Seven of the Nation’s Top 10 Markets for Office Rent Growth are in Florida
Amid flat sales transaction rates, increasing finance costs and high vacancies nationwide, investors may feel wary of office building purchases. But one U.S. state is a bright ray of sunshine peeking through even the dreariest of office market forecasts.
Over the last 12 months, markets in Florida have dominated office rent growth. Of the 10 U.S. markets with the highest rent growth in the last year, seven of them were in Florida, according to data from CoStar, the publisher of LoopNet. Outpacing the national average of just 0.7%, Palm Beach, Florida tops the list with 6.2% rent growth, followed by markets including Miami (5.5%), Fort Lauderdale (4.1%), Sarasota (3.9%), Melbourne (3.6%), Tampa (3.4%) and Jacksonville in 10th place at 2.8%.
Many of these markets also had vacancies below the national average of 13.2% (Sarasota’s is just 4.1%), signaling their strength and demand even as tenants give back space across other parts of the country.
For investors looking to capitalize on the Sunshine State’s rent growth, LoopNet chose five Florida cities ranked in that top 10 list and compiled a sampling of office properties for sale right now for less than $15 million. The options range from a $3.15 million converted warehouse in Miami’s Little River district to a sleek and modern, award-winning building on eight acres in Sarasota with a $15 million price tag.
$9.4M — Palm Beach, Florida
As the market with the highest rent growth in the country, Palm Beach, Florida offers office investors an opportunity for long-term income. This 30,000-square-foot building in the West Palm Beach submarket is already 94% leased and home to medical tenants that occupy 66% of the building. The anchor tenant is AmTrust Bank, and the building generates annual net operating income (NOI) of $564,149, according to documents from the listing broker. One 1,800-square-foot suite is available on the second floor.
“The 603 Village property is a uniquely attractive offering for prospective tenants as it provides a presentable alternative and affordable rents, without compromising on access to the many great amenities of West Palm Beach, as compared to exorbitant rents in the new Class A buildings downtown,” listing broker Darryn Dunn of Asset Specialists, told LoopNet in an email.
“For investors, it’s a rare opportunity to dip their toes into a booming office market and purchase a fully stabilized property with a historically high occupancy rate and leased to an impressive list of local and national credit tenants," he continued.
West Palm Beach, which Dunn said many are calling the “Wall Street of the South,” has one of the highest shares of both sales and leasing activity among submarkets in the city, according to data from CoStar.
The building is less than one mile from Interstate 95 and is walkable to several retail and restaurant locations. The building would represent a 6% capitalization rate at its list price, and the brokerage noted that its “generous commercial zoning” could give an owner flexibility for other future uses.
$3.15M — Miami
The HQ at Little River, 271 NE 69th Street
“It’s a warehouse at its core, but it was renovated so tastefully that it's ideal for a modern operation. It's for somebody that doesn't want to be in a traditional office space, somebody that is going to be a little bit more on the creative side or has a dynamic use,” said Mateo Romero, listing broker with Gridline Properties. “And this property [reflects] what’s going on in this submarket, which is close to some of Miami's best residential neighborhoods where you have high net worth individuals and successful people and companies.”
Miami’s Little River neighborhood is about a 15-minute drive to the city’s downtown and is an up-and-coming area for art, culture and renovated buildings undergoing significant development. Small, urban warehouse buildings such as this one are becoming a highly-sought-after rarity in the area, said Romero.
“These [existing] warehouses are an asset type that’s being preyed upon, because they're not really building any more of them, and the supply of what they're building is just not anywhere near to the level of demand that is out there,” Romero said. “As these neighborhoods grow, typical warehouse users are looking [further out from the urban core], and any new warehouses in the development pipeline are huge, around 100,000 square feet. The small ones closer to downtown are being converted into multifamily, offices for creative users, cafés or restaurants.”
The building is also located in an opportunity zone, providing investors with tax incentives.
$15M — Sarasota, Florida
A winner of the "Design Award of Excellence" from the Florida chapter of the American Institute of Architects, this 23,000-square-foot building presents investors with the opportunity to own a striking building with floor-to-ceiling glass windows rising 25 feet.
The modern structure packs a lot of function into two floors, featuring a reception area, zen room, numerous conference rooms, a large staff break room, 15 private executive offices, six administrative assistant stations, two huddle rooms, a boardroom with a kitchen and bar, and an executive office with 360-degree views on the second story bridge.
“The two-story office building was designed to maintain the views and natural light from the numerous large windows overlooking the beautifully landscaped grounds, creating a garden-like work setting,” said the listing brokerage.
Adding to its appeal, the deal is also a land grab — the eight-acre property includes six acres of wooded scenic land, offering future development opportunities on one of the last sites available for development on Fruitville Road East of Interstate 75. The land has zoning designated for a commercial center.
$12M — Tampa
Offering instant revenue, this 26,000-square-foot office building and land deal combo is currently occupied by the federal government through July 2024, with a monthly rental income of $67,000.
The property is located in the Westshore Business District, which is the metro’s largest commercial office district "that outpaces both downtown Tampa and downtown St. Petersburg in terms of pricing, amenities and everything along those lines,” said Joshua Sims, listing broker with Vector Realty. “So, it’s a really good place to be close to the airport and close to the heart of where business is done in Tampa.”
It offers future possibilities as well — the $12 million purchase price includes 2.6 acres of developable land on the property; however, the building and land can be sold separately for $8.5 million and $3.5 million, respectively.
“It’s a great property for investment on the redevelopment side. There are a lot of different potential uses for [the land] within the office and industrial space, as well as potentially hotels and other specialty uses,” said Sims. He noted that for investors interested in building a hotel specifically, the land has “some special accessory zoning requirements, but [the city] has historically approved other hotels within that same zoning plan.”
$4.5M — Jacksonville, Florida
900 Building, 900 N University Blvd.
For investors who don’t shy away from a challenge, this 76,000-square-foot office across the river from downtown Jacksonville is ripe for revenue growth. Currently unoccupied, the seven-story building’s sale price clocks in at $59 per square foot. The building is LEED Silver certified, has had $800,000 worth of improvements over the past six years, and the top three floors have upgraded common areas.
Jacksonville has had positive absorption rates over the past 12 months, and its vacancy rate sits at 8.9%, below the national average of 13.2%. “Office leasing fundamentals in Jacksonville are sound and deals are still getting done even though headwinds to office demand are becoming more prevalent,” noted an August 2023 CoStar report on the market. “Office leasing demand remains healthy, and Jacksonville has outperformed several peer markets over the last year. While Jacksonville is contending with an elevated rate of sublease availability … it has far less than the Orlando, Tampa and Fort Lauderdale areas. Jacksonville has the second lowest amount of total sublease space among Florida's six primary office markets, just behind Miami.”
Five minutes from both Jacksonville University and downtown Jacksonville, “the building is also surrounded by a robust potential workforce and client base of more than 187,000 people in a five-mile radius,” said the listing brokerage. “The Town & Country shopping center, which also includes 88 planned market-rate apartments, is directly across University Boulevard.”
