November 4, 2019
By David Cohen
As the calendar inches closer to 2020, South Florida’s office market is experiencing stable fundamentals. Rent continues to grow, vacancy rates are low and construction is at record levels.
Connect Media asked Stephen Rutchik, Executive Managing Director of Office Services in Colliers’ South Florida office, to share insights about South Florida’s office market as we move closer to 2020. Check out his responses in our latest CRE Q&A:
Q: Moving into 2020, how strong is office demand in South Florida?
A: Office demand in South Florida remains healthy, with law, technology, insurance, accounting firms and co-working groups showing the most activity. Across all sectors, we are seeing more tenants with larger space requirements looking to relocate into new developments, or to expand into newly available blocks of space. All market indicators signal a healthy demand for office space in South Florida – rents continue to climb and vacancy rates are in single digits even with increased supply. New office construction is at record levels – an obvious sign of a healthy office market, as developers react to the demand for more office space.
Q: There’s been a lot of buzz about co-working over the past year what with WeWork’s failed IPO… etc. What is the current state of the flex office market in South Florida?
A: Undoubtedly, co-working has re-shaped the office market. Nationwide, leases to co-working operators has tempered, but in South Florida, 2019 saw meaningful expansion of co-working’s share of office square footage. Colliers research tracked 484,180 square feet of co-working leases across Miami-Dade and Broward counties, year to date. Despite the recent dramatic news stories regarding WeWork, co-working remains a viable model, particularly in South Florida, which continues to be a magnet for large corporations, startups, freelancers, small businesses, satellite offices and transient business visitors, which helps secure the future demand for co-working space locally.
Q: Suburban office product has been gaining steam lately around the country. What’s your outlook for that segment in 2020?
A: As office users assess their locations and real estate decisions, several factors add to the appeal of suburban office markets.
- Traffic woes across South Florida – congestion has become a challenge and suburban accessibility or proximity to major thoroughfares can be a locational advantage for companies looking to attract talented employees.
- Exacerbating the CBD congestion challenge is limited, and increasingly expensive parking options. For companies with dense office requirements – parking costs can be a major factor in choosing a location
- Accelerating rental rates in the CBD are pricing some tenants out of the urban office market and towards more affordable rents in the suburbs.
- New suburban mixed-use developments, particularly those built around public transit, appeal to younger professionals. Significant public and private investment in transit in South Florida will support this demand for the foreseeable future.
Q: Anything else we should look out for as we move into 2020?
A: We’re looking forward to new, highly-amenitized office buildings, that combine sustainability, technology and hospitality-level tenant experience, coming to market which will drive a new flight to quality as tenant demands shifts to the new Class A++ offices. With new residents and new businesses continuing to relocating to South Florida, largely as a result of tax reform, there’s reason to remain optimistic about the future of the South Florida office market.
For comments, questions or concerns, please contact David Cohen