Miami’s Design District is emerging as a new frontier for the city’s boutique office market, where smaller space geared toward family offices, investment banks and hedge funds are expected to command rents topping $300 per square foot.
Peter Thiel’s investment firm raised the bar for Miami office rents, with a reported $250-per-square-foot lease at 830 Brickell.
But the question is whether that eye-popping figure is an outlier or a sign of what’s to come.
That was part of the discussion during the #MovingToMiami panel, moderated by South Florida reporter Lidia Dinkova, at The Real Deal’s Miami Forum Wednesday.
The panel featured Tony Arellano of Dwntwn Realty Advisors, Andrew Trench of Cushman & Wakefield and Cyril Bijaoui of Corcoran.
The pandemic-era corporate relocation boom brought major financial firms to Miami-Dade County, including Ken Griffin’s Citadel, Carl Thoma and Orlando Bravo’s Thoma Bravo, and Barry Sternlicht’s Starwood Capital. In the years since, tech companies including Peter Thiel and Alex Karp’s Palantir, Jeff Bezos’ Amazon and Apple have established a presence across Miami-Dade.
Brickell has been a major beneficiary of that influx, with 830 Brickell, developed by Vlad Doronin’s OKO Group and Jonathan Goldstein’s Cain International, emerging as a hub for corporate tenants. But other submarkets, including Coral Gables, downtown Miami, Coconut Grove and Wynwood, have also seen significant growth.
In Wynwood, the brokers are bullish that Griffin’s planned multibillion-dollar Carnegie Mellon campus at Mana Wynwood could give the office market a boost.
The neighborhood has about 1.5 million square feet of office space, with vacancy topping 30 percent. Despite Miami-Dade’s growth, the brokers pointed out that the county’s office market is still relatively small, with about 60 million square feet of inventory compared with roughly 550 million square feet in New York City and 300 million square feet in Chicago.
The Miami Design District could be the next frontier. The luxury retail destination, shaped by Dacra founder Craig Robins, has attracted brands like LVMH and Kering, with rents comparable to those on Rodeo Drive in Beverly Hills. While the neighborhood has little existing office space, boutique projects such as The Ursa, Sweetbird North and Mirai are looking to attract financial and creative firms seeking smaller space and an alternative to Miami’s established office markets.
“The Design District is one of those markets that could produce office rents above $300 [per square foot] if given the opportunity,” Arellano said, adding that the neighborhood has the potential for Miami’s most-expensive office rents.
The discussion turned to whether Miami’s increasingly eye-popping office rents are becoming the new normal. Peter Thiel’s $250-per-square-foot lease at 830 Brickell has raised questions about how far rents can climb. But the brokers cautioned against treating a single deal as the market benchmark.
“One outlier or several outliers is not the new market,” Bijaoui said. “And this is driving a lot of ownership, pushing the rates higher and higher, but not necessarily giving anything back to the tenants.”
Trench described how quickly rents have climbed, with leases he worked on at 830 Brickell initially marketed before construction at $65 to $75 per square foot, gross. Its first lease came in at $80, but rents quickly topped $100.
“The tricky thing now is, when a new building is being developed, it’s like, OK, last deal was $250, our next deal will be $251, and the truth is you have to kind of reset a little bit,” he said.
