The South Florida housing market may be uneasy, but the regional commercial real estate market is on its best pace in three years.
The pace of sales of commercial buildings in the industry’s four major categories grew over the first three quarters of the year compared to the same time period last year.
Despite persistent concerns about the value of office buildings, commercial sales of regional office buildings total almost $2 billion so far this year, according to data collected by the Miami Association of Realtors.
Almost $10 billion of South Florida commercial real estate traded hands between January and September. That’s the strongest since 2022.
“Commercial sales volume over a 3-quarter period has steadily increased since 2023 amid a challenging economic environment, indicating investors' positive long-term outlook in the Miami Metro market area,” said the realtors association report.
READ MORE: Can South Florida's commercial real estate market moderate without breaking?
The biggest deal during the quarter: a shopping center in Sunrise.
Sawgrass Square was purchased by two out-of-state investment firms in August. It was part of a larger, two-state portfolio of shopping centers anchored by Publix supermarkets. The Broward County buyouts included four other retail centers in Broward and Palm Beach counties.
The sales activity through the third quarter happened before the Federal Reserve cut its target short-term interest rate in September. Such a reduction may reduce other borrowing costs, including commercial real estate mortgages.
The most money continued to be spent in the multi-family market during the quarter. As the housing market remains tight, investors and builders have concentrated on apartment buildings in recent years. Tens of thousands of new apartments are under construction. Vacancy rates remain below the national average across the three major counties in the region. The median price per square foot for a multi-family building has jumped at least 75% since before the COVID-19 pandemic led to a rush on residential real estate in South Florida.
Two of the largest purchases in the third quarter in both Miami-Dade and Broward counties were for apartment buildings.
The office market continued to defy worries about the impact of remote work hurting demand. Law firms resigning leases helped absorb space in downtown Miami, according to data from Blanca Commercial Real Estate. More than a third of office leasing in the neighborhood last quarter was from the legal industry.
The realtors association credits buyer interest in office buildings for helping increase median sales prices per square foot, a real estate metric to compare sales trends.
“The robust demand for office space is evident in the spike in office asking rents,” the association report said. The Blanca data found Miami-Dade office rents were up between 6% to 8% from a year ago, depending on the quality of the building.
Florida's state tax on commercial leases was eliminated on Oct. 1, thanks to a new law. Landlords had been charged a 2% sales tax on commercial leases. Florida was the last state to still levy the tax until this month.
The on-again off-again volatility of import tariffs remains a concern for the industrial space in the region. A warehouse complex in Doral sold to a California buyer in September for $130 million, making it the second largest regional commercial real estate deal during the quarter. The two warehouses were built in 2024.
However, the median price per square foot for industrial space was flat to lower across the region through the third quarter of the year.
“The softness could be associated with the recent tariff increases,” noted the realtors association.
