The emergence of challenges surrounding the construction of One Brickell City Centre, poised to be Miami’s tallest corporate skyscraper at approximately 1,000 feet, reflects the gradual cooling of the city’s once-booming office real estate market. Related Cos., a New York-based developer, and Swire Properties, an international firm founded by the British Swire family, find themselves in a struggle to secure a key tenant nearly a year after breaking ground. Sources familiar with the situation indicate that Related is in the process of restructuring its agreement with Swire, the landowner. Reports suggest that Swire has even contemplated selling the 1.55-acre downtown Miami site, as revealed in a document reviewed by The Wall Street Journal. However, Swire has clarified that while they regularly assess various options for their development sites, the One Brickell City Centre site is currently not up for sale. Related has affirmed its ongoing collaboration with Swire despite the challenges.
The U.S. office market has faced pressures from rising interest rates and the shift to hybrid work models, impacting cities like Miami, which previously weathered such challenges better due to corporate relocations and limited office space availability. However, recent data from commercial real estate services firm JLL indicates a 25% decrease in leasing activity in the Miami office market last year compared to 2022. Additionally, sublease vacancies surged by 66%, signaling existing tenants’ desires to downsize their office footprints. Steven Hurwitz of JLL notes, “There’s a slowdown of new-to-market activity. We’re sort of at a new inflection point.” Juan Arias, director of market analytics for CoStar in South Florida, highlights that office construction starts in Miami have decelerated following a peak in the second quarter of 2023. Factors such as higher interest rates, increased construction costs, and subdued leasing activity in a softer economic climate have contributed to this slowdown. Miami, once primarily focused on leisure and tourism, is striving to evolve into a thriving business and financial hub. While the city has attracted financial and tech firms from various regions, it also grapples with challenges such as soaring property prices and limited educational infrastructure for new residents. Despite these hurdles, Miami’s office market remains robust compared to many U.S. cities. It registered the highest annual office rent growth last year and maintained a low office vacancy rate of 8.4%.
Related chairman Stephen Ross, known for his interest in South Florida projects, has emphasized One Brickell City Centre’s significance. The tower, with 68 floors spanning 1.5 million square feet, is slated for completion in 2028. Ross aimed to secure prominent tenants, including discussions with Ken Griffin of Citadel regarding potential tenancy, although recent developments suggest Griffin’s firm is pursuing other ventures. While the partnership for One Brickell City Centre’s anchor tenancy did not materialize, both Ross and Griffin have hinted at future collaborations. Their joint statement expresses eagerness to partner on initiatives beneficial to the community, indicating potential future endeavors despite the current challenges facing this high-profile project.