Investors are showing love — but little money — for South Florida’s office market
Investors stayed on the sidelines of South Florida’s office market during the second quarter 2020 as they to measure the pandemic’s impact. But that’s changing.
Office sales in Miami-Dade and Broward counties fell to rock bottom during the second quarter of 2020, according to data from commercial real estate firm CBRE. That’s a drop from the second quarter 2019, when 10 buildings were sold — seven in Miami-Dade and three in Broward.
“Most investors said they don’t want to sell now because prices are down; buyers can’t afford to pay more,” said Christian Lee, vice chairman of CBRE South Florida Capital Markets. “It’s not that investors don’t want to invest. It’s just about make those concerns between buyers and sellers go away.”
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The number of transactions has increased slightly in the third quarter. “Whereas we had five or seven deals per month above $20 million,” Lee said, “Now we have about one per month.”
But the deals have been in the pipeline for months, Lee said. He said, “We’re not going to see a lot of new activity because it just doesn’t happen in a declining environment.”
Before office investors are ready to jump back into the market, three factors will need to change before office investors are ready to buy, Lee said: An improvement in commercial lending loan-to-value ratios; price adjustments by sellers and clarity on how the pandemic will impact office supply, demand, pricing, and absorption rates.
While few investors may be willing to pull the trigger, calls and emails are still coming in, Lee said.Potential buyers — private, offshore and institutional investors — from California, Canada, Central America, Europe and the Middle East are drawn by South Florida’s population growth and looking for deals.
About 950 people per day moved to Florida in 2019, with 48% of those new arrivals coming to Miami-Dade, Broward and Palm Beach, according to the 2020 ISG Miami World report.
“The dynamics are good here,” Lee said. “The population is down or flat in a lot of states. Here the population is growing. Combine that with South Florida rising employment numbers and office use, that’s great for a long-term investor.”
This story was originally published July 24, 2020 at 7:00 AM.
