While the U.S. office market at large is contending with a number of headwinds hurting rent growth, Florida’s primary office markets are excelling. South Florida’s three markets lead the state, each recording positive rent growth greater than 4% year over year, followed by Tampa, Jacksonville and Orlando.

Yet, while Florida as a whole is performing well, not all markets in the state are performing equally. The vacancy rate in all six primary Florida markets is comparable and hovering between 8% and 10%, but there is a substantial difference as it relates to office demand in the last year, particularly within higher-tier four- and five-star inventory.

Miami and Fort Lauderdale have experienced the highest absorption levels, defined as the change in number of square feet occupied, collectively totaling more than 1.5 million square feet in the last 12 months. Orlando, on the other hand, is the only large Florida market to have negative net absorption during that same period, totaling negative 290,000 square feet. Unsurprisingly, the pace of rent growth within that higher tier of office space is slowest in Orlando at 1.7%, significantly behind the pace of Miami at 6.8% and Palm Beach at 4.6% as of August 2023.

Office landlords across the state contending with lower office occupancies have largely been holding steady on their rents and, in many cases, have been increasing them despite a decline in overall deal volume. Rather than lowering rents, many have opted to increase the concessions package they are offering tenants, often by offering free rent for a certain number of months or higher tenant improvement allowances.

In the Orlando market, many tenants that postponed their longer-term office strategies earlier in the pandemic have since reentered the market, and there has been a corresponding uptick in rents. Still, despite the increase in face rents, owners have shown a willingness to compete at the negotiating table, although they often require a minimum of a three- to five-year lease before opening serious discussions about incentives. When they do, rent abatement is often offered at one month per year of lease term, and some landlords are dropping annual escalations from 3% to 2.5% on longer-term deals.

Looking forward, however, lingering pressures affecting office occupancies and a projected weakening in demand may cause growth to decelerate at a faster pace throughout Florida. Tampa is projected to be the statewide leader for office rent growth over the next four years with an annualized growth rate of 0.4%, followed by Fort Lauderdale, Jacksonville and Miami, all of which will experience minimal to flat growth in that time. Orlando and Palm Beach are expected to experience negative rent change during the same period, although it should be limited.