The Rise of FloridaRead Now
The State of Commercial Real Estate
The Miami Tower, famous for contributing to the third tallest skyline in the country and partaking in countless culturally iconic pop media, has been sold to the Boca-Raton-based CP Group for just $163.5 million. That is $56.5 million less than what it went for six years ago. Though Miami’s office rent growth is the strongest in the country, Miami Tower’s vacancy was nearly thirty percent. Yet, just a mile south, the 1221 Brickell Class A Tower sold for $286.5 million, marking a record for South Florida office deals since 2016. Why is there a seemingly stark difference between Brickell and Downtown?
The answer, in short, is amenities. Between a global pandemic, record inflation with the Federal Reserve aiming to increase rates further, and the looming prospect of a recession, you’d expect an economic downturn. However, it appears that Miami’s lack of city and state tax, international allure, and geographical advantages is attracting investors. The trendy Brickell district has a corporate but modern vibrancy with no shortage of restaurants, retail, nightclubs, and other hot spots for young urban professionals. Brickell has proven to be the core of Miami’s banking, investment, and financial sector with rent increasing on an average of 13.7% annually.
Brickell’s explosion into prominence is proving the CBRE’s Spring 2022 Occupier Sentiment Survey correct, where they revealed that most companies are back to developing long-term plans to expand or contract their office space now that employees are returning after nearly two years of mostly remote work. To avoid the high rent of Brickell, some companies are looking to relocate to Class A buildings Downtown. This is part of CP Group’s plan.
In March, The CP Group bought the Bank of America Plaza in Atlanta and sunk an extra $50 million in renovating the lobby, adding a high-end restaurant, and adding other amenities to attract employees back to their desks. The CP Group has been very active as it also bought The Las Olas Square in Downtown Fort Lauderdale for $144.5 million.
It’d be negligent not to mention that the annual rent growth in Miami and Fort Lauderdale are 16.9% and 16%. These two Florida cities are only behind Orlando which leads the nation in annual rent growth at a whopping 18.6% which is over eight percent higher than the national average. These figures have led to a new trend amongst investors and developers of repurposing aging offices and hotels into affordable housing for workers. In Orlando, we are seeing investors such as T2 and California-based Vivo Living buying hotels that have lost business due to the expansion of Disney’s value-category hotel rooms, converting the building into a unit property that contains studio apartments for rent under $1,000 per month. Similarly, The Estate Companies recently completed a hotel conversion in Hialeah, converting the old Ramada Inn across Westland Mall into 245 luxury studios and six one-bedrooms. According to representatives at the newly constructed Alture Westland, they are already at 98% occupancy with units costing roughly around $1,800 monthly.
With all the continued activity in the market, it appears that the old adage ‘time in the market is better than timing the market’ holds true. Buy now, as the commercial real estate in major Florida cities, including Miami, is only on the rise.
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