Relocations To The Rescue: New-To-Market Tenants Could Fill Empty Office Spaces
South Florida has attracted solid corporate relocations and new regional offices this past year, but experts say an even bigger wave of big tenants is about to flood the market.
Prominent companies, such as Goldman Sachs and Microsoft, reportedly have deals in place, but aren’t ready to announce them yet.
Miami-based Related Group is best known for luxury condominiums, but office space is becoming a bigger part of its development strategy due to demand, President Jon Paul Pérez said. The company fully leased the extra office space in its new headquarters building in Coconut Grove and filled the new Annex office building in Wynwood with new-to-market tenants including D1 Capital and Founders Fund. Now, it’s fast-tracking another office building as part of a mixed-use project in Wynwood, and it’s in discussions with a single tenant that could lease the entire 140,000-square-foot office building,
“Related is planning on Terminal Island in Miami Beach,” Pérez said. “I thought I made the wrong decision pre-Covid because it was only Live Nation in the Annex and it was quiet. But now we are looking to build more office.”
As the Related Group seeks opportunities to build office, location and amenities will be key, VP Nicholas Pérez said. Executives want to be near their homes and great schools, and have access to fitness centers, private elevators and outdoor spaces.
Once Related’s Coconut Grove office filled up, many tenants looking for space there shifted their interest to his office building at 3480 Main Highway, said Raoul Thomas, CEO of Miami-based CGI Merchant Group.
“CGI bought the building during the pandemic with 25% of the space available. It’s now fully leased with rents 15% higher than expected when he purchased it last year,” Thomas said.
Tenants from the Northeast are signing longer leases than most South Florida companies and spending more on office interior improvements. He’s signed over 10 out-of-market financial firms to deals in Coconut Grove and Coral Gables.
“We bought 300,000 square feet of conventional space over the past two years and we’ve taken massive advantage of that,” Thomas said. “I wish I had more office properties now.”
New York-based Related Cos. found tremendous traction leasing office space in West Palm Beach over the past six months, said Gopal Rajegowda, managing partner for the Southeast. Its new 360 Rosemary building has leased 95% of its 300,000 square feet. It plans to break ground on One Flagler, another 300,000-square-foot office, in October because demand has been strong. Most tenants are companies from the Northeast and Midwest.
“The companies are choosing West Palm Beach because it’s near the town of Palm Beach, where many wealthy executives buy homes, and its access to the Brightline passenger rail and the airport, Rajegowda said. “A lot of these companies were looking pre-Covid, but during Covid it accelerated the discussions and they were willing to do transactions. Many of them are setting up satellite offices. They aren’t fully moving here.”
Many companies are right-sizing their office space to reflect a partially remote workforce, but also creating larger workstations for employees and keeping a little extra space in case there’s a rebound in in-office work, said Matthew Goodman, a managing director with JLL in Miami who specializes in tenant representation. The net effect is a smaller office footprint, but companies want to be flexible in case new hires prefer to work in the office. That will lead to more available office space as companies contract, but Goodman is confident it will be filled by relocating businesses.
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