When Rebeka Ramos read the new lease terms for her company’s offices in Coconut Grove, she was outraged by what she called an “astronomical” rent increase.
“Overnight, the rate went from $42 to $75 a square foot – up roughly 79%,” she said.
The new terms for the office space near Oak Avenue and Mary Street, proposed last year, not only angered Ramos, but surprised her, too.
As she explained, “We had been there a long time and had stayed on through COVID. We never complained. We never made a late payment. We were very loyal.”
Ramos’s company, Dawson & Associates, had been providing accounting services in the Grove for over 30 years. The neighborhood “felt like home,” she said, adding that suddenly, “I could see from the numbers that the only choice was to move.”
The company engaged Bert Checa, a commercial real estate veteran, to guide its search for new space. The challenge was familiar.
“The Grove is the tightest office space market in the Miami area,” Checa said. “Some of my clients have been priced out.”
The cost of office space in Coconut Grove has been rising for several years now – a market trend that is gaining momentum. The neighborhood’s shrinking vacancy rate, Checa said, is what’s driving the increase.
He and other industry experts estimate that rate at around 3%. “That’s the rate of Class A and Class B office space combined,” he said, noting that the vacancy rate for Class A space alone is even lower.
According to Checa’s recent calculations, comparable space in Brickell has a vacancy rate of 13%, and in Coral Gables, where Dawson and Associates signed a new lease, 15%. Those rates compare to a national vacancy rate that hovers near 20%, up from 7% prior to COVID-19.
Grove history
The shortage of available office space in Coconut Grove is due partly to the neighborhood’s history.
Long viewed as a residential and tourist community, the Grove has traditionally attracted developers interested in building housing, retail stores, and restaurants.
Now, that focus is shifting, as the 3% vacancy rate has sent a strong signal to developers that there is money to be made in Grove office projects, too.
Perhaps the most ambitious plan unveiled so far is the massive, mixed-use Ziggurat, which will include 100,000 square feet of Class A office space, 19 condominiums and 40,000 square feet of retail space. Completion is scheduled for 2027.
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Other projects on the drawing board include 3443 Grand on Grand Avenue in the West Grove with 80,000 square feet of Class A office space, and the Vizcaya Capital Building at 2871 Oak Avenue with 40,000 square feet.
Older developments – notably Cocowalk and Mayfair in the Grove – are contributing to that shift as well. Cocowalk’s recent renovation, finished in 2021, added 86,000 square feet of new Class A office space overlooking its shopping plaza.
Then came Mayfair in the Grove, located just down the street.
Designed by esteemed Miami architect Kenneth Treister, Mayfair was launched in 1979 as a retail project with tenants that included exclusive designer shops from across the Atlantic such as Valentino, Yves St. Laurent, and Pierre Balmain.
Since then, Mayfair has had its ups and downs, but appears to be on an upswing now, thanks to a shift from retail to office space.
Earlier this year the owner, Whalou Properties, completed a $30 million renovation of the property, which spans close to 300,000 square feet. The renovation preserved Treister’s architectural approach, but converted most of the retail space to offices and restaurants.
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According to Chris Dekker, senior vice president at Mayfair Real Estate Advisors, over 90% of the office space is now leased, although that number will drop when Sony Music Entertainment moves to Wynwood next year.
Dekker said that the 28,000 square feet of space that Sony occupies represents 10% of Mayfair’s rentable area. “As far as vacancies go, this is a rather large vacancy for Coconut Grove, but we’re optimistic about finding the right tenant to fill it,” he wrote in an email.
Domino effect
Today, asking rates at Cocowalk and Mayfair can top $70 a square foot, levels unheard of locally six years ago. Industry experts predict further increases in pricing.
That’s because a strong migration of out-of-state companies to Miami, a trend which began during COVID-19, is expected to continue. That migration is now having what brokers describe as a domino effect on other areas, including Coconut Grove.
The domino effect began as newcomers settled into Brickell skyscrapers, a favored destination for out-of-state companies seeking sleek, modern architecture. Brickell rents have doubled as a result during the past four years, according to Checa.
