Numerous Projects Under Construction Signal Ongoing Office Boom in Tri-County Region
52 Projects and Growing Pipeline Signal That Office Construction No Longer an Afterthought in South Florida
With vacancies hitting single digits across South Florida's Tri-Counties region and financing easier to get while the red-hot condominium market takes a breather, developers are again putting shovels in the ground to build office projects that largely have been on the shelf since the Great Recession.
As many as 52 buildings are currently underway in Miami-Dade, Broward and Palm Beach Counties, according to CoStar data, signaling that office construction may be more than afterthought in South Florida. Miami-Dade has the most with 28, and about half of those are 4- and 5-Star. Broward and Palm Beach Counties have 15 and 12 projects underway, respectively, but only three of those are considered Class A.
Even more office development has been announced but not yet started in Miami-Dade and Broward, including 600,000 square feet planned for the Miami Worldcenter project. Construction is expected to begin there next year.
Meanwhile, the first office development is coming to Miami-Dade's Coconut Grove neighborhood in 20 years, according to Colliers International. Coconut Grove projects include Mary Street at 75,000 square feet, the CocoWalk with 73,000 square feet and 27@Lincoln coming in at 68,000 square feet.
At the end of the second quarter, Miami-Dade's overall vacancy rate was less than 9 percent, according to CoStar data. The Miami-Dade vacancy rate fell below the national average in 2014 and remains lower today, according to CoStar.
"When the vacancies get into the single digits, you're stifling that market from growing," said Donna Abood, managing director of Avison Young. "Developers are starting to make plans, and it makes every bit of sense. The need to develop more Class A space is very realistic in Miami."
Not only do the market fundamentals make sense now, but also the softening condo market in Miami is causing developers to re-think their building strategies, according to Evan Snow, a CoStar Market Analyst for South Florida.
"You had so much condo construction in the past few years while condo prices were soaring, and you had a lot of demand coming from foreign entities," said Snow. "That was the sexy thing to do, but once that market slowed down, developers are going back to consider the full range of options."
The office building boom also is headed north to Broward County.
In Pembroke Pines, a western suburb of Fort Lauderdale, TPA Group of Atlanta is planning a 330,000-square-foot office park next to I-75 and near The Shoppes at Pembroke Gardens shopping center. The 165,000-square-foot first phase of Edison Pembroke Pines is due to open in the first quarter of 2019, noted Greg Martin with Avison Young. In downtown Fort Lauderdale, Stiles is planning a 23-story office tower at 201 E. Las Olas Blvd. in a deal with Broward College to replace its two buildings on the site.
Stiles' 360,000-square-foot building, the largest office tower in the city since the firm delivered the AutoNation building a decade ago, is expected to open in fall 2020. It also will include 17,000 square feet of ground floor retail.
"Over the last two years, we started to see the signs that another building in the downtown could be justified," said Scott MacLaren, president with Stiles.
MacLaren said there's strong interest from prospective tenants, though he declined to say how many lease commitments the firm has. For a building this size, lenders typically require a developer to have one-third to one-half of the property preleased, he added.
Also in Fort Lauderdale, developer Joseph Traina Jr. this summer received approval for two 30-story towers that will include 185,000 square feet of office space, 612 apartments and retail in a project called FatCity at 300 N. Andrews Ave. The site is in the Flagler Village neighborhood and near FAT (Flagler Arts and Technology) Village. That corridor houses tech companies as well as arts and other professionals.
Traina expects construction to start on FatCity by the end of 2018 or early 2019, with the project opening two years later.
"There is internal pent-up demand from law firms, financial firms and technology companies in the area wanting to expand, but there's nowhere to expand to," Traina said. "I see the Flagler Village submarket as being the heart of downtown."