Q2 2022 Market Report – Miami & Coral Gables Office & Retail

Office Market Overview:

Office property owners are capitalizing on strengthening fundamentals and raising rents at above average clip. Miami’s annual rent growth is 6.6%.

In the office sector, vacancy is at 10% with 110,378,057 SF available at Q2 2022. The average market rent is $42.87 per SF. There is 3,234,000 SF of office space under construction, which is less than what was under construction in mid-2020 but elevated compared to prior decade norms. Current space under construction represents 2.9% of the metro’s current inventory.

Miami ranks as one of the top metros in the country for year-over-year rent gains, with 12-month growth of 6.6%, compared to the national average of 1.1%. Office demand in Miami is benefiting from recent growth in the area’s office- using employment sectors. Annual rent growth in 4-& 5-Star assets is 7.5% and driving recent gains. Demand for a diverse tenant base including law firms, financial institutions, and tech firms have fueled recent gains.

Over the past few quarters, office sales activity has increased with few deals trading for a discount in Miami. This is driven by national and institutional investors acquiring high-end assets. The current market sales price is $369/SF with a 12-month sales volume of $2,240,939,936. The 12-month sales volume growth is 27.5% at a 5.9% market cap rate.

Despite a dip in overall economic activity, the office sector has done quite well. Employment is well above pre-pandemic levels in both the professional and business services and financial activities sectors. Leisure and hospitality sectors continue to struggle, and employment there is still about 7% below the peak as of April 2022.

Retail Market Overview:

The metro Miami area retail vacancy rate is now at an all-time low of 3.2% with a 9.1% annual growth rate, outpacing the national average of 4%. Most of the 3.5 million SF underway is pre-leased, so new supply should not have much of an impact on rent growth in the near term. Future performance is contingent on the recovery of Miami’s tourism sector.

The Coral Gables retail market still has 667,000 SF currently under construction over three buildings, with 83.2% pre- leased, which ranks as the eighth submarket in the metro-Miami pipeline. Market rents average $43.06 per SF at the end of Q2 2022. Miami ranks as one of the priciest retail markets in the country, with Miami Beach average asking rents exceeding $80/SF triple net.

Sales volume has hit a record high of $2.7 billion over the past 12 months with a market cap rate of 5.4%. The average market sales pricing of $422/SF is above the metro’s pre-pandemic peak. There has not been a noticeable decline in pricing despite the recent interest rate increase.

Contact the Coral Gables Team at info@comreal.com for more information!