South Florida’s office market is rapidly changing as the COVID-19 pandemic has fueled a large migration of businesses to the region. The companies, many of which are from the Northeast, California and Midwest, are seeking to expand or relocate to take advantage of the state’s tax benefits, lifestyle and prime real estate.
Many businesses are attempting to get back to “regular life,” which means going back to the office. That means the office market will likely start to see more normalcy, despite thousands of Delta variant cases, according to Todd Rosenberg, managing principal and co-founder of Pebb Capital, a multi-strategy real estate and private equity investment firm in Boca Raton.
“Part of that would be going back to the office and taking precautions within the office, maybe making some modifications, but still trying to get back to work outside of work-from-home,” said Rosenberg.
The South Florida office market has seen a shift due to COVID, with some downsizing and modifications of office buildings, but the influx of new potential tenants has helped mitigate any potential downsides other markets may have seen.
“I don’t think we’re going to see any big pullback at this point because a lot of the pain has gotten backfilled,” Rosenberg said.
Jeff Gordon of JLL says South Florida is seeing a consistent group of new-to-market tech, fintech and financial companies.
“It remains to be the most dominant sector that continues in the new-to-market sphere,” Gordon said. “I think the openness of business and business climate in South Florida has seemingly drawn in the past year, additionally our tax climate as a state, plus being a good-sized metropolis with much to offer.”
From Palm Beach County to Miami-Dade County, there’s a lot of capital coming in.
“There are large hedge funds that have opened offices and there are different types of financial services companies that have chosen South Florida as a place to grow, expand their footprint and open their new office,” Gordon said.
Many capital management companies and large private equity firms have taken space in downtown Palm Beach.
“You see 360 Rosemary leased up to its entirety in delivering throughout the pandemic. The entire building was leased up. The Related Group, from an ownership perspective, made significant bets in Palm Beach and pushed rates based on the demand. You’re seeing a significant influx on the financial services front. I think Broward was probably a little bit lagging but has picked up considerably where you’re seeing a number of large leasing momentum downtown and in the suburbs,” Gordon said.
Looking six to 12 months into the future, the Delta variant may have only put a wrinkle in the collective evaluation process in the office market, but long-term projects have been maintained and will continue to happen.
“Ultimately, the commitments are still being made, and you’re seeing it where new commitments are happening and the assets that are pushing their rental rates are those that are doing so in a meaningful way because they’re performing, not because they’re not getting the rental rates they’re asking for,” Gordon said.
With new companies establishing more of a presence in the office market, Gordon believes it’ll be fun to watch the next phase and see South Florida “perform” once new projects are delivered.
In Broward County, there’s continued positive growth in the submarkets, which are seeing a lot of activity, especially in the last six months. The county is seeing a lot of organic growth with companies expanding their footprint, according to Jonathan Kingsley of Colliers South Florida.
“UKG, who used to be Ultimate Software Group, is one of the biggest tenants in Broward County and has a footprint of probably half a million square feet through southwest Broward in Weston and Sunrise in particular. They’re in the market for 250,000 square feet to consolidate or utilize new space but they’re actively in the market now,” said Kingsley.
Executives from large companies often relocate to find high-end real estate for their personal residences and then move their companies with them.
“Many of them park themselves in an executive suite where they share space with someone as they’re negotiating their sectors, because you can’t sign a lease until you have the incentives in place before the incentives can be negated,” Kingsley said.
American Cruise Lines recently signed a 230,000-square-foot lease in uptown Fort Lauderdale to relocate its headquarters from Indianapolis. PineBridge Investments, a New York City-based private global asset manager, recently signed a 10,000-square-foot lease in suburban Fort Lauderdale.
Kingsley said the lifestyle and lower-cost alternatives are what draws similar companies to Broward County rather than Miami-Dade. Commercial real estate agency Stiles Corp. recently delivered at The Main on Las Olas Boulevard in Fort Lauderdale.
“That’s the top of the market building. The rates are like $40 to $42 a square foot net. Compare that to Brickell Avenue and for the same type of quality brand product, you’re looking at $65 to $75 a square foot net. It really comes down to where their business is best served and access to the type of labor that these companies are interested in,” Kingsley said.
No negative trends so far, but Kingsley said he hopes to see the government keep up with infrastructure to support the population growth.
“That’s not a negative, it’s just a challenge that needs to be met by the government. But beyond that, I think we see these growth trends are going to survive COVID, and hopefully it’s down to being nothing more than the common flu, where you take a shot every year and think nothing of it,” Kingsley said.
In Miami-Dade County, Todd Rosenberg said Miami Beach has historically been constrained with high-quality office space supply, and is now seeing any decent spaces have been absorbed by overwhelming demand from new-to-market office users. Pebb Capital has recently acquired prime mixed-use property on Collins Avenue for $47 million.
“Most spaces that these people have leased do not offer the types of amenities onsite that we will be providing our tenants,” Rosenberg said.
A new trend to keep an eye on is the concept of “hoteling” office spaces. That’s when you get rid of the independent offices and have employees come into a large office building, so they can sign in and use that space as their workspace for the day.
