Resilient office market? Not quite. South Florida sublease availability soars

Enjoy an excerpt from the original article published by The Real Deal and written by Lidia Dinkova. View Link | View PDF

7600 Corporate Center Drive in unincorporated Miami-Dade County, 401 East Las Olas in Fort Lauderdale, 19500 South Dixie Highway in Cutler Bay and a rendering of 830 Brickell (Google Maps, Getty, OKO Group/Cain International)

The tri-county region’s sublease availability soared this year, data from two sources show, contradicting fanfare over the market.

In the second quarter, nearly 2.9 million square feet were available for sublease, up 29.7 percent, year-over-year, according to data provided by Avison Young, sourced from the brokerage’s analytics platform Avant and CoStar Group. In the first quarter, nearly 2.6 million square feet were on the sublease market, a 10.3 percent jump from the same period of last year.

For the past two years, some companies shaved off space to accommodate the remote work shift. Yet, many more that had merely contemplated downsizing took the leap this year. The tipping point? Inflation and expensive capital due to interest rate hikes, which prompted firms to seek cost-cutting measures.

“Corporate America has called employees back to the office, and they are just not coming. It’s just a very delayed effect,” said Donna Abood of Avison Young in Miami. “The economy is influencing, too. The cost of money is really, really impacting these firms. … It’s possible it put a few of these [companies] over the edge.”

While some experts counter that data may be augmented by various factors, such as some sublease availability doubly counted, they still agreed that generally South Florida tenants increasingly are seeking to offload offices.

“I can give you 150 examples,” said Neil Merin of NAI Merin Hunter Codman. Space is for sublease “in West Palm Beach, in Boca [Raton], in Fort Lauderdale, in Plantation, in Sunrise, in Tamarac. You name it,” he said.

In November, electronics company Kemet Corporation subleased 56,000 square feet of its 66,000-square-foot headquarters at Pacific Coast Capital Partners’ 1 East Broward Boulevard, according to Merin of NAI, which leases the building for the landlord. Less than a year later, sublessor West Marine, which moved its headquarters to the building, is sub-subleasing the space.

Kemet Electronics still has 10,000 square feet of the original space it leased in 2018.

“That’s an unusual one,” Merin said. South Florida is “not seeing a lot of” sub-subleases.

Because the 56,000-square-foot availability at 1 East Broward is a sub-sublease, it could be counted twice in some tallies, Merin said. This may be artificially increasing the total availability count.

Indeed, sublease tallies generally should be viewed with caution, brokers warned.

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Author: Admin

Marketing Manager at NAI Merin Hunter Codman

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