New Mega Projects Poised to Further Change Miami's Skyline as Downtown Commercial Markets Rebound

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(MIAMI, FL) -- According to a new report by Jones Lang LaSalle's Miami office, over the last few years office fundamentals, particularly in the CBD, included the delivery of new, largely empty buildings in the middle of a disastrous employment and economic decline. Attractive pricing resulted in early renewals for a great majority of transactions.

As such, Jones Lang LaSalle says to look to the next wave of expiration turnover to fall in the 2014 to 2015 period. Overall leasing activity was most robust if not record-setting during the last two thirds of 2010. Better than expected expansions with some new-to-market users providing glimmers of hope. However, the volume expected to reduce vacancies, which continue to hover in the 20.0 percent range market-wide, is most likely not enough in terms of new or expansion activity at this point in time to make a significant statistical difference. Seven million square feet have remained vacant for almost two years. While this year's leasing has been decent, it waned noticeably during fourth quarter.

Steve Medwin, Managing Director of Jones Lang LaSalle South Florida tells World Property Channel, "The playing field has been leveled somewhat for the best positioned buildings and strongest credit users. It appears that we have reached the bottom of the market in terms of pricing and concessions for this subset of properties and tenants.  Class A buildings accounted for virtually all of Miami's positive absorption with the CBD's trophy towers capturing the majority of the city's year-to-date new occupancy."

Alyce Robertson, Executive Director of the Miami Downtown Development Authority also comments, "Downtown Miami's Brickell neighborhood is coming alive as new residents and businesses flood the area, and international buyers launch new projects in the district.  Brickell CitiCentre is just one example of the activity taking place today that will further propel downtown Miami onto the international stage as a major center for commerce and retail."

Downtown Miami Commercial Market Outlook

Proposed development is poised to change Miami's landscape. Look to mid-year 2012 in what will be the country's largest urban LEED mixed use development preparing to break ground called Brickell CitiCentre. The project is being developed by Hong Kong-based Swire Properties, who also developed Brickell Key. The massive 4.6 million square foot, $1.0 billion project is centered in the heart of the CBD's Brickell submarket.

More than double this size is what is projected to be the nation's largest casino, hotel, residential and entertainment complex just north of the CBD called Resorts World Miami being developed by Malaysia-based Genting Group.

Two new Florida bills just went before the Florida Legislature last month for approval to allow for three new destination casino licenses to be issued in South Florida (Florida bills - SB 710, sponsored by Sen. Ellyn Bogdanoff, and HB 487, sponsored by Rep. Erik Fresen). Both bills were effectively delayed for further review into early 2013 for possible approval, thus killing any mega-casino licensing in 2012.

See related news stories on WORLD PROPERTY CHANNEL:
 

• Destination Casino Gambling in Florida Becomes Hot Issue as Multi-Billion Dollar Suitors Circle Miami
• Miami's New $3.1 Billion Mixed-Use Mega Project Unveiled, Largest Real Estate Development in North America Since 2004

Two Suburban areas are also looking at extensive mixed-use projects: the redevelopment of the 2,000 acre Biscayne Landing project (northern Biscayne Corridor) and a third attempt to get approvals to build (office and retail) on a near 10-acre parcel in Kendall outside of the "UDB" (urban development boundary).

Commercial Tenant Perspective

Jones Lang LaSalle says the strongest credit tenants with name recognition, the advantage remained theirs. But movement is getting close to the bottom of market pricing. While free rent offers are subsiding in many cases, typically falling in the one month per year of term range, tenant improvement concessions remain mixed depending on the landlord and their respective hold period. Some landlords wish to preserve cash, while others focus on maintaining face rents.

Landlord Perspective

Over the last few years, office fundamentals, particularly in the CBD, included the delivery of new, largely empty buildings in the middle of a disastrous employment and economic decline. Attractive pricing resulted in early renewals for a great majority of transactions. As such, look to the next wave of expiration turnover to fall in the 2014 to 2015 period.