The South Florida office market is holding steady, despite fears that that office might crater amid the work-from-home trend.
Vacancy rates remained relatively unchanged in the second quarter 2020, according to Newmark Knight Frank’s second quarter South Florida office market report. And asking rents increased from $34.38 in the first quarter to $34.46 in the second quarter.
The vacancy rate remained at 11.2% for the first and second quarters looking across Miami-Dade, Broward and West Palm Beach. Broward experienced minimal change, from a vacancy rate of 10.3% in the first quarter to 10.4% in the second quarter. The vacancy rate in Miami-Dade remained flat at 11.6%.
Clay Sidner, tenant representative specialist at Newmark Knight Frank, isn’t surprised: Tenants are staying in place. “Everyone has been thinking about what they are going to do, not causing the market to move. Tenants are sitting tight until they can get back into the office, and those larger deals [in prior quarters] are typically of companies playing musical chairs between neighborhoods.”
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But the vacancy rates are expected to increase in the third quarter with the completion of projects including the 325,000-square-foot 545Wyn. The office is 4.12% leased, said Sidner, a broker for the project. Other projects due in Q3 / Q4 include Plaza in Coral Gables (440,000 square feet), 850 LeJeune (113,081 square feet) and One Cocowalk (85,7662 square feet).
Office demands will fluctuate among tenants depending on their industry and needs, Sidner said. “We’re going to see some push and pull. A lot of tenants went from 250 to 200 square feet per person to 180 to 100 square feet per person.” That trend may reverse as companies seek greater distance between employees to prevent the spread of COVID-19.
Firms in law and finance are maintaining their office footprints, Sidner said. He expects those in tech or with large sales teams to downsize, asking employees to rotate between working from home and the office.
Still, there are some new-to-market tenants checking out the city, he said. Some in tech, family-owned businesses and private equity firms are looking to relocate from the northeast — think New York, New Jersey, Connecticut — to Miami. Some are requesting for 40,000 square feet up to 60,000 square feet.