🎢 Rental Roller Coaster Ride

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Happy Saturday Highest & Best! Today we’re talking down, out and up.

Here’s the rundown:

📉 Florida rents are falling

🫣 Two more Miami office foreclosures

🚫 City of Stuart rejects the Brightline train

🍰 A Cheesecake Factory trade

Let’s get to it!

Retreat of the Florida Rental

The air is deflating from Florida’s high-flying rental market.

Cities in the Sunshine State saw some of the nation’s largest rent declines last month — fueled by a construction boom that’s saturating the market with a record supply of new apartments.

👀 In Miami, rents in August fell 3.8% from a year earlier to a median of $2,404 per month, according to a report by Redfin.

📉 Tampa saw rents decline 5.8% to a median of $1,750. In Orlando, they fell 4.1% to $1,762.

😲 Jacksonville, however, took the cake: Rents there dropped 13% in August to a median $1,478. It just so happens that last year there were 6,156 newly built apartments added to the housing market— the biggest increase in a decade, according to Yardi Matrix. Oh, and there are an additional 15,333 units under construction, based on a tally from early this year.

🤔 Compare these local rent declines to the U.S. overall — where median rents climbed by 0.9%, which is actually the most in over a year, Redfin said.

🌊 The wave of new apartment construction is not a past tense thing. It’s still ongoing— especially in the South Florida counties of Miami-Dade, Broward and Palm Beach.

By the end of this year, 23,863 newly built rental apartments will be added to the South Florida market — the most ever in data going back to 2002.

🔍To put that in perspective: the previous record was set in 2021, when 14,339 new units were delivered (nearly 10,000 fewer than are forecast for this year!), according to a report by commercial real estate firm Berkadia.

See Redfin’s August rental report here.

⏪ Catch up on recent Highest & Best issues:

• Office Ditch, Mansion Switch, Sept. 7, 2024

• We Gilt This City, August 30, 2024

• The Old College Try!, August 23, 2024

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A Pair of Miami Office Foreclosures

Not all good things come in pairs.

The lender to two downtown Miami office buildings is seeking to foreclose on both after the owner failed to repay a mortgage that came due in June — and is behind on more than $1.2 million in property taxes.

The buildings — a 25-story tower at 44 West Flagler St. and a 12-story property at 200 SE 1st St — were purchased in 2022 for $56.7 million, according to real estate intel site Vizzda. The buyer (an entity connected to Deerfield Beach’s Stonerock Capital Partners), took out a $58 million loan to complete that deal.

But in January, the borrower stopped making monthly payments on the debt and did not repay it when it came due June 1, according to a foreclosure lawsuit filed by the lender in Miami and flagged by Vizzda.

The lender, Atlanta-based Ardent Companies, said in legal filings that it’s owed $49.5 million in remaining principal, plus interest and fees.

Both properties — the taller one built in 1974, the other in 1958 — appear to have empty space available for lease. At 44 West Flagler, formerly known as Courthouse Tower, a penthouse suite space can be leased at $44 per square foot, according to LoopNet. At 200 SE 1st St., vacant office space can be leased at between $39 and $42 per foot.

🤔 Older, so-called “Class B” offices, don’t carry the same allure to corporate re-locators that Miami’s glimmering new office towers do.

In the second quarter, more Class B space in downtown Miami was vacated than filled, according to Colliers. Compare that to prime, Class A space in the same neighborhood. For that, 17,777 more square feet were leased than vacated in the same time period.

🔁 ALSO: See our previous coverage of South Florida office foreclosure filings. A downtown Fort Lauderdale story is here. And a brand new office building facing foreclosure in Miami’s Wynwood neighborhood is here.

No Brightline for You!

Brightline, the high speed train that runs between Miami and Orlando, announced in March that it selected the city of Stuart, Florida as the site of its newest passenger station.

This week Stuart offered a reply: No thanks.

Stuart commissioners rescinded two agreements with Brightline on Monday, killing the 6-month-old plan on account that the city, in addition to shouldering half the station cost, could be on the hook for an unspecified amount of extra expenses.

"It's a bad deal for taxpayers," Commissioner Christopher Collins said at the meeting, where members of the public were dressed in Brightline’s signature yellow, in support of the station plan.

The city voted 3-2 to rescind a ground lease agreement with Brightline, that would have allowed the company to lease 2.35 acres of public land for $1 per year over 80 years. The city also backed out of a commitment to contribute up to $30 million toward building a station and parking garage.

Brightline had previously selected Stuart as the site of its seventh Florida station, expected to be complete by 2026 at an estimated cost of $60 million. The train line had evaluated five proposals in Martin and St. Lucie Counties, along Florida’s Treasure Coast, a logical stop between existing stations in West Palm Beach and Orlando.

The reversal by Stuart has ignited a new round of Brightline boosterism in nearby Fort Pierce, where officials, whose first bid for a station was unsuccessful — they held what seems like a group therapy session to move past the rejection — may try a second time to lure Brightline to its downtown.

A Hefty Slice of Cheesecake

A 6-story Boca Raton office building — with a Cheesecake Factory restaurant attached — sold last week for $32 million.

That price is nearly three times the $13.25 million that the seller paid for it back in 2001.

Here’s what the new owners, Schmier Property Group, got for that price:

A nearly 72,000-square-foot office building, built in 1980, that counts Flagstar Bank as a tenant. The property, at 5550 and 5530 Glades Rd., sits on 6.6 acres near the entrance to I-95, and has a 14,000-square-foot restaurant that’s leased to the (aforementioned) Cheesecake Factory.

The office complex, named Boca Financial Plaza, was recently seeking tenants at $26 per square foot — considerably less than the average asking rents for prime office space in East Boca, which was $44.20 per foot in the second quarter, according to Colliers.

East Boca Raton’s office market had among the highest vacancy rates in Palm Beach County, at 16% for Class A properties in the second quarter.

That’s it for today!

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