A recent report from JLL indicates that the South Florida office market is experiencing significant challenges, with asking rents declining in both Miami-Dade and Palm Beach counties during the third quarter. Demand for office space has plateaued compared to the same period last year.
Some property owners have responded by selling off assets to minimize losses. Last month, developer Michael Shvo sold his properties at 1656-1680 Alton Road in Miami Beach, including the former Epicure Gourmet Market & Cafe building, for $28.2 million to Infinity Collective of New York. Shvo had purchased these properties in 2022 for $39.3 million with plans to develop The Alton, a six-story building featuring office space and apartments. Shvo stated, “the office project was ‘no longer the highest and best use for this site.’”
In another case reflecting market distress, R&B Realty of New York lost control of Gateway at Wynwood, a 12-story office and retail building at 2916 North Miami Avenue, after failing to refinance a $112.9 million mortgage. Cire Equity from San Diego acquired the property by purchasing an $89.6 million credit bid from A10 Capital, which had obtained the asset at a bankruptcy auction.
Despite these setbacks, there were some notable deals during the quarter. Playboy signed a lease for a 20,000-square-foot penthouse at The Rivani in Miami Beach, planning to move its headquarters from Beverly Hills to South Beach next year. However, the deal is contingent on the city providing $800,000 in incentives; otherwise, Playboy can withdraw.
According to JLL, the average asking rent in Miami-Dade County dropped to $65.89 per square foot in the third quarter from $66.33 per square foot a year earlier. The vacancy rate was nearly unchanged at 15.8 percent compared to 15.5 percent last year. New construction slowed to 971,000 square feet under development, down from 1.1 million square feet in the same period last year.
The largest lease of the quarter was by law firm Stearns Weaver Miller Weissler Alhadeff & Sitterson, which renewed its agreement for 96,800 square feet at Museum Tower in downtown Miami. In Wynwood, OKO Group led by Vlad Doronin leased 25,200 square feet at Wynwood Plaza.
Broward County saw an increase in average asking rent to $48.54 per square foot from $42.93 per square foot a year ago. The vacancy rate remained steady at 15.9 percent, with little change in new construction activity. There were no major leases signed during the quarter, but several companies chose to purchase office properties instead. Notably, Lennox Industries bought a 30,000-square-foot building in Fort Lauderdale for $16 million for its Southeast U.S. headquarters.
Palm Beach County has also slowed after previous growth driven by investments such as those by Steve Ross in West Palm Beach’s office market. The average asking rent decreased to $68.81 per square foot from $70.69 per square foot last year, while the vacancy rate increased to 14.4 percent from 13.2 percent. Construction activity remained strong with 1.1 million square feet under development.
A major lease signing in Palm Beach County involved ServiceNow leasing 200,000 square feet at 10 CityPlace, an office tower developed by Ross’ Related Ross.
