Miami-Dade County became a magnet for new-to-market firms from late 2020 to early last year. As companies gobbled up office space, real estate circles were especially giddy over two industries: financial services and tech.
Once billionaire Ken Griffin moved his Citadel and Citadel Securities’ headquarters to Miami, the city’s fate as a mecca for financial firms seemed sealed. The tech firm influx to the city led some to rechristen Miami as the “Silicon Valley of the South.”
Yet, financial and tech firms are now the top contributors to the sublease availability in Miami-Dade, according to a new CBRE report.
Financial services companies have 128,000 square feet of office space up for sublease, and tech and telecommunications firms have 112,000 square feet, according to Ilyssa Ettelman, who worked on the report. This accounts for about 37 and 34 percent of the share, respectively, of the county’s 397,000 square feet of available subleasing space, according to CBRE’s data.
Inflationary pressures and high borrowing costs are impacting these companies’ national and international business, prompting them to cut expenses where they can, including shaving off their Miami-Dade office footprint, according to brokers.
“Financial services and tech are generally international corporations. So if you are going bad everywhere except South Florida, but you are cutting back as an organization on a macro basis, South Florida is going to be impacted,” Robert Orban of Cresa said. “Who has a tech business that only serves Miami and South Florida? Nobody.”
In the rest of South Florida, financial services firms aren’t top contributors to the sublease availability. But tech and telecommunications firms accounted for the second largest share of sublease availability in Broward County and Palm Beach County. In Broward, these tenants have 139,000 square feet on the market, or 20.8 percent of the county’s 752,000 square feet of space for sublease, according to CBRE. In Palm Beach, tech firms have 104,000 square feet of space on the market or just below 19 percent of the county’s 687,000 square feet for sublease.
The remote work shift is somewhat to blame. While South Florida universities have worked to meet tech workers’ needs, the region still isn’t producing enough skilled talent, said Grant Killingsworth, a broker at CBRE. Firms are turning to hiring out-of-state, meaning many of these employees aren’t working in Miami offices.
“Also a lot of homegrown talent that is leaving to go to universities outside of South Florida is not coming back,” he said. It “has been an ongoing issue of kind of the brain drain of talent here in South Florida.”
The big picture
Overall, South Florida’s office sublease availability of 1.8 million square feet marks a nearly 15-percent increase year-over-year, CBRE’s data shows.
While this dents the storyline of South Florida’s office real estate being immune to woes plaguing other U.S. markets, experts said the growth is a normal outcome of the economic headwinds and slowed influx of businesses.
In “2021 and 2022, it was an avalanche of companies moving to South Florida. I don’t want to say it’s dried up, [but] that number has diminished,” Killingsworth said. “There’s not a sense of urgency for these organizations to move here as there has been in the past.”
While Miami-Dade experienced a drop in sublease availability by 107,000 square feet in the past year, Broward saw it increase by 85,000 square feet, a comparison between CBRE’s report from September last year and this year shows. Palm Beach experienced the biggest sublease availability growth, adding 254,000 square feet to the market.
The three submarkets of Boca Raton North, Boca Raton West, and Boca Raton East accounted for the largest share, or 78 percent of the county sublease availability, according to the report.
That’s consistent with CBRE’s finding that suburban areas, as opposed to central business districts, accounted for a larger share, or 67 percent of the tri-county region’s sublease availability.