“That could be a trend. I heard of large office users thinking about going in that direction and I do think that there’s definitely a trend where larger spaces are getting broken up into smaller spaces, or are diversifying in different geographic regions to allow their employees to live where they want to live. I do think you’ll see a larger network of smaller offices, as opposed to a massive corporate office where everyone has to go and live near,” Rosenberg said.
Other than Miami Beach, any area that’s walkable and offers food, beverages and other amenities will be popular with new office tenants. Submarkets such as Wynwood and downtown Miami often fit the bill.
“What a lot of people appreciate is the ability to potentially be in a lower to mid-rise building with outdoor space, so that the ability to get fresh air becomes much more available than it otherwise would in a high-rise office tower,” Rosenberg said.
As a result of the pandemic, more companies are incorporating more health and wellness amenities and touchless technologies into their workplaces. Jay Richmond, the South Florida Division Leader of ORIGIN Construction in Miami, said there’s a change in how offices are designed, built and laid out.
“Health and wellness is the big main focus on the future of office build-outs, as well as office building common area amenities. We’re seeing things like open roof decks, lounge areas for tenants, as well as social halls that can be used for seminars and meetings,” Richmond said.
The company has secured more than $160 million of contracted work in the first six months of this year, comprising over 1.4 million square feet of space.
“We’re currently doing the 701 Brickell lobby renovation, which has more services to offer than a standard gym you’d find in an office building with a treadmill and a bike. We’re also seeing touchless technology highly integrated, such as elevators that can be operated from a phone app, facial recognition lobby entrances, and daylight harvesting lighting controls and automatic door openers,” Richmond said.
The fitness areas include yoga or dance rooms, Peloton bikes and treadmills to offer top-tier gym environments. Integrating a multitude of services, especially health-focused, is ideal for many office tenants, in Richmond’s view.
Due to a huge uptick in the use of virtual meetings since the start of the pandemic, technology improvements are the No. 1 concern for companies.
“In the past, it may have been a large conference room that has these capabilities, but now there’s a multitude of huddle rooms and telephone rooms of all different sizes. Each room is capable of virtual meetings, which is prevalent in how businesses operate and how they’ll move forward in the future,” Richmond said.
Amenities such as open area spaces create a live-work-play environment, which will be the new norm, especially in Class A office spaces. There are also air filtration options some companies are taking advantage of, which can improve air cycling. The only downside is that it can be cost-prohibitive.
For the time being at least, South Florida is seeing a tidal wave of new migration, which is bringing large companies from all markets and influencing others to join in on the action in the office market.
“We’re very excited to continue our exceptional growth, and offer the excellence and services we do for our clients,” Richmond said.
With 20 years in the construction industry and over a decade with ORIGIN Construction, Jay Richmond has played a key role in the company’s growth and building its reputation for market excellence.
The leadership at ORIGIN Construction has named Jay Richmond as a shareholder at the leading general contracting services firm. ORIGIN Construction partners John Wood and AJ Mueller make the announcement as the company continues to expand its footprint and project portfolio across the state.
Among the projects Richmond has spearheaded are Facebook’s Miami office, Bloomberg’s regional office and studio in Brickell City Centre, Kauffman Rossin’s headquarters at Mary Street in Coconut Grove, Morgan Stanley’s newly opened offices in downtown Miami, Spotify’s new corporate office in the Wynwood Arts District and multiple Florida locations for co-working company Pipeline Workspaces.
“We are extremely proud of the contributions Jay has made to our business over his 10-plus years working together with us,” Wood said. “We look forward to his continued success at ORIGIN.”
With a track-record of over 20 years of experience in the construction industry, Richmond has been integral to building the company’s strong reputation and success in the South Florida market. As South Florida Division Leader, he has overseen a variety of commercial projects helping to manage the construction and design teams, consultants and clients from the inception to the conclusion of the projects. Over his career at Origin, Richmond’s leadership and mentorship have contributed to its growth as a specialized builder of commercial interiors.
“Naming Jay a shareholder is a recognition of his commitment and dedication to our company and to building long standing relationships with our clients,” Mueller added.
Throughout its history, ORIGIN has built and transformed more than 10 million of square feet of commercial real estate, ranging from commercial offices and retail shops, to restaurants, hotels and medical offices.
Richmond is a licensed State of Florida Certified General Contractor. Additionally, he is an active member of the BNI Biscayne Connection, a business networking and referral organization. He resides with his family in Miami Shores.
To learn more about ORIGIN Construction, visit www.OriginGC.com and follow us on LinkedIn, Facebook and Instagram via @OriginBuilds.
About ORIGIN Construction
In 2020, ORIGIN Construction became an independent general contracting services firm when former Amicon Principals John Wood and AJ Mueller continued on under the new brand name. ORIGIN was co-founded by a team that has built and transformed commercial projects for some of Florida’s most recognizable brands for nearly 20 years. All told, the firm has completed real estate projects totaling more than 10 million square feet on behalf of clients including Viacom, Facebook, Porsche, Pipeline Workspaces, Prada, and more. Today, ORIGIN Construction provides a full range of general contracting services for corporate office interiors, ground-up commercial buildings, retail, and restaurant buildouts, and more. To learn more about ORIGIN Construction, visit www.OriginGC.com
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