The WFH Narrative Died in South Florida, Here's What Actually Happened
South Florida office didn't collapse post-pandemic. It bifurcated. Class A absorption stayed positive 2023-2025 while Class B sublease inventory piled up and Class C started getting floated as conversion candidates. If you're still pricing office deals on pre-2020 cap rate comps, you're underwriting the wrong asset class. The institutional bid in 2026 is concentrated in two narrow lanes: newly-delivered Class A trophy product in Brickell and downtown West Palm Beach, and medical office anywhere demographics justify it. Everything else trades at a basis discount or doesn't trade at all.
The kicker in South Florida office right now is that the market looks resilient on the surface, financial services relocations from the Northeast kept Class A leasing active, headline vacancy in Palm Beach County and Broward stayed below national averages, and asking rents on new product hit all-time highs in some submarkets. But that headline number hides the fact that Class B landlords are competing with their own tenants' sublease space, and Class C is functionally obsolete in most corridors unless you're buying it for the land.
If you're looking at office in 2026, the question isn't "is office dead", it's "which office, in which submarket, with what tenant credit and what remaining lease term." The dispersion between winners and losers is wider than it's ever been, and the buyers who understand that are the ones getting deals done at numbers that actually make sense.
Class A: The Flight-to-Quality Trade is Real
Class A office in South Florida, particularly Brickell, downtown West Palm Beach, and Fort Lauderdale's financial district, absorbed the narrative that office is dead and said "not here." Financial services firms relocating from New York, Connecticut, and New Jersey took blocks of space in new trophy product, and those leases are coming in at premium rents with creditworthy tenants on 7-10 year terms. Asking rents in Brickell are pushing $70-$80/SF NNN on newly-delivered towers. Downtown West Palm saw multiple build-to-suits deliver 2023-2024 for financial tenants who wanted ownership-quality space without the basis risk of buying.
The institutional bid for stabilized Class A is still there, insurance companies, REITs, and family offices are underwriting 5.5-6.5% going-in caps on fully-leased trophy product with investment-grade credit. That's compressed from 2019, not expanded. The reason: replacement cost is $500-$600/SF all-in for new Class A construction in these markets, and a stabilized asset trading at a 6 cap with 7 years of weighted average lease term (WALT) to credit tenants prices at a basis discount to rebuild. If you can buy an existing trophy tower at $400-$450/SF, you're buying it right.
The risk in Class A isn't tenant flight, it's that the supply pipeline in Brickell and downtown WPB is still delivering new product, and if absorption slows even marginally, asking rents on new leases could flatten or tick down. But that's a 2027-2028 risk, not a 2026 risk. Right now, if you have a stabilized Class A asset with quality tenants and term, you can move it at a rational number.
Class B: Sublease Overhang is the Unpriced Risk
Class B office is where the market is lying to you. Headline vacancy looks manageable, Palm Beach County Class B is quoted around 12-14% direct vacancy depending on the submarket, but that number doesn't count sublease inventory, and sublease inventory is the real problem. Tenants who took 10,000-20,000 SF in Class B buildings pre-pandemic, locked into 2027-2029 expirations, and then went hybrid are now trying to dump 30-50% of their space on the sublease market at discounts to direct asking rents. That sublease space competes directly with the landlord's own vacant inventory, and it comes at lower effective rents because the sublessor is eating part of the basis.
If you're underwriting a Class B office acquisition in 2026, the first question is: how much sublease inventory is in the building, and how much is in the submarket? If the building is 85% occupied on paper but 15,000 SF of that is subleased out by tenants trying to reduce footprint, your effective occupancy for renewal risk purposes is lower than the rent roll shows. And when those subleases roll in 2028-2029, you're not negotiating a renewal with the original tenant, you're negotiating a renewal with the subtenant, who has no lease obligation beyond their sublease term and will walk if the economics don't work.
