The 2010 census validated what many in the real estate sector have been observing for years: population growth in America’s cities is outpacing our suburbs. In fact, 27 of the country’s 51 largest metro areas saw their urban cores grow at a faster rate than their surrounding suburbs in 2011.
The same can be said of Miami, where our downtown population has grown by 80 percent in the past decade, according to the Downtown Development Authority. The commercial real estate base is closely following this trajectory of growth, with downtown Miami and the Brickell Financial District welcoming more than 2 million square feet of class A office product in the last three years alone.
As was the case in most major American cities, Miami’s office market suffered during the depths of the recession due in part to the arrival of this new product. Vacancy rates doubled, some companies vacated space amid downsizing and layoffs, and the class A office market endured negative absorption for the first time in years. But in contrast with other urban markets, Miami’s office sector is bouncing back sooner than many projected.
New to market tenants are arriving and establishing operations here, new investment is pouring in from domestic and international sources, and existing office users are increasingly looking to upgrade their space. The first of the new class A buildings to deliver, Rilea Group’s 1450 Brickell office tower, is already 96 percent leased less than three years after opening its doors to tenants.
Now there are signs that growth within downtown Miami is having a spillover effect into Miami-Dade’s urban submarkets – areas with a high density of commercial, residential and retail product – even outside of the Central Business District and Brickell Financial District. This marks an important shift versus the previous 50 years when, aside from downtown Miami, many of our city’s commercial office users preferred suburban office space.
Downtown Miami and Brickell receive much of the attention due to the high volume of leasing activity underway and the sheer amount of available product that has been developed over the years, but places like Doral, Coral Gables, South Miami and Downtown Dadeland are growing stronger as well.
Some of Miami market’s largest lease transactions of the past year have involved major users entering or expanding into urban markets outside Miami’s CBD. Examples include the Miami Herald Media Company’s upcoming relocation to the former U.S. Southern Command Headquarters in Doral; HBO Latin America’s consolidation of its South Florida headquarters at 396 Alhambra in Coral Gables, which was Miami-Dade market’s largest lease of 2011; and Preferred Care Partners’ lease in Downtown Dadeland.
The recent announcement that Simon Property Group would repurpose 100,000 square feet of retail space at The Shops of Sunset Place in South Miami for commercial office use was the latest sign of rising demand for office space in densely-populated, mixed-use settings.
With so much focus placed on the commercial, residential and retail growth taking place in downtown Miami, we are now beginning to see a significant spillover effect into urban markets outside the city’s core. This is a positive sign for our local business base and our real estate economy.
Just as skeptics doubted the residential market’s ability to absorb oversupply during the housing boom, there is reason to believe that urban office markets in Miami will outperform expectations.