Commercial Real Estate News / General CRE / Q3 2022 Office Space Report: Miami, FL

Q3 2022 Office Space Report: Miami, FL

Published: 01-30-23 Category: General CRE

Specializes in providing actionable insights into the commercial real estate space for investors, brokers, lessors, and lessees. He covers quarterly market data reports, investment strategies, how-to guides, and top-down perspectives on market movements.

As one of the fastest growing cities in America and hosting the headquarters of businesses like Office Depot and Burger King, Miami is positioned as one of the most desirable cities to live and do business in.

In the third quarter, robust leasing activity saw a boost of 9% from the previous period, while Class A availability decreased year-over-year. CBD space was particularly sought out by tenants looking for higher quality options, as evidenced by over 110,000 sq. ft in total net absorption across this area alone.

The unemployment rate has also decreased to 2.4% this quarter, well below the nation’s 3.7% average.

Miami’s office space market is benefiting greatly from the fight-to-quality trend happening nationally, becoming one of the hottest markets in the Southeast of the US.

General Area Overview & Demographics

Miami is a vibrant city with a diverse population and culture. According to the latest U.S. Census data, the city has an estimated population of more than 5 million people living in an area of nearly 400 square miles.

The population is ethnically diverse, with the largest demographic group being Hispanic (59%), followed by African American (20%), White (14%), and Asian (4%).

The median age in Miami is 37 years old, slightly lower than the national average of 38. There is also a large number of young people between 18-29 years old (26%) and a significant number of older adults aged 65 and over (15%).

Miami is well-known for its sunny skies and beautiful coast. It experiences a tropical climate with hot and humid summers and mild winters. The average annual temperature is around 80 degrees Fahrenheit, with temperatures ranging from the mid-70s to mid-80s in the warmer months and the mid-50s to low 70s in the colder months.

The city is known for its diverse culture and a wide variety of entertainment options. There are numerous theaters, art galleries, museums, parks, and concert venues. Miami is a city full of life, with plenty for locals and visitors to enjoy.

Summary of Miami Office Space Performance in Q3 2022

Office space in Miami performed exceptionally well this quarter, with an over 30% increase in leasing activity year-over-year. This surge, combined with the "flight-to-quality" trend, has reduced overall vacancy rates to 16%.

The Class A Office segment experienced the greatest demand, with its vacancy rate lowering to 17.3%, while Class B space landed at 14%.

These are some of the most favorable figures seen since 2021, demonstrating strong economic growth for the office space in Miami.

What are office space rents like in Miami?

Miami’s office market is heating up as solid tenant demand pushes rate increases across Classes A and B.

In the third quarter of this year, average asking prices rose 5.7% compared to last year hitting $49.20 per square foot.

Class A rents are increasing by 6.4%, and Class B has seen a 7.9% increase over the same time, bringing in an impressive close at $38.80 per square foot by the end of this quarter, illustrating that there remains high interest for great spaces throughout Miami.

Districts such as Brickell and Biscayne exceeded expectations, with their rent rates alone climbing more than $5, now sitting comfortably around $66.90 and $65.70, respectively.

These numbers will continue rising, given new additions set to become available as 2022 ends.

Purchase & Leasing Activity

830 Brickell is a prime destination for major tenants in this booming Miami district.

Sidley Austin and Citadel signed leases at 830 Brickell, with their agreements exceeding 56,000 square feet and 90,000 square feet, respectively - all while impressive lease rates of around $150 per square foot were attained.

With quality amenities, 830 Brickell sits fully occupied as it finishes construction.

Miami’s real estate market hit notable milestones in the third quarter of 2022, as close to $360 million was closed in investment sales.

This surge has driven year-to-date totals to over a billion dollars, which already surpasses eight of twelve years since 2010 and is on track to exceed the 2019 record high volume figure of $1.2 billion.

Citadel going all in with Miami could be seen as a critical driver to moving average prices up by an impressive $30 per square footage to $380.

Notable Office Space Deals in Miami in Q3 2022

Several notable office deals and leases occurred in Miami, Florida, in Q3 2022. These include:

Citadel’s leasing of about 95,000 square feet.
Shook Hardy’s leasing of about 55,000 square feet.
Exan Capital, Azora’s purchase of about 80,000 square feet.

These are among other notable sales transactions and leases.

New Office Space Development Activity in Miami in Q3 2022

Developers OKO Group, Agave Holdings, Newgard, and JDS Development all have projects under construction this quarter, with three of the four developers locating their builds in the Brickell submarket.

OKO Group is the developer behind the massive 664,000 square feet 830 Brickell Plaza, which is projected to be completed by the end of 2022, along with the 164,000 square foot Plaza Coral Gables property by Agave Holdings.

After 2022, Newgard’s Natiivo has an estimated completion date of April 2023, while JDS Development’s 1 Southside Park is expected to be finished in 2025.

Market Forecast for Miami’s Office Space Market in 2023

With positive net absorption, rising asking rent, declining vacancy, increasing development, and investment sales trending up at the close of Q3, the Miami office space market couldn’t look healthier or more promising going into 2023.

Takeaways for Office Space Investors

The Miami office space market is not just hot but has every indicator of remaining that way. An investor will need to consider the barrier of entry given the clear positive momentum that the office space in Miami is currently showing.

Each investor will need to do their due diligence to investigate if this highly active market is the investment move to make.