The Coral Gables market remains a destination for multinational companies searching for space. With approximately 200 multinational companies currently calling it home, Coral Gables truly is an international community.
The retail market in Miami has been hit hard by the coronavirus pandemic with mandated closures of shops, restaurants, health and grooming, and other retailers throughout 2020. Many of these temporary closures have turned permanent, and the vacancies in each of the past three quarters are at a seven-year high, up about 50 basis points in the past year. However, the rate is still below the National Index as it has been for at least 15 years.
The Coral Gables retail market still has 286,000 SF currently under construction, which ranks as the ninth submarket in the metro-Miami pipeline. Market rents average $37.13 per SF at the end of Q1 2021, which is a decline of -1.4% rent growth. The vacancy rate is steady at 4.4% to start the year.
Though retail investment has been declining in the larger region, there were several large sales in Q2 2020. The largest deal since the lockdowns began was the sale of Plaza San Remo in Coral Gables. The 60,000-SF Whole Foods-anchored retail property is on the ground floor of a 100,000-SF, seven-story mixed-use building, which includes office space and a parking garage. The property was acquired by Zurich Alternative Asset Management for $46.75 million, or about $783/SF, more than double the metro price per SF of just under $400, and more than 50% above Coral Gables pricing around $500/SF.
In the office sector, vacancy rose to 11.2% with 109,466, 896 SF available at Q1 2021 with the average market rent at $39.30 per SF. There is more than 3.5 million SF of office space under construction in the Miami metro area. Plaza project. In 20Q4, work completed on the North Tower at The Plaza Coral Gables. The South Tower is under construction and set to deliver late this year. The combined 537,000 SF of 4- & 5-Star office space will expand the submarket’s inventory by nearly 5%. There is 320,000 SF of space that remains available in the project, at asking rents between $55-$62/SF.
As a result of the pandemic and widespread telecommuting, demand is forecast to remain relatively muted. Many of these projects will open to weak demand, particularly for elevator-dependent towers. Projects that have not secured large commitments at this point will likely face difficulties with about 40% of the space underway available for lease in the Miami office market.
Despite muted leasing and rising vacancies in the short term, we believe the Coral Gables office market will have a strong recovery. Now may be a good time to secure a favorable lease rate on office space while inventory exists, giving tenants more options for affordable rents, especially if entering large, long-term commitments.