Today it was announced that the law firm Bilzin Sumberg Baena Price & Axelrod will be vacating 80,000 sq. ft. of office space at the once iconic Wachovia office tower for the yet to be completed 1450 Brickell office tower at the end of 2010. To put that in perspective, this transaction will increase the vacancy at the 1,225,000 sq ft Wachovia Financial Center to 24% from a more respectable 17% advertised on CoStar today.
What does this mean for all of the existing office space in downtown Miami? Are tenants shopping for newer more efficient buildings? Are tenants shopping for “deals” where they are pitting the current landlord against developers who just hope to get most of their operating expenses covered by these new lease deals? In the case of the new deal at 1450 Brickell, has the developer made huge concessions just to get a coveted tenant to give the building some credibility? In any case there is certainly going to be a lot of activity in the office market in downtown and surrounding markets during the next few years while tenants are shuffled around. It is becoming increasingly apparent that Real Estate professionals, landlords, and tenants are all going to have to work very hard in this environment to preserve value, keep occupancy rates high, and be aware of market conditions especially LEED certification for buildings and LEED accreditation for individuals.
There is approximately 3 million square feet of new office space coming on line when Met II, 1450 Brickell, and Brickell Financial Center come on line. There is not any evidence that economic growth alone will bring nearly enough new tenants to South Florida to absorb all that space. The 3 buildings are boasting a LEED certification for Core and Shell meaning all 3 buildings are registered with the USGBC and are being audited to receive some level of certification. LEED certified buildings are buildings that are constructed for the long term health of the community and the occupants.
Developers at one time thought tenants would be willing to pay more for all of these benefits. There is no clear evidence in the Miami market that tenants are willing to pay more for LEED but I can see the occupancy of LEED certified buildings increasing while existing non LEED buildings will lag in occupancy rates. The answer is for existing building owners to take initiative and get their buildings at the very least energy star rated with possible upgrades to HVAC, lighting, and reflective roof material. A step further would be to get their buildings LEED-EBOM certified for existing buildings, operation and maintenance. This will give them the edge to keep current tenants, operate more efficiently, and ultimately help turn the tide on doing the “right” thing for their bottom line and their communities.