Those higher rents in turn are displacing older, long-term Brickell tenants who – frustrated by traffic, parking, multiple elevator rides, and other hassles associated with a Brickell address – are seeking more relaxed locations.
Industry insiders say that for some companies, swapping office space in high-rise neighborhoods like Brickell in favor of locations such as the Grove is an easy choice, as many of those businesses are run by executives who live in the Grove and nearby Coral Gables, Pinecrest and South Miami.
For these decision-makers, relocating to Coconut Grove is often viewed as ideal. As Michael Comras, president and CEO of the brokerage and investment firm that bears his name, explained, “People don’t like to commute… It’s a sacrifice of family time.” The idea, he emphasized, is to locate offices where you can “get your lifestyle needs met.”
That’s exactly who Comras, a former investor in Cocowalk, had in mind when he launched The Canopy. The 33,000 square foot office building is located on Grand Avenue across the street from Cocowalk, steps away from the Pura Vida cafe.
The building’s first leases were signed by business owners who live nearby, he said, who were seeking something different than “one of these big glass towers where they’ve got to go deal with multiple elevators and a million people.”
The Canopy is now undergoing final touches on its third floor, which features a private terrace with a view. Comras declined to specify pricing, but confirmed that rates hover near $100 a square foot – “definitely at the higher end of the market,” he said.
'Boutique' is booming
Brokers say another factor pushing demand for office space in the Grove is hybrid work arrangements that make huge swaths of office space unnecessary. This trend has clients scavenging the Grove for smaller, “boutique” spaces that can be customized.
An example is Lemartec Corporation, a design-build construction firm which transitioned to a hybrid work schedule in the early 20’s, a change which made its 20,000 square feet of space in Kendall obsolete.
A search across metro Miami landed Lemartec at Mayfair in the Grove. Here, its custom design includes an open kitchen anchored by sweeping stone counters where employees and visitors can congregate. Sunlight pours in through floor to ceiling windows, illuminating a modern floor plan with high ceilings and few walls.
Kurt Dyer, vice president of operations, said the fresh environment is a radical change from their Kendall location, which had “narrow hallways… and lots of cubbies.”
Today, he said, “when employees look outside, they are inspired… You are in the middle of activity and energy, and that is transferable.”
“Boutique” is exactly how Ryan Holzman describes Ziggurat, planned for completion in 2027. Holzman, a sales veteran at Cushman & Wakefield, said the project will set a new benchmark for office space. “It’s the most significant redevelopment in the Grove since the 1980s, when they completed the Mayfair,” he claimed.
Pros and cons
Like any surge in development, the growth in office space has both advocates and critics. Supporters say that the businesses moving to Coconut Grove help diversify the economy with new jobs. They also point out that the additional workforce means more year-round patrons at Grove stores and restaurants, making these retailers less dependent on tourist dollars.
Detractors say the Grove’s infrastructure can’t handle the projects now on the table.
“We are approaching a point where they’ll need to widen Grand Avenue,” said Jamilla Stephens, second vice president of HOATA, a West Grove community group that represents both home owners and residential tenants. “That would really change the character of the Grove,” she lamented.
Ned Murray, associate director of the Metropolitan Center at FIU, believes that a longer-term issue is the possibility of over-development.
He said that the lack of affordable housing has workers fleeing Miami, a trend that could trigger a recession. While it might seem unlikely now, he said, “The worst-case scenario is that we get stuff built and it sits there, vacant.”
A more immediate issue to some locals is, will the additional supply created by new developments soften pricing anytime soon? Many industry insiders predict that, for now, the answer is no.
Donna Abood, vice chairman at the tenant advisory firm, Savills Corporate Real Estate, explained, “As long as the out-of-state business migration to Miami continues, there will be upward pressure on rental rates.”
Meanwhile, Ramos and her colleagues at Dawson & Associates, forced out of Coconut Grove by skyrocketing rents, have no regrets about their move.
“Coral Gables is great. We’re a block from Miracle Mile with double the space for the same price,” she said.
