Average rental rates (Class A vs. Class B)
$0 $5 $10 $15 $20 $25 $30 $35 2006 2007 2008 2009 $ ps
f Class A rental rates Class B rental rates
-500000.0 -400000.0 -300000.0 -200000.0 -100000.0 0.0 100000.0 200000.0 300000.0 400000.0 500000.0 2006 2007 2008 2009 sf in th ou sa nd s 0% 5% 10% 15% 20% 25%
New deliveries YTD Net absorption YTD
Vacancy Class A YTD Vacancy Class B YTD
Overall new deliveries / overall net absorption / overall vacancy rates
All of the (eight) Class B buildings at Waterford, totaling nearly 830,000 square feet, are now owned exclusively by MetLife. At the “Atrium” buildings (6100, 6303 and 6505), overall vacancy was up from 8.0 to 10.5 percent and the five “West” buildings also lost occupancy with a combined 15.3 percent vacancy rate. A 13,500 square foot office in one of the West buildings is the largest contiguous office being offered.
At Airport Corporate Center, the largest contiguous Class A vacancy remains at 9,300 square feet. The park ended the year with a strong occupancy rate of 95.0 percent. However, look to an additional 24,369 square feet coming available in the first quarter of 2010. For the park’s Class B product, the 82.0 percent occupancy rate was up slightly over last quarter. 9,200 square feet is the largest contiguous o
ffice availability.
Unchanged for most of the last several years, vacancy at Doral Center’s Class A building has remained low, ending the year in the five percent range. The park’s Class B buildings posted vacancy at 25.0 percent. However, the amount of available Class B space for lease has gone down, with four buildings slated for a 2010 demolition.
Downtown Doral has all approvals in place for its master plan city center at the site of the Doral Center office park. This redevelopment into an upscale office, residential and retail village will result in the demolition of all 26 Class B and C buildings. This will mean that a total of one million square feet of office space will disappear from the market. To date, eight Doral Center buildings have been demolished including Billings, Cleveland, Austin Albany, Springfield, Scranton, Seattle and Plaza. The Seattle building was demolished during first quarter 2009 to make room for the park’s new Class A 8333 Downtown Doral office building. The planned residential condominium component, to be known as The Cordoba, broke ground during midyear 2009 for 224 units. The project had been slated as condo sales but has since been repositioned as a rental development. Completion is scheduled for midyear 2010.
Even after the Downtown Doral redevelopment project is completed, the Doral Center office park will retain its 400,000 square feet of existing Class A product. As part of the redevelopment, another 400,000 square feet are proposed. Construction began last quarter on the first new office building where one of the state agencies, the Agency for Healthcare, has pre-leased over 43,000 square feet or 29.0 percent of the available space. To comprise 150,000 square feet, the new building will be known as 8333 Downtown Doral and should open by the end of the third quarter 2010. The building will rise six stories and offer generous floor plates of 25,000 square feet. Pricing at this point is being quoted between $22.00 and $23.00 per square foot, triple net with a 2010 $10.98 operating expense.
Doral Center’s Class B “Denver” building completed its conversion in 2008 to an office condo, comprising nearly 70,000 square feet of space. Marketing of the building, known as 7950 Professional Center, has selling prices of $276 to the slightly reduced $300 per square foot, with 31.0 percent of the space closed. No leasing is available at the project.
Vacancy was reduced somewhat at year-end at the combined two- building Class A Doral Corporate Center development, registering 19.0 percent at fourth quarter. Building II still contains the largest contiguous office space being marketed at 13,000 square feet. Only two sublets remain, the largest of which is the long standing 5,400 square feet office, former Countrywide (now Bank of America) space which came to market at year-end 2008.
Although Doral Concourse’s Class A Building I remains nearly fully occupied, a 19,500 square foot sublease has been available on the second floor. This is former space for Avaya, a global leader in communication systems, applications, and services. During second quarter 2009, the availability had been expanded to nearly 37,000 square feet, making it one of Miami’s largest subleases. Term is through year-end 2011. Located near the prestigious Doral Golf Resort & Spa, the “move-in condition” office space has an asking rate of $16.50 per square foot, triple net with an estimated 2009 operating expense of $10.69.
