SOUTH FLORIDA BUSINESS JOURNAL – JULY 8, 2021 BY BRIAN BANDELL There’s little doubt that Covid-19 cast a blow to office markets nationwide. But unlike other regions, a spate of business relocations could be the lifeline South Florida’s office sector needs to bounce back strong.
In most U.S. metropolitan areas, office has been a dicey investment prospect, as experts fret over how much remote work will impact existing occupancy. South Florida isn’t immune to that concern. But some industry insiders are bullish on the region’s office market as companies, especially those in technology and financial services, flock to the region in record numbers.
The big question is whether these moves will make up for the hits to the office market during the pandemic. If so, this could lead to developers spending hundreds of millions of dollars on office construction and renovations to capture premier tenants.
Office occupancy declined throughout the tri-county region during Covid-19 as companies closed and downsized, and leasing activity stalled for much of 2020. Even at the end of the first quarter of 2021, the office vacancy rates remained significantly higher than they were 12 months earlier, according to statistics from both JLL and Colliers.
Vacancy rates will fall, as the amount of deals in the pipeline from relocations is the biggest he’s witnessed during his career, said Stephen Rutchik, executive managing director of the office sector for Colliers in South Florida. Some of those companies leased space on Miami’s Brickell Avenue in the $80s per square foot, whereas 2020’s top rents were in the $60s, he said. That’s high for South Florida, but much less expensive than New York or Boston.
“The number of financial service firms and family offices coming from the Northeast and West Coast is driving the bulk of our daily activity,” Rutchik said. “The leading indicator is the residential market. We see many of the big names out there buying houses here, and we see them the same week or the next week touring the market for office space.”
With Covid-19 vaccines widely available, more companies are bringing workers back to their offices. However, not all businesses will need as much space because more employees will work remotely.