Why Miami Beach’s Office Market Is Booming
6 min read
New legislation and initiatives are bolstering the city's development pipeline. Here's what's next for the area.
Miami Beach’s business-friendly policies and year-round warm climate have contributed to its resilience through these uncertain times, as the city has experienced a wave of businesses and their capital relocating from colder, tax-burdened states throughout the country.
“These companies are prioritizing quality of life—walkability, commute times, proximity to housing and schools—when planning their South Florida office space, and that is creating natural demand for Miami Beach,” Stephen Rutchik, executive managing director at Colliers, told Commercial Property Executive.
Already a popular tourist destination, the city is looking to attract financial services companies and tech businesses that bring higher paying jobs and a diversified tax base to the area. “The City Commission has enacted a robust business attraction incentive program for targeted industries with incentives such as expedited plan review and permitting and performance-based grants for companies which create a minimum of ten high-wage jobs,” Miami Beach Mayor Dan Gelber explained.
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Recognizing that Class A office design demands higher floor-to-ceiling heights, Mayor Gelber sponsored legislation that allows additional height for office developments along portions of Alton Road and the Sunset Harbour neighborhood. Developers have already submitted applications for projects that take advantage of the height incentive, which requires that these include ground floor activation and obtain building permit issuance before 2023.
In a effort to capitalize on the wave of business migration to the area, the city has also approved a similar height incentive for Class A office development on Terminal Island, while considering other areas as well, Mayor Gelber added.
According to Rutchik, Miami Beach’s newest Class A office building is 20 years old, so developers are meeting demand for newer product with projects like Eighteen Sunset. The mixed-use development from Deco Capital Group will have nearly 40,000 square feet of Class A+ office, retail and street-level restaurant space as well as a top-floor penthouse residence with a private rooftop deck.
Eighteen Sunset was granted final approval by the city in May of 2021 and will take shape in Miami Beach’s trendy Sunset Harbour district, with construction set to begin this fall. The project, slated to be complete in 2023, will be the first-ever Class A office space developed in the neighborhood.
“Business decision-makers are increasingly looking to walkable lifestyle districts when it comes to locating their office space—and Eighteen Sunset is well-positioned to capture that migration,” Bradley Colmer, founder of Deco Capital Group, told CPE.
Rutchik, who is leading office leasing for the upcoming project, said he is already in talks with finance firms, hedge funds, family offices and several professional services firms, and expects the building’s office space to be fully leased long before it delivers.
The project is rising at a time when the Miami Beach office market is in high demand. According to data from Colliers, average Class A office rents in Miami Beach now stand at $57 per square foot—up 10 percent year-over-year. And if the trend of companies relocating and expanding to South Florida from across the U.S. and around the world persists, office experts expect that demand to continue.
Other companies making notable office moves include investment firm Starwood Capital relocating its corporate headquarters in Miami Beach and completing construction of a new Class A office building in the Collins Park neighborhood, and the Related Group receiving approval for a 120,000-square-foot mixed-use office project overlooking the seaport.
Taking the road well-traveled
Lincoln Road, an east-west pedestrian street in the heart of Miami Beach, is poised to experience a slew of new commercial development.
In late 2020, the city of Miami Beach launched a request for letters of interest for a public-private partnership to redevelop three parking lots next to Lincoln Road between Alton Road and Meridian Avenue. According to Lyle Stern, president of the Lincoln Road Business Improvement District (BID), a total of 18 developers, including Related Group, Dacra’s Craig Robins, Terra’s David Martin, Starwood Capital and Deco Capital Group expressed interest in building office projects on the city-owned land.
Following the surge of interest in the site, the city launched a formal RFP and added a fourth piece of land—a parking garage, which created 400,000 square feet of total office space available on public land. Ultimately, city voters will have to approve any project on city-owned land through a referendum.
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“Affectionately referred to as Miami Beach’s living room, there is nothing as quintessentially Miami Beach as Lincoln Road,” said Stern. “It has long been a haven for the LGBT community, where models walk their dogs after runway shows, a must-stop on any visitors’ itinerary, and where café culture overrules standard business meetings.”
Early on in the pandemic, when theaters went dark and concert halls went silent, Lincoln Road BID began forming a series of partnerships with organizations and entertainment venues impacted by the shutdowns.
The BID partnered with the New World Symphony for a program dubbed Musicians in Golf Carts, where players from the symphony serenaded Lincoln Road visitors from the back of slowly roving golf carts. Miami New Drama, which typically performs at Lincoln Road’s Colony Theatre, transformed seven storefronts into mini stages for Seven Deadly Sins, a 90-minute, live, outdoor theater production.
Big-name companies have recently chosen Lincoln Road for their newest outposts, including Amazon, which announced it was opening one of its “4-star” store concepts on the street last summer, and Chinese retailer Yoyoso, which is set to open its first store in Florida on Lincoln Road later this year.
Nearby, two financial services firms recently signed leases for space at 1674 Meridian Ave., just off Lincoln Road. New York-based GMF Capital is relocating its headquarters to Miami Beach, adding more than 12 employees in the next year, while SEC-registered Melvin Capital Management plans to hire at least eight new employees in 2022.
A bright future
Because Miami Beach is an island with minimal land that is primed for ground-up development, building in the city requires creativity and patience. Colmer and his team spent years assembling the parcels that are now becoming Eighteen Sunset.
“North Beach is an interesting neighborhood that is ripe for development, but proximity to the mainland and access to major transportation arteries are still important,” he said.
However, while Sunset Harbour and Lincoln Road are popular areas for high-end office projects, Colmer believes North Beach is the next big thing. The city and voters recently approved a zoning change for the area that will open the door to more density in the district’s so-called town center, and that is attracting interest from developers who are building multifamily housing, hotels and retail space. Colmer believes as those uses come to the market, so will the demand from high-end office users.
“Miami Beach has a major opportunity right now to capitalize on the world-class cultural venues we have within a few short miles, as well as the eclectic, diverse community of residents and talent living here to demonstrate we are much more than sun, sand and nightlife,” Stern said.