The value-add play in Class B is basis-driven: buy a 75-80% occupied building at a 9-10% cap, spend $15-$25/SF on cosmetic upgrades (lobbies, common areas, spec suites), reposition it as "creative office" or "boutique professional," and lease it to smaller tenants (law firms, wealth management, healthcare admin) who want better finish than Class C but can't pay Class A rents. That trade works if your basis is $150-$200/SF or less. If you're paying $250-$300/SF for Class B, you're fighting the market, those buildings don't have the bones to justify the capex required to compete with new Class A, and they don't have the basis to justify the hold period required to stabilize.
Class C: Creative Conversion or Dead Basis
Class C office in South Florida is either a land play or it's unsellable. Buildings with 1980s-era systems, no parking ratio to support modern tenants, and suburban locations that lost their anchor employers are trading at $75-$100/SF if they trade at all. Some of that inventory is getting floated as conversion candidates, residential, self-storage, medical, but the numbers on those conversions are brutal unless you can buy the building at effective land value and the zoning supports the conversion without a multi-year entitlement fight.
The exception: single-tenant Class C office with credit tenants on absolute NNN leases. If you can buy a 15,000 SF government-leased building in a tertiary Palm Beach County location at a 7.5% cap with 10 years of term remaining, that's a bond proxy, and there's a buyer for it. But multi-tenant Class C with mom-and-pop tenant rosters and 3-5 year remaining term? That's a basis trap. You're buying it hoping to reposition, and unless you have a very specific plan for the capex and the tenant mix, you're going to own a 50% occupied building for three years while the market decides what it wants to do with that product.
Medical Office: The Institutional Bid Depth is Real
Medical office is the one office subtype in South Florida where the institutional bid is deeper than it's ever been. Demographics are on your side, Florida's 65+ population is growing 3-4% annually, healthcare utilization is recession-resistant, and physicians need proximity to hospital systems, which anchors demand in specific corridors. Medical office buildings (MOBs) on-campus or within a mile of a major hospital system (Boca Raton Regional, Cleveland Clinic, Baptist Health, Memorial Healthcare) are trading at 5.5-6.5% caps for stabilized assets with credit tenants, and that pricing has held firm through 2023-2025 even as general office cap rates expanded.
The reason institutional buyers love MOBs: lease structures are functionally NNN (tenants pay CAM, utilities, and often their own build-out), credit quality is strong (hospital systems, physician groups, outpatient surgery centers), and renewals are sticky because physicians don't move unless forced. A physician group that's been in the same 5,000 SF suite for 12 years with built-out exam rooms, imaging, and patient records isn't moving to save $2/SF on rent. That stickiness reduces your renewal risk, and it justifies tighter cap rates.
If you're buying MOBs in 2026, the due diligence is different than general office. You're underwriting tenant mix (percentage hospital-affiliated vs independent physicians), remaining lease term, and proximity to the anchor hospital. An on-campus MOB with 8 years WALT and 90% hospital-system tenants trades 100-150 bps tighter than an off-campus MOB with independent physician groups and 4 years WALT. Both are institutional-grade, but the pricing reflects the credit quality and renewal risk.
The other tailwind for MOBs: new supply is constrained. It's very difficult to develop medical office without a hospital-system partnership or a pre-leased anchor tenant, and most health systems are doing build-to-suits rather than spec development. That supply constraint supports rent growth on stabilized MOBs and protects against the kind of overbuilding you see in general Class A office.
How to Underwrite Renewal Risk in 2026 (The Part Most Buyers Miss)
The single biggest miss I see in office underwriting right now is failing to stress-test renewal risk on buildings with short remaining lease term. If you're buying an office building where 40% of the rent roll expires in the next 24 months, your pro forma better assume at least 20% of that space doesn't renew, and it better assume the renewals that DO happen come at flat or negative rent growth unless you're in a submarket where you can prove otherwise with recent comps.
