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Miami office boom pushing deeper into posh residential areas

(Bloomberg) — Miami-based financial and technology firm is boosting the office market in the sunny South Florida city at a time when buildings across the United States are struggling.

Leasing is increasing, rents are increasing. And demand is spreading from core business districts like downtown and Brickell — where Apollo Global Management Inc. and Blackstone Inc. have replaced — into residential areas where Wall Street and Silicon Valley officials have built multimillion-dollar homes during the pandemic. Scooped.

“You have bigger firms and they’re starting to attract other smaller firms that want to be around and serve them,” said Ryan Holtzman, Miami-based managing director of brokerage Cushman & Wakefield. “We’re getting a ton of new-to-market technology, law firms that, while pre-pandemic, they would have never thought of Miami.”

Now, office projects are starting closer to where their employees live.

Over the past year, the New York-based hedge fund quickly filled a related group’s boutique property in Miami’s trendy Coconut Grove neighborhood. Starwood Capital Group has just completed its new headquarters in Miami Beach, not far from where Chief Executive Officer Barry Sternlich’s home is. Starwood and its partners are bidding on more office projects nearby in the entertainment district famous for its Art Deco hotels and opulent homes.

Wealthy northeasters and Californians have long been flocking to Miami, attracted by its warm weather, outdoor lifestyle, and low taxes. The pandemic hastened that change. After buying lavish homes as lockdown retreats, many of the 2020 expatriates became permanent residents, enrolled their children in private schools and established social networks in the city.

This has led to a wave of office leasing with companies including Microsoft Corp. And private equity firm Thoma Bravo is relocating to Miami to house its growing workforce. Amazon.com Inc. chose a WeWork location in nearby Coral Gables for about 100 employees.

“We’ve never been so busy, seen so much growth,” said Holtzman, who has worked in this field for 17 years. “And this is only the beginning.”

small but growing

This is in stark contrast to what is happening in other US business centers, including San Francisco and New York, where vacant office space is piling up. Employers are re-evaluating their real estate needs, as many of their employees are reluctant to resume long commutes, adopting permanent hybrid schedules.

According to Cushman & Wakefield’s fourth-quarter report, Miami-Dade County’s office market is smaller, with just 46 million square feet (4.3 million square meters) of space, compared to 408 million square feet for Manhattan. Last year, 2.8 million square feet of new leases were signed in the area, the most since 2005, with Midtown Manhattan alone accounting for nearly a quarter of the total.

Companies are still attracted to the commercial center of Miami, where the New York-based Related Cos. Planned to be billed as Florida’s tallest office skyscraper. But to capitalize on the rising demand, developers are moving beyond the congested business hubs of the city.

The bet is that people who have moved to the area to work away from their spacious homes want the benefits of spending time in the office, but don’t want to be bogged down with traffic to get there.

In Coconut Grove, tenant of 2850 Tigertail Ave. of the respective group. Valet can enjoy parking, electric car charging stations and the private art collection of the developer’s CEO, Jorge Perez. A branch of Manhattan brunch staple Saddle’s is a one-minute walk from the building.

Dan Sundheim’s D1 Capital and Casimir Holdings – an investment firm co-founded by Sequoia Capital partners Jim Goetz and Geoff Sverdlin – in 2020 signed leases on 2850 Tigertails last year. According to people familiar with the matter, Cerberus also agreed to take up space in the building. Representatives for Cerberus and the concerned group declined to comment on the lease.

Nick Perez, Senior Vice President of Related Groups, said, “Many executives are moving into and buying expensive single-family homes in Coral Gables and Coconut Grove and want to live closer to their offices and not deal with traffic. ” “With its proximity to the best schools in Florida, without really going into the urban core, makes for a short commute to everything – open green space, schools, dining, retail.”

In Miami’s Design District, known for its upscale restaurants and luxury fashion stores, developers including Brookfield Properties and Dacra Development Corp. A 15-storey office tower is being constructed which is equipped with outdoor space and 360-degree views. Starwood’s new headquarters in Miami Beach features private cabana balconies and lush landscapes.

In today’s world, they are essential, according to Victor Ballestas, principal at Miami-based Integra Investments, Starwood’s development partner.

“One thing we’re seeing in high demand is outdoor facilities in the office that we weren’t used to building in the past,” Ballestas said.

rising rent

The leasing boom and new construction of new high-end spaces drove rents up 8.6% in the fourth quarter from a year ago, Cushman & Wakefield data show.

Costs rose to records in some submarkets, including Miami Beach, where landlords demanded an average of $59.87 per square foot in high-quality buildings. Coconut Grove was one of the priciest areas for a Class A space, at $66.55. That’s a bargain compared to Manhattan’s Class A average of $76.29, according to the brokerage.

Developers from New York are among those wanting a piece of the action.

Manhattan-based L&L Holding Company has teamed up with Carpay Real Estate Partners to build a mixed-use complex in Miami’s Wynwood Arts District.

Related, the firm behind New York’s Hudson Yards, is planning its first office project in the city, a tower in the Brickell neighborhood set to rise more than 1,000 feet (305 m). The developer already has properties in West Palm Beach by the likes of Goldman Sachs Group Inc and Point 72 Asset Management.

“The momentum in the Miami office market is extraordinary,” Concerned President Stephen Ross said in a statement. “The large national firms we work with across the country are actively seeking out the world-class office product we are known for delivering.”

© 2022 Bloomberg LP

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