32,500 square feet of space on the top floor at Amadeus Centre is available in the five-story building which is headquartered by Amadeus North America LLC, a leading global distribution system and technology provider to the travel industry. Amadeus occupies the balance of the building. The quoted rental rate stands at $14.00 per square foot, triple net with 2009 operating expenses at $10.35 per square foot.
Vacancy at the Class B Lennar Corporate Center park has declined over the last two quarters, standing at 16.5 percent at year-end. Still available is one of the largest contiguous office availabilities: two floors comprising 40,000 square feet in the 730 Building. Another $1.00 per square foot pricing reduction was implemented this quarter to $25.00 per square foot – down from $27.00 per square foot at the beginning of the year. On the leasing front, a new 6,000 square foot transaction was completed for Star Clippers, who operates three of the world's largest and tallest sailing vessels.
The departure of the FAA at the Class B Doral Court left a significant 35,000 square foot contiguous office space available. The asking rate is $18.00 per square foot, full service.
1000 Waterford was completed on schedule during third quarter 2009. Mirroring its recent Class A 701 and 703 Waterford buildings, TIAA- CREF and the Hogan Group constructed a 10-story, 247,000 square foot building, to be the first LEED certified building in the Waterford at Blue Lagoon office park. Located next to the Sofitel Hotel, ownership had secured several pre-leased tenants: relocating from Coral Gables, law firm Mintzer Sarowitz et al, for 9,124 square feet and global engineering/consulting firm, Black & Veatch for 3,000 square feet. Its first tenant – Sandler, Travis & Rosenberg, an international trade and customs law firm – committed to 16,000 square feet from within the park (exiting 10,000 square feet from 5200 Waterford). Just prior to opening, Aerolíneas Argentinas signed a 5,000 square foot lease. The airlines will relocate from within the park (5301 building). At year-end, a substantial new tenant was signed – Turner Construction who will occupy 17,500 square feet in a relocation from Downtown Miami. This brings the occupancy up to 22.0 percent.
Miami Airport
The Waterford office park also has what is known as its “20-acre core site” – the final build-out of three additional Class A buildings totaling 800,000 square feet. Accompanying support amenities are proposed to include a hotel, retail, restaurants and a health club component. Except for the Burger King headquarters, most of their office product has been built on speculation. TIAA-CREF is one of the market’s largest
commercial real estate owners with nearly 4.0 million square feet of both office and retail space spread out through Miami-Dade County.
The owner of the former Ryder System headquarters’ property, Shoma Development, completed a new 231,500 square foot Class A office building during midyear 2009. Part of a master-planned site, the 11- story One Park Square, located at 3470 N.W. 82nd Avenue, had the project’s developer as the first tenant, who will occupy their headquarters in 12,000 square feet on the ninth floor by early 2010. During fourth quarter, Alcora Group, an international trade firm, signed a lease for 6,700 square feet, also on the ninth floor. The overall project will eventually incorporate a hotel, a retail component (150,000 square feet) and residential product – recently refigured (400 apartments) due to the downfall in the overall housing market. The retail segment will be geared towards urban style, higher end users. Asking prices for the office space are now $22.00 to $24.00 per square foot, triple net. Operating expenses are $9.04 per square foot. The landlord is offering a parking ratio of 4.0 spaces per 1,000 square feet.
While geographically outside of the competitive set, office product has opened at Flagler Station, located northwest of the airport in Medley. Comprised largely of industrial product, the first two multi-tenant office buildings have opened in a development that can eventually
accommodate up to 10 million square feet – 550,000 of which can be office space. Presently, the 950-acre campus has 3.5 million square feet of existing space. The first two office buildings (built in 2006 and 2007) total 118,000 square feet each and are posting occupancy at 88.0 and 97.0 percent, respectively. New availabilities, however, include a substantial 30,000 square foot sublet at the 1200 Building, half of the Brightstar Corporation space. Term is no less than five years with pricing listed only as “negotiable”. Building 1300, which mirrors the other two buildings except in size – 156,000 square feet – was completed in 2009 but opened with no pre-leasing. Pricing remained at $18.00 per square foot, triple net with an $8.55 per square foot operating cost. The project offers a generous parking ratio of 5/1,000 square feet. The park is also the location for Ryder Systems’ 250,000 square foot headquarters facility.
