Office demand in Florida has diverged sharply by market and by class since 2020, and an exchange deadline is a poor moment to discover that a building's occupancy is propped up on leases expiring inside the next two years. Section 1031 does not distinguish between a fully leased Class A tower and a half-empty Class B building; both qualify as replacement property if held for investment or business use. Underwriting has to do the work the exchange rules do not.
South Florida, Tampa, and Orlando have each pulled corporate relocations drawn by the absence of a state individual income tax, which supports certain submarkets even as national office vacancy stays elevated. That inflow is uneven, and it does not rescue a building with obsolete floor plates or deferred building-systems capital.
Underwrite the lease roll, the tenant improvement obligation, and the building's mechanical condition before treating the purchase price as a settled number, and use the closing timeline to confirm financing can actually fund on schedule.
Build a lease expiration schedule showing every tenant's term, renewal options, and below-market or above-market rent relative to current asking rates. A building that looks fully leased on the rent roll can carry concentrated rollover in year two or three that changes the return profile entirely.
Confirm whether any anchor tenant has a termination right tied to a co-tenancy clause or a square-footage threshold, since losing one large tenant in a partially leased building can trigger other tenants' exit rights. Compare the schedule against the exchange holding period an owner realistically expects, since a lease expiration clustered near the anticipated resale date compounds re-leasing risk right when the owner most wants stable income.
Review each material tenant's financial condition, guarantor strength, and whether the lease is full-service, modified gross, or triple net. A high occupancy figure means little if the largest tenants are month-to-month or backed by a thin corporate guaranty.
Ask for estoppel certificates before closing to confirm rent, term, and any side letters that do not appear in the base lease. Cross-check the operating expense reconciliation history for each tenant, since a full-service lease with an uncapped expense stop can quietly erode net rent as insurance and property tax rise.
Florida office re-leasing routinely requires substantial tenant improvement allowances and commissions, and a pro forma that ignores this cost overstates net proceeds. Estimate TI and commission cost per square foot for the building's class and submarket, then apply it to every lease expiring during the projected hold.
Where the seller has already signed a renewal at a reduced rate to boost occupancy before marketing the sale, confirm the economics reflect that concession rather than the prior, higher rent. Ask the property manager for actual construction cost on the two most recent buildouts rather than relying on a market-average figure, since Florida labor and material costs vary widely by submarket.
Request wind-mitigation documentation, impact-rated glazing certifications, and backup generator specifications, since these directly affect insurance pricing and a tenant's willingness to renew after a storm event. A building without emergency power for elevators and life-safety systems can lose tenants to a competing building that has it.
Review the most recent building envelope and roof inspection, and confirm whether any open permits or code violations exist that a buyer would inherit.
Office lenders typically underwrite to in-place cash flow and require an appraisal, environmental report, and sometimes a market study before committing proceeds, and a building with rollover risk can draw a lower loan-to-value than the purchase price assumes. Get preliminary lender feedback before the identification deadline closes.
If more than one office building is identified, weight financing certainty alongside rent roll quality, since a deal that cannot close by day 180 forfeits the deferral regardless of underwriting quality. Confirm the lender's timeline for appraisal review and loan committee approval against the closing deadline, and ask what documentation would let them move faster if the schedule tightens.
