The move by Andreessen Horowitz, the $43 billion venture capital firm that opened an office in Miami Beach just two years ago, to vacate its building led to what its broker called a bidding war among potential tenants wanting a spot in the island city's first high-end office tower to open in decades.
The firm, also known as a16z, signed a lease in 2022 at 2340 Collins Ave., a newly built boutique office building developed by Starwood Capital that also serves as the Barry Sternlicht-led real estate investment firm's new headquarters. Andreessen Horowitz's space spanned 8,300 square feet.
The demand this year from multiple potential tenants signals that even with the high-profile departure, the region is still a sought-after location for some companies. When Andreessen Horowitz took its new outpost space two years ago, it added an air of legitimacy to South Florida’s growing reputation as Wall Street South as other other big-name financial companies have also gone to South Florida such as Citadel and Thoma Bravo.
While the Andreessen Horowitz departure sparked some speculation that perhaps high-end offices in the Miami area could be losing some allure, the broker handling the Andreessen Horowitz space said that when the firm vacated its lease this year, the process involved multiple bids until the winner emerged: Bausch + Lomb, an American-Canadian corporation based in Vaughan, Ontario, that makes contact lenses, cleaners and related surgery products and pharmaceuticals.
“Sternlicht was able to create such a desirable building with all top-tier tenants. And top-tier tenants that have a base in Miami all want to be in the same building together,” Brandon Charnas, co-founder of New York-based Current Real Estate Advisors and a member of the team that helped broker a16z's lease and the deal with Bausch + Lomb, told CoStar News. “It was a bidding war.”
Both the quick filling of the space in March and a lack of competing buildings offering new, high-end office space in Miami Beach align with that characterization of the demand.
Whether Andreessen Horowitz has any future plans in Miami or the wider South Florida region remains to be seen. Representatives for the company, headquartered in Menlo Park, California, and with offices in Santa Monica, California; San Francisco; New York; and London, did not return CoStar News' requests to comment, Charnas declined to comment on any plans related to Andreessen Horowitz in South Florida, and Bausch + Lomb didn't comment.
First new tower
Designed by Gensler, 2340 Collins Ave. was completed at the end of 2021, according to Integra Investments, which partnered with Starwood Capital to develop the 144,430-square-foot building.
Starwood Capital and Starwood Property Trust occupy about half of the building's total space. Other occupants include wealth management firm Stifel and global financial services firm BTIG, CoStar data shows.
"This exclusive network in Miami of multibillionaires all took space in that building and that's what made Bausch + Lomb want that building so much," Charnas said.
Miami Beach, a 7.69-square-mile barrier island, is a little over four miles from downtown Miami. Even though it shares the same general demand dynamics with other parts of South Florida, Miami Beach "tends to be more of a boutique office submarket," said Juan Arias, CoStar's director of market analytics for South Florida. Thanks to a mix of factors, like the city's lower density and higher costs, the market is home to more family offices and high-end tenants compared to the mainland, Arias said.
"In contrast, Brickell, Downtown and Wynwood tend to have more typical office towers, with more established office-using tenants in the finance, real estate, tech and leisure/hospitality space," Arias added.
Andreessen Horowitz's departure from Miami coincides with a decline in venture capital funding that had flowed into the city at the height of the pandemic. In 2022, the city pulled in $5.5 billion in venture capital funding for the full year. This year, Miami has attracted about $1 billion during the first two quarters, according to reports from Pitchbook and the National Venture Capital Association.
Miami's 2024 figures are a stark contrast when compared to venture capital's more traditional hubs like San Francisco and New York. Both cities pulled in over $15 billion just in the second quarter.
“The high interest rate environment we are in is not conducive to continued [venture capital] expansion," said Arias. "I am not surprised by a firm, specifically in the VC world, to rethink its space strategy."
Investments from venture capital firms in blockchain, cryptocurrencies and bitcoin have taken a backseat to artificial intelligence — and Miami is not known as a hub for AI, Arias said.
Still, the Miami area "has seen some of the healthiest recovery in office visitation rates relative to other major U.S. markets,” Arias said.
Office space in the city remains in demand, and some top-tier buildings have seen lease rates hit over $100 per square foot.
Over 100 firms made commitments to expand or relocate to Miami between 2020 and 2023, according to Miami-Dade County's economic development partnership. Recently, both Citadel and Santander Bank announced plans to move forward with new office towers in Brickell. About three miles north in Wynwood, the city's trendy arts neighborhood will soon host Miami's first-ever securities trading floor at 545Wyn, a new office built by Chicago developer Sterling Bay.
"We have not seen many announcements of companies leaving Miami after expanding here during the pandemic," Arias said.