Demand
The submarket’s largest Class A lease this quarter occurred at
Waterford: a 60,000 square foot renewal for FedEx at the 701 Building. In addition, Nokia renewed for 25,000 square feet at 703 Waterford. Other renewals included Hand Innovations for nearly 16,000 square feet (6303 building), communications firm PAETEC for 7,700 square feet (5301 building) and Charney Palacios for 7,000 square feet (5201 building).
Other Waterford transactions included the in-park relocation and expansion for Hospice of the Palm Coast for nearly 10,000 square feet, Bank of America’s 7,200 square foot renewal for their home loan division and software designer Mariner System’s 7,500 square foot renewal. On the sublet front, Permasteelisa subleased the former CB Richard Ellis office at the 703 building (8,800 square feet).
In addition to the Turner Construction transaction, the newly opened 1000 Waterford building welcomed a new financial services tenant - First American Services in a 4,000 square foot lease. The firm will relocate by midyear 2010 from the office condo Douglas Centre project in nearby Coral Gables.
Renewals made up the majority of leasing activity at Airport Corporate Center and included two Class A transactions, Symetra Life Insurance Company (7,700 square feet) and Ecolab, Inc. (3,200 square feet) and the largest Class B transaction of 3,900 square feet for Network Engineering Services, which was also an expansion.
United HomeCare signed a new 24,000 square foot transaction at the Class A Westside Plaza I. United, who will move in by midyear 2010, will relocate from the Class B Palm Coast 2 at Doral Center to occupy the former Blue Cross Blue Shield space. Excellent leasing this year in the form of 175,000 square feet at the Class A Westside Plaza asset reduced vacancy to approximately 11.0 percent.
Class B 40,000 SF Lennar Corporate Center
Class A 37,000 SF Doral Concourse Class B 32,500 SF Amadeus Centre Class A 35,000 SF Doral Costa Class A 156,000 SF Flagler Station-Building 1300
Large contiguous availabilities
Class A 197,000 SF 1000 Waterford
Class A 213,000 SF The Office at Park Square
Doral 25,000 SF Nokia Waterford 60,000 SF FedEx Waterford 16,000 SF Hand Innovations, LLC Waterford
Significant lease transactions
19,500 SF Attorney’s Title Doral Center 17,500 SF Turner Construction Waterford 24,000 SF United Homecare Westside Plaza
Miami Airport
Relocating from within the Doral Center office park, Attorney’s Title signed a new lease at the Class A Davenport building for 19,500 square feet. Their previous office was at the older, Class B Flint building which is slated for demolition. In addition, LG Electric expanded and renewed for a total of 6,000 square feet at their Class A Trenton building office. Class B leasing activity totaled 32,000 square feet in renewals for various users.
Doral Corporate Center welcomed Bouygues Civil Works in a new lease for 5,000 square feet. Bouygues was awarded the contract to provide the new tunnel for the Port of Miami in Downtown.
Prospects touring the market include:
- VITAS Hospice Services for up to 50,000 square feet - Elizabeth Arden for up to 30,000 square feet - GE for up to 30,000 square feet
- Road America for up to 25,000 square feet - Kaplan College for up to 25,000 square feet - Gainsco Auto Insurance for 25,000 square feet
- Phoenix American Insurance Group for up to 20,000 square feet - Miami Children’s Hospital for up to 20,000 square feet
- Business Centers International for up to 20,000 square feet - Florida Highway Safety/DMV for up to 20,000 square feet - URS Corp. for up to 20,000 square feet
- Big Brothers, Big Sisters for up to 15,000 square feet - YMCA for up to 15,000 square feet
- V.Ships for up to 10,000 square feet - Clarvent for up to 10,000 square feet
Pricing
As with most of the market, operating expenses have come down. Combined with the pressure on asking rental rates due to supply outpacing demand, overall pricing has been falling.
