighborhood have sold since August for more than $149M combined, rare activity amid sales volume across the city dipping 54% below the previous year at the end of the third quarter.
Princeton International Properties Corp. purchased a 223K SF office building at 355 Alhambra Circle from PGIM Real Estate for $90M in September. Princeton President David Twafik described the neighborhood at the time as “one of the most coveted submarkets in Miami.”
A month earlier, Torose Equities, Lndmrk Development and Terranova Corp. paid more than $50M to buy the 220K SF office building at 255 Alhambra Circle from a Deutsche Bank fund. Alex Karakhanian, founder and principal of Lndmrk Development, was more direct in his assessment of the neighborhood, saying in a statement that it had a “great deal of untapped potential” and presented a “tremendous opportunity for the partnership.”
The most recent sale came last month when Miami-based investment firm Cam Group paid $19M for an office building that it plans to demolish and replace with 89K SF of medical offices and 17K SF of commercial space.
While office space in Coral Gables is still relatively easy to come by — the vacancy rate was 15.7% at the end of the third quarter, slightly above Miami’s overall rate of 15.6%, according to Cushman & Wakefield — the city’s retail space is essentially full.
The neighborhood has seen a wave of new restaurant and store openings, pushing vacancy down to 0.5% in the third quarter, the lowest of any of Miami’s submarkets, according to Colliers.
The neighborhood’s growing population of daytime office workers, its high net worth resident population and its location near other wealthy enclaves has made it especially attractive for restaurant owners, said Michael Sullivan, a principal at the retail brokerage Vertical Real Estate.
“You’ve got Brickell, you’ve got Wynwood, you’ve got the Design District, so there was a period where the Gables wasn’t in the spotlight,” Sullivan said. “What we’ve seen over the last few years, and definitely in the post-Covid world, is people really paying attention again to Coral Gables.”
Among the recent high-profile dining entries to the Coral Gables market is a restaurant from acclaimed French Laundry chef Thomas Keller, who opened the French bistro Bouchon in September, his second Miami restaurant. Shingo, a 14-seat omakase restaurant from Shingo Akkiuni, opened at the La Palma building in May, around the same time that the popular Israeli eatery Motek Cafe opened its doors in 7,600 SF on Coral Gables’ Miracle Mile.
Michelin-starred chef Michael White is also planning a restaurant in the neighborhood, Sullivan said. He will join Zit Sum, an Asian fusion restaurant that opened in 2021 and received a Michelin Guide Bib Gourmand award in 2022.
Restaurant owners in Coral Gables, like office tenants, also find significantly less expensive rents compared to Miami’s other food destinations. Asking retail rents there were at $36.08 per SF at the end of the third quarter, less than half of what landlords in Wynwood, the Design District and Miami Beach are seeking, according to Colliers.
“In the past two years, we felt like Coral Gables was mispriced. It was just undervalued,” Sullivan said. “We actually thought it was your best bang for your buck to step into the Gables today.”
The burgeoning restaurant scene in Coral Gables is happening as the neighborhood continues to pull in a wave of wealthy residents.
The average condo sale price in the area was $675K in the third quarter in a market with 3.1 months of supply, according to Douglas Elliman. Across the Miami Mainland, the average sale price was $604K with
5.4 months of supply. The gulf is even wider when it comes to single-family homes, which cost an average of $2.3M in Coral Gables compared to $998K on the Miami Mainland.
Local residents make up around 70% of buyers at projects being built in Coral Gables by MG Developer, one of the most active homebuilders in the neighborhood, said Catie Naranjo, the firm’s chief development officer.
Buyers in the area are attracted to its cohesion compared to other parts of Miami and the local government’s focus on a “thoughtful evolution of a community that protects its vision for its future,” she said.
The layout and zoning rules of Coral Gables, famous for its Spanish architecture, necessitate designing new developments on a neighborhood scale that prioritize fewer units and low-rise construction, Naranjo added.
MG Developer’s most recent Coral Gables project is The Village at Coral Gables, a collection of 48 townhomes, lofts, villas and flats that is slated for delivery in 2025. The developer secured a $67.5M construction loan in July from New York-based Churchill Real Estate for the project, which it describes as “paying homage to the aesthetic beauty and lifestyle of Seville, Spain.”
The emphasis on smaller communities is attracting buyers and helping to push up prices as much of the development in Miami leans toward high-rise towers with hundreds of units, Naranjo said.
“The prices that we’re getting from a per-SF basis on this new product is at a higher price per SF than what we sold for in our last project that sold out during the peak of the housing market during Covid,” she said.