Using the latest DDA Development Activity Report, I created the chart below. It represents commercial space that has been built since 2002, current active construction, and commercial projects that have been approved but remain inactive.
Chart: Derived from the DDA Development Activity report, the chart above, which is separated by retail and office use, represents new commercial space added to the market since 2002, current construction, and approved but inactive commercial development.
As is the case with Brickell Village, 2008-09 represents a significant hike in new commercial space for the CBD market. At 803,000 sq. ft. of new construction, the Central Business District, ironically, falls short of Brickell Village’s over 1.4 million sq. ft. of new office space coming into the market.
Here’s what CBRE’s Market Pulse has to say about the office market outlook for the next two years:
Market space is expected to remain tight until 2009 when nearly 2 million square feet of new space hits the office market. The CBD has not seen new space added to the market since before 2004. Even Brickell Village saw new space since 2004. This brings into question whether Brickell Village is emerging as more of Business District than Miami’s Financial District–north of the River. Plans for Tibor Hollo’s One Bayfront Plaza, in the CBD, may add 2 million square feet of new office space to the CBD, which keeps the CBd in the game, but there haven’t been any major developments in this respect, yet.
In the meantime, expect vacancies to decline and rents to rise as indicated by the CBRE charts below:
Charts: CBRE Market Pulse; Vacancy Histories, and Rental Rate Averages
Since the 3rd Quarter of 2004, the average asking rate for rental was $24.61 per sq. ft. and is now at $28.10. Vacancies have gone from 14.1% in the 3rd quarter of 2004 to 8.4% in 2007. Let’s take a look at absorption patterns since 04′:
Chart: CBRE Completion versus Yearly Net Absorption
You will notice that 2004 ended with negative absorption–30.5 thousand square feet were vacated. 2005 was followed up with slightly over 300 thousand sq. ft. of space being filled. Since then, absorption has lingered at around 80,000 sq. ft. a year with no new inventory added to the market. For all intensive purposes,the CBD’s office market has been dull. With more new office space coming online during the next to years than the last five, both Brickell Village and the CBD office markets will be tested. If absorption versus new space is sufficiently high, then both office markets are likely to become more desirable for new commercial development.