Rental rates at Waterford remain among the highest quoted, due primarily to the quality of the Class A product and its preferred location. The Class A rate for the park’s largest contiguous vacancy remains unchanged from year-end 2008 at $19.25 per square foot, triple net; operating expenses were up at midyear 2009 by $0.75 to the current $14.00 per square foot. Stabilized higher rates at the 701 and 703 buildings are $22.00 per square foot, triple net with a $12.00 operating expense – up by $0.25 per square foot.
Quoted pricing for the newly delivered 1000 Waterford building ranges from $21.50 to $26.50 per square foot, triple net with operating expenses at $9.50 per square foot.
Unchanged for the last three quarters, the Class B West Waterford buildings had full service quotes ranging from $24.00 to $25.00 per square foot. Pricing for the Atrium buildings remained at $18.00 triple net with operating expenses ranging from $11.57 to $12.03 per square foot.
For the past year, Class A asking rates at Airport Corporate Center had a base rent quote of $15.50 per square foot, triple net – down from the $17.50 to $18.00 year-end 2008 range. 2009 estimated operating expenses remained unchanged in the range of $12.37 to $12.60 per square foot. Likewise, triple net asking rates for Class B space fell to $11.75 per square foot, down by $2.00 per square foot during the same time period. Associated operating expenses were also unchanged at $12.10 to $12.40 per square foot.
Class A pricing at the Doral Center office park was reduced in midyear 2009 by five percent and remained unchanged through the rest of the year at a full service rate of $26.50 per square foot. Likewise, asking rates for its Class B product also dropped at midyear from $19.95 to the current range of $17.50 to $18.50 per square foot, full service.
Reduced rates were implemented at the free-standing Class A Doral Corporate Center project. While quotes are on a triple net basis, the full service rates translate to $24.75 per square foot, down from the $28.00+/- per square foot range quoted for most of the year.
Unchanged was the competitive below-market pricing being advertised for the Bank of America sublease – at a bargain rate of $20.00 per square foot, full service. Term is through 2011.
Trends
Unchanged for the last two quarters, concessions remain higher for those buildings with the largest vacancies, with offers for up to 12 months of rent abatement. Credit-worthy tenants willing to sign longer commitments can expect an overall average of six months of rental rate concessions – nearly double which was offered earlier in the year.
A significant number of tenants with sizable requirements in excess of 10,000 square feet are presently touring the market. While most are users with leases expiring near-term, some are out in the market up to three years prior to expiration – all of which are eager to lock in favorable rates and provisions.
Leasing activity over the last six months has been dominated by large users. Half of the 539,000 square feet of total transactions signed during this period were leases in the 20,000 square feet or greater category.
Benefitting principally from some of the largest, renewing users in the market are the Class A Waterford (TIAA-CREF) buildings. Going forward, building representatives are anticipating another successful year with 2010 pointing to encouraging signs of tenant expansions.
Unchanged for most of the year, despite discounted rates which provide an opportunity to upgrade into higher quality space, tenants are choosing to secure deals that lower costs. Prevalent throughout other submarkets, early renewals are providing users looking for immediate rental rate relief while enabling landlords longer term commitments.
While the below-market pricing in the CBD’s three under construction buildings is being leveraged outside of the Downtown/Brickell sectors, it is unlikely to have a direct impact on the parks or submarket as a whole. However, with many tenants able to renew in the CBD and Coral Gables markets at favorable rates, demand is likely to be lower for the suburban markets. In the past, the growth of the Airport market had been driven in large part to tenants looking to lower costs. This lower than historical relocation demand is likely to contribute to a slow absorption of available space. The submarket will continue to offer favorable pricing due to lower rents and free parking.