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Escalating Shopping Center Rents Show No Signs of Abating
Miami Today  |  By Catherine Lackner

Retail and shopping-center space in Miami-Dade County is fetching escalating rental rates that show no signs of abating, said Steven Henenfeld (pictured), Vice President of Continental Real Estate Companies (CREC). Vacancy rates are “touching historic lows,” he added.

“Leasing is doing extremely well,” with overall vacancy rates in Kendall standing at only 3%, though there may be individual variations. Some centers in Doral are fully leased, he added.

The area east of I-95 is exploding with high-end retailers paying high-end rents, Mr. Henenfeld said. Brickell, the Design District, Miami Beach – as well as retail planned for Miami Worldcenter – “all is becoming Bal Harbour,” he said.

In Wynwood, retail space is going for more than $50 per square foot, in Brickell for $80-$100 per square foot, in excess of $100 per square foot in the Design District, and higher than $300 per square foot on Lincoln Road, “and these are triple-net leases,” he said.

On the west side of I-95, a tenant could expect to pay “in the high teens into the $20s for a junior big-box” of about 25,000 square feet in Kendall, in the high $30-$40s per square foot in East Kendall, and in the $50 per square foot range in Doral.

“In these markets, even when things were booming in the past, we didn’t see rents like these,” Mr. Henenfeld said.

The reason? “Simple economics – supply and demand,” he said. “There’s a land shortage, and no more places to grow.”

There havs been an explosion of residential development, which creates more demand for retail, he added. The growing economy also provides fuel, he said. “People think the economy is doing extremely well right now, and it reflects their optimism.”

At Dolphin Mall, it’s not only the strength of the American economy, but also Miami’s appeal to international shoppers that has not only kept the mall healthy but triggered a recent expansion that will add five new restaurants, a new valet service and a 1,300-space parking garage.

The mall, which bills itself as Miami-Dade’s largest outlet mall, with 240 stores in 1.4 million square feet, draws a combination of locals as well as domestic and international tourists, said Pete Marrero, mall general manager.

“We have a diversity of customers, with the vast majority of international tourists coming from South America,” he said. For an international destination, South Florida is under-retailed, he said. “I don’t think we have reached the saturation point.”

Even if more retail were to be added, “it might hurt us in the short-term, but on a long-term basis it will only help bring in that many more tourists.”

Investors and lenders have noticed retail’s robust growth, said Jason Shapiro managing director of the Aztec Group.

“We’ve seen a fair amount of transactions happening, both on the investment and financing sides. Lenders are increasing their loan-to-cost or loan-to-value spread.”

For example, on a recent Miami-Dade construction-loan transaction for a center anchored by a Publix, during the pre-leasing process rents rose dramatically, he said. “Over a span of three to six months overall, on average, rents were 20% higher toward the end of the cycle. That supports the positive nature of the things that are going on in retail.”

A number of factors are responsible, he said. “The economy continues to improve in Miami-Dade County and there are unique global sources of capital coming in all the time, seeking investments of this type. There’s only so much land available.”

Future forward movement “depends on interest rates,” he said, “But in the short term I expect it to continue.”

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Orlando Retail and Office Spiking

With Central Florida retail and office transaction activity spiking – and more regional and national businesses and retailers expanding – it’s a good time for brokers doing business in the region. CREC is one player that’s seeing traction.

CREC just inked 11 new leases and sales assignments across Central and North Florida. The deals add over 924,000-sqft of leasable space to its office and retail portfolio. CREC vice President, Joshua Busby, and Senior Leasing Associate, Nathan Cutchin, will lead leasing and sales efforts.

“The retail market in Central Florida is extremely strong right now,” Busby tells GlobeSt.com. “Numerous shopping centers are under development around Central Florida and the demand for quality space is driving rents to levels that we have not seen in years. Retail Sales are strong and tenants are now renewing early and exercising options, rather than terminating their lease or opting to miss the option notice to renegotiate the lease.”

CREC’s new retail and office assignments include: Magic Place is a retail and residential mega center with infill retail space, outparcels and seven high-rise condos and time share residences on US Highway 192 in Kissimmee, FL; DuPont Station, which spans 87,099-sqft with three fully built-out restaurant spaces and a 19,982-sqft former grocer space available for lease in Jacksonville.

CREC is also leasing World golf Village in St. Augustine, FL; the 92,180-sqft Steeplechase Plaza in Ocala, FL; the 73,619-sqft shopping complex Homosassa Plaza in Homosassa, FL; Semoran Plaza and Colonial Shoppes in Orlando; and Malabar Commons in Palm Bay, FL; Heritage Plaza, a 40,000-sqft Class A office building in Lakeland, FL; and Oakridge Office Park in Orlando.

Built in 2011, Former Rec Warehouse for sale. The 14,400-sqft, bank-owned warehouse sits on 1.61 acres at 8134 North US Hwy 98 in Lakeland, FL. The list price is $694,000. The warehouse is one mile from Northside Village, which is poised to become the premier multi-use development on Lakeland’s north side.

Job growth in Orlando will be healthy this year as 44,000 positions are created, expanding headcounts by 3.9%, according to Marcus & Millichap. In 2014, employment grew 4.5%. New jobs will be led by the leisure and hospitality sector.

