A slumping South Florida office market has some landlords and developers seeking exit strategies.
Asking rents tumbled in Miami-Dade and Palm Beach counties in the third quarter, as demand for office space plateaued compared to the same period of last year, a JLL report shows.
Meanwhile, a handful of distressed properties traded, as some owners sought to cut their losses. For instance, developer Michael Shvo last month sold his assemblage at 1656-1680 Alton Road in Miami Beach, including the former Epicure Gourmet Market & Cafe building, for $28.2 million to New York-based Infinity Collective.
In 2022, Shvo paid $39.3 million for the properties that he planned to redevelop into The Alton, a planned six-story building with about 17,000 square feet of office space and five apartments. Shvo told The Real Deal that the office project was “no longer the highest and best use for this site.”
In another sign of trouble in South Florida’s office market, New York-based R&B Realty lost Gateway at Wynwood, a 12-story office and retail building at 2916 North Miami Avenue, after failing to secure refinancing on a delinquent $112.9 million mortgage. San Diego-based Cire Equity acquired Gateway at Wynwood after purchasing the $89.6 million credit bid from A10 Capital, a lender that won the property at a bankruptcy auction.
A few bright spots in the third quarter included Playboy inking a lease in August for a 20,000-square-foot penthouse at The Rivani, a mixed-use building in Miami Beach owned by real estate investor Robert Rivani. Playboy plans to relocate its headquarters from Beverly Hills to South Beach next year, but with a caveat. If the city of Miami Beach does not provide $800,000 in incentives, Playboy can cancel the deal.
Miami-Dade County
The average asking rent in Miami-Dade County dropped to $65.89 a square foot in the third quarter, compared to $66.33 a square foot during the same period of last year, the JLL report shows. The vacancy rate remained relatively unchanged at 15.8 percent, compared to 15.5 percent, year-over-year. New construction also slowed a bit in the third quarter to 971,000 square feet, compared to 1.1 million square feet under construction during the same period of last year.
The third quarter’s largest lease was Miami-based law firm Stearns Weaver Miller Weissler Alhadeff & Sitterson renewing its agreement for 96,800 square feet at Museum Tower, a 28-story office tower in downtown Miami owned by Moishe Mana.
In Wynwood, billionaire developer Vlad Doronin’s OKO Group inked a lease for 25,200 square feet at Wynwood Plaza, a nearly completed mixed-use project.
Broward County
Landlords in Broward County experienced a boost in the average asking rent to $48.54 a square foot in the third quarter, compared to $42.93 a square foot during the same period of last year, according to JLL. Like Miami-Dade, the vacancy rate in Broward hasn’t moved up or down, staying the same, year-over-year, at 15.9 percent. New construction was also stagnant. In the third quarter, Broward had 340,000 square feet under construction, compared to 354,000 square feet during the same period of last year.
While Broward didn’t have any standout lease signings in the third quarter, the county’s office market did see a flurry of end users opting to buy office space. Among the deals was Richardson, Texas-based Lennox Industries’ $16 million purchase of a 30,000-square-foot building in Fort Lauderdale for the company’s Southeast U.S. headquarters.
Palm Beach County
Recently fueled by billionaire Steve Ross’ big bet on West Palm Beach’s office market, Palm Beach County is also experiencing a slowdown.
The average asking rent in the county dipped to $68.81 a square foot in the third quarter, compared to $70.69 a square foot during the same period of last year, the JLL report shows. The vacancy rate also climbed to 14.4 percent, compared to 13.2 percent, year-over-year. But Palm Beach County is still experiencing a robust development pipeline with 1.1 million square feet under construction in the third quarter, the same as in the third quarter of 2024.
The most notable lease signing took place at 10 CityPlace, one of the new office towers in West Palm Beach developed by Ross’ Related Ross. ServiceNow, a cloud computing company, signed a lease to occupy 200,000 square feet, nearly half the space at 10 CityPlace.
