The Miami office market continues to deal with the effects of the delivery of 1.9 million square feet in the three major office towers that completed construction in the greater downtown area (the Central Business District (CBD) and Brickell areas combined) in 2010 and 2011. The $310 million, 40-story, 602,700-square-foot Brickell World Plaza at 600 Brickell Avenue completed in August 2011 in the Brickell submarket. In 2010, the 750,000-square-foot Wells Fargo Center (formerly the Met 2 Financial Center) delivered downtown at 333 Avenue of the Americas, and the 585,000-square-foot 1450 Brickell office tower completed in the Brickell submarket. According to Cushman & Wakefield, the Wells Fargo building and Brickell World Plaza hosted a combined vacancy total of some 981,400 square feet as of mid-year 2012. The same source cites a 15,000-square-foot second-quarter lease by Lyoness Management Americas at 1450 Brickell. And Studley, Inc., reports a 25,975-square-foot deal during the quarter by SAB Miller in the same tower. At Brickell World Plaza, meanwhile, international law firm Hogan Lovells signed a 12-year lease for 40,000 square feet, the South Florida Business Journal reported in August.
These deals aside, the market has taken “a step back,” states Studley, Inc., in its second-quarter report. Net absorption market-wide through the first half of 2012 as counted by Reis was negative 5,000 square feet. The total for the second quarter alone was negative 90,000 alongside the delivery of 44,000 square feet, all in the General Funding Office building that completed in the Airport West submarket in June. Two general purpose, multi-tenant office buildings have delivered since—the 58,000-square-foot Building on Ponce in Coral Gables in July and the 84,360-square-foot office component of the Aventura Optima Plaza in Aventura in
September. No other projects are expected to complete construction this year. In June, meanwhile, the 120,000-square-foot office component of the initial phase of Brickell CitiCentre broke ground at S.W. Eighth Street and S.W. First Avenue in the Brickell submarket.
Vacancy ended the second quarter at 17.1%, up 30 basis points from the quarter before, up 110 year-over-year. The 45,000 square feet of positive net absorption that followed in July, trailing the month’s delivery total by 13,000 square feet (see above), held the rate steady at 17.1%. Measured by the year, rent growth, following losses in 2009 and 2010, turned moderately positive in 2011, with gains slightly above 1.0% recorded for the year. Additional acceleration is not yet seen. Growth rates should increase slowly, however. At $30.16 psf and $24.18 psf, asking and effective averages for the second quarter were up 0.1% each for the period, following similarly anemic gains the quarter before. Each rate added a penny in July.
Substantial positive net absorption over the remainder of the year should result in a rough equivalence of new supply and net absorption totals for 2012 as a whole. Vacancy should close just under 17.0%. Gains of 1.0% and 1.3% are projected for the mean asking and effective lease rates.