Here's how to underwrite it:
- WALT under 3 years = assume 25% rollover risk. Budget TI and leasing commissions at $25-$40/SF for renewals and $50-$80/SF for new leases, depending on asset class.
- Sublease exposure = assume the subtenant walks. If 10% of your rent roll is subleased, model that space as vacant at expiration and budget releasing costs.
- Credit tenant concentration = single-point-of-failure risk. If one tenant is 30%+ of your NOI and they're up for renewal in 2026-2027, get a read on their renewal appetite BEFORE you close. If they're non-committal, assume they walk and underwrite the deal accordingly.
- Rent comps = verify with RECENT transactions. Don't use 2022 asking rents. Call the leasing brokers in the submarket and ask what deals actually SIGNED in Q3-Q4 2025. That's your comp.
The buyers getting deals done right now are the ones who underwrite renewal risk conservatively and price it into their basis. The buyers who lose money are the ones who assume tenants renew at market rents without stress-testing the downside.
The Boutique Office Reposition Trade (If You Have the Basis)
There's a narrow trade in Palm Beach County and Broward where you can buy a tired Class B office building in a good location (Mizner Park area in Boca, Las Olas corridor in Fort Lauderdale, Clematis Street in West Palm) at a basis under $200/SF, spend $20-$30/SF on cosmetic upgrades, and reposition it as "boutique professional office" targeting wealth management, legal, and healthcare tenants who want better product than generic suburban Class B but don't need trophy amenities. That trade works if you have patient capital and a 3-4 year hold horizon, you're buying at a 9-10% cap on trailing NOI, stabilizing it at 90%+ occupancy, and selling it at a 7.5% cap to a long-term hold buyer.
The key to that trade: location and bones. You need a building in a walkable, amenity-rich corridor with good visibility and parking. And you need structural systems that don't require a full gut, if the HVAC is 25 years old and needs replacement, your capex budget just doubled and the trade doesn't work. The buildings that pencil are typically 1990s-2000s vintage with decent parking ratios, good floor plates, and cosmetic deferred maintenance. You're not fixing the building, you're upgrading the finishes and the tenant mix.
What I'm Telling Office Buyers Right Now
If you're looking at office in South Florida in 2026, here's my take:
- Class A trophy product in Brickell, downtown WPB, and Fort Lauderdale financial district is still institutional-grade and trades at rational numbers. If you can underwrite stabilized NOI with credit tenants and 5+ years WALT, there's a buyer at a 6-6.5% cap.
- Medical office is the deepest institutional bid in the sector. On-campus or hospital-adjacent MOBs with long-term physician leases trade 100 bps tighter than general office, and that spread is justified by the tenant quality and renewal stickiness.
- Class B is a basis trade, not a cash-flow trade. If you're paying over $200/SF for Class B, you're betting on rent growth and high renewal rates, and the market isn't giving you that right now. Underwrite it as a reposition with 3-4 year hold and budget real capex.
- Class C is dead basis unless you're buying it for the land or you have a very specific conversion thesis. Don't buy Class C hoping the market comes back, it's not coming back.
The office market in South Florida didn't die, it repriced. The buildings that make sense in 2026 are the ones with credit tenants, real term, and a basis that supports the hold period required to stabilize. Everything else is a bet on the market bailing you out, and that's not a bet I'd take.
If you're actively looking at office deals in Palm Beach, Broward, or Miami-Dade and want to talk through the underwriting, happy to jump on a call. And if you're open to off-market opportunities across other asset classes, multifamily, industrial, NNN, sign up here and I'll keep you in the loop as things come across my desk.
Anthony Conners is a Florida licensed real estate sales associate (license SL3334618) with Atlantic Commercial Advisors, affiliated with KW Commercial and based in Boca Raton. He represents buyers and sellers of multifamily, retail, industrial, hospitality and net lease property across Palm Beach, Broward and Miami-Dade counties. About Anthony · Track record
