The quality of office space has become a critical front in the battle against remote work, with occupiers and landlords spending tens of millions of dollars to win this battle with luxurious, desirable workspaces.
Interior work at 830 Brickell, Miami’s much-anticipated office tower, is costing an average of $400 per square foot, according to Brian Gale, vice chairman of Cushman & Wakefield, which is leasing space in the building. Interior work in the building cost $45 per square foot.
This isn’t just an issue for brand new towers: Tenants at 701 Brickell Avenue that Gale worked with spent more than $600 per square foot to finalize their space, he said Thursday. Biznow‘s South Florida Office and Workplace Summit was held in the building.
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Bisnow/Matt Wasilewski
Stefana Simic of AEI Spaces, Brian Gale of Cushman & Wakefield, Charles Russo of Nuveen Real Estate, Gigi Alvarez of G Alvarez Studio and Anthony Iandoli of JRM attended Bisnow’s South Florida Office and Workplace Summit on Thursday.
Companies are pushing the boundaries of what office space can be, and in the process, revitalizing an entire ecosystem, from architects to furniture manufacturers.
“The flight to quality is very real. [Tenants] “People will literally pay almost anything to get what they want,” Gale said. “The evolution of the office world is almost like a mix of the hotel market and the condo market, as we try to bring people back from home to the office.”
Demand for quality spaces is not just affecting the interiors but also the physical structure, forcing developers to change their design standards to ensure they can secure sufficient upfront leasing and get off the ground.
Expensive amenities that were once considered unnecessary are now being embraced as a point of differentiation – a marketing tool that changes how prospective tenants view your property.
“The idea of incorporating biophilic design to create more flexible living is not new,” says Stefana Simic, partner at Miami-based architecture and design firm AEI Space. “Architects and designers have been proposing these ideas for decades, but they’ve always been value-engineered out.”
“These companies are now investing in luxury real estate with amenities they hadn’t considered before,” she added. “It’s a survival strategy.”
The strategy isn’t just aimed at rank-and-file employees at big companies: The many wealthy executives who have flocked to Miami during the pandemic are looking to live closer to their offices and work in spaces that fit the vision that drew them to Florida from cities like New York and Chicago.
Executives also experienced working from home during lockdown and are now demanding similar spaces when they return to the workplace, Gayle said.
“They want to sit in their beautiful homes and not come into an office,” says Gayle, one of Miami’s leading office brokers. “They’re not going to come back to a run-of-the-mill office with low ceilings and small windows. They definitely won’t.”
The features that this demand for attractive spaces translates into vary widely: rooftop gardens, outdoor green spaces, tenant lounges and ground-floor restaurants are popular, but golf simulators, pet daycare and curated exhibits of expensive art are also not uncommon.
The post-pandemic world will be about connection and wellness.
“Anything that’s wellness-oriented, experiential, or allows for large gatherings is beneficial,” says Charles Russo, Southeast Region Workplace Manager for Nuveen Real Estate, “as well as features that create Instagram-worthy moments and ensure projects are always in the mix in some way.”
Russo pointed to Komodo, a Southeast Asian hotspot at 801 Brickell, as the type of amenity that will keep the building in people’s minds. Nuveen sold the property in October for $250 million, the most expensive single office asset to trade in Miami last year.
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Bisnow/Matt Wasilewski
WeWork’s Nicholas DeMarinis, Mindspace’s Gianni Piccoletti, Deco Capital’s Bradley Colmer, Urban-X Group’s Andrew Hellinger, and Life Time Work’s Molly Walsh discuss how office space is changing to attract tenants.
Property owners in trendy areas like Miami Beach can capitalize on the surrounding environment to add curb appeal to their projects by using nearby businesses as an extension of amenities. In less popular areas, landlords must instead focus on creating their own place.
The latter route is the one Andrew Hellinger, co-president of Urban-X Group, had to take to site Miami River Landing Shops & Residences, a 2.2 million-square-foot property with 800 feet of riverfront access, 528 apartments and 346,000 square feet of retail space.
When the project began in 2011, an AMC movie theater was supposed to occupy the top three floors, but after the theater chain’s stock price plummeted and its future became uncertain, Urban X opted for 118,000 square feet of office space instead.
The retail and apartments at Miami River Landing were 97% leased in March, but Urban-X is still looking for tenants to lease office space.
Urban-X continues to invest in Riverwalk upgrades and access to diverse retail for prospective tenants. But Hellinger said River Landing’s nearly 40,000-square-foot floorplates are hard to divide and difficult to lease in the current market. More than half of Miami’s 2023 leasing activity is for deals under 10,000 square feet, according to Avison Young.
“We’ve struggled because, frankly, we’ve been told we’re in the middle,” he said. “We’re located between Brickell and Wynwood, between Biscayne and the Blue Lagoon and Doral. We’re hopeful that enough people will visit our property that it becomes a destination where brokers say, ‘Hey, you’ve created a great lifestyle for employers and employees.'”
In Miami Beach, Deco Capital has leveraged the area’s inherent strengths to increase leasing rates for 60,000 square feet of office space at Eighteen Sunset to 80% ahead of delivery next quarter.
Eighteen Sunset, at 1752 Bay Road, also includes 17,000 square feet of ground-floor restaurant space and a rooftop pool deck where luxury watch brand Audemars Piguet has signed a deal to open a 12,000-square-foot retail lounge.
Decco CEO Bradley Colmar said the pool has become a selling point for tenants, who are already paying a high price for property surrounded by Miami Beach’s retail and waterfront, so Decco is focused on coming up with a plan for the property that will revitalize the rooftop space while also giving tenants a luxurious place to hold meetings.
The project was originally planned as apartments, but by converting it to offices while keeping roughly the same amenity package, Deco was able to find tenants and drive up rates, Colmar said.
“By preserving the residential component of the building for office use, we’ve been able to achieve probably the highest net effective rent on the East Coast of the United States south of New York City,” he said. “We’re very pleased with that.”