Retail vacancy will fall 60 basis points to 6.2% in 2015, the firm predicted, despite the influx of new construction as retail spending increases throughout the metro. This will advance last year’s 60-basis-point drop.

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The big winners in South Florida

The South Florida market is playing favorites again: used to be favoring tenants, now it’s landlords, says CREC associate VP Rafael Romero. Either way, rents continue to rise. Rafael adds that New Yorkers are coming down in droves, looking at South Florida as a second chance…

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CPAC nearly triples investment on retail asset

Are there still value-added opportunities in Miami retail? Underperforming assets aren’t exactly low hanging fruit but the firms willing to go out on a limb are finding commercial real estate profits. Miami-based private firm Continental Properties Acquisition Corporation (CPAC)…

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CPAC sells Palm Johnson Plaza for $8.45 million

Pembroke Pines, Fla. — Continental Properties Acquisition Corporation (CPAC) has sold Palm Johnson Plaza, a 90,000-square-foot retail center located in Pembroke Pines, for $8.45 million.

A Miami-based private investment group purchased the center. Prior to sale, CPAC completed a repositioning program including parking lot upgrades, landscaping and new tenant build outs. Tenants of the center include anchor Winn-Dixie and junior anchor Planet Fitness.

Tenants of Palm Johnson Plaza include anchor Winn-Dixie and junior anchor Plant Fitness.

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Edgewater church plans to sell two-acre waterfront lot

Sometimes even a house of God has to know when to cash out. With land prices soaring in Miami, a nondenominational church plans to sell a two-acre bayfront plot in Edgewater that has been its home since 1961. “We were faced with making costly improvements and renovations in order to remain here,” said the Rev. Christopher Jackson, who has led the congregation at Unity on the Bay for nine years…

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Doral becomes heart of West Dade’s high-end office market

The West Dade office market, which years ago comprised buildings near Miami International Airport with small pockets near Dadeland and Kendall, now has coalesced around the Doral area, observers say, where class A space is in strong demand…

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Daily Business Review: Top deal makers of 2015

When it comes time for lease renewal, many law firms decide to head to the newest, glitziest building on the market. But Stearns Weaver Weissler Alhadeff & Sitterson’s leaders preferred to stay put in…

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Stearns Weaver Miller expands in downtown Miami
with 110,000 SF renewal

Miami law firm Stearns Weaver Miller Weissler Alhadeff & Sitterson PA has expanded and renewed its presence at Museum Tower, located at 150 W. Flagler St. in Miami, FL, taking a total of 110,000 square feet in the office building where its has had its South Florida offices since 1987.

The lease qualifies as the largest single office lease signed in 2014 in the city’s Central Business District, just edging out Akerman’s 108,000-SF office lease to anchor Miami’s Brickell City Centre, signed two months earlier. It represents a growing trend in the area: large firms are having difficulty finding class A space in downtown Miami, leading many to renew and expand at their current locations while completing ongoing upgrades to fit their needs.

“Miami’s legal sector is thriving as new investment pours into the market, putting law firms in position to grow their practices while making smart, forward-looking improvements to their offices,” explains Carol Brooks, president and co-founder of CREC

MuseumTower“After evaluating buildings in Miami’s urban core, we decided that expanding and upgrading our current space at Museum Tower was the best long-term move for our firm,” says Rick Schatz, shareholder and managing director at Stearns Weaver Miller.”The physical and technological improvements we’ve made over the years, coupled with our Flagler Street location and proximity to the courthouse, puts us in position to remain efficient while serving our clients.”

Stearns Weaver Miller has undertaken a series of office upgrades over the years, including the addition of a full-service mock courtroom. The firm is planning additional improvements to its new space, while upgrades along Flagler Street will enhance the streetscape outside Museum Tower.

Museum Tower is a 29-story, 243,166-square-foot, 4-Star office tower constructed in 1987 in downtown Miami. It features 12-foot slabs, on-site banking and restaurant, and covered parking.

“Miami’s legal sector is thriving as new investment pours into the market, putting law firms in position to grow their practices while making smart, forward-looking improvements to their offices,” explains Carol Brooks, president and co-founder of CREC. “Though Stearns Weaver Miller could have moved to any number of Class-A buildings, they are doubling down on Flagler Street because they value the investments they’ve made in their offices to date and believe this location puts them in position to grow.” Carol Brooks and Steven Hurwitz, senior vice president with CREC represented the tenant. Kirk Fetter, vice president with Dallas-based Gaedeke Group represented the landlord in-house.

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Developers seek retail strips as commercial land values soar

Market watchers agree there will always be demand for commercially-zoned land in South Beach but see other areas growing in popularity and value.

Land in the downtown Miami area is just picking up steam compared with Brickell, said Jason Katz, vice president for the Aztec Group. “Zoning is the most ripe in the central business district,” he said. “It’s the densest neighborhood with the highest available height [allowed].”

Developers are buying big retail strips, Mr. Katz said and paying anywhere from $350 to $700 per square foot for the land.

“Before this market cycle, Flagler Street and Miami Avenue weren’t getting as much attention,” he said/ “In the past three years, however, with Miami Worldcenter and the announcement of All Aboard Florida, people saw a more defined neighborhood with major job generators and retail centers.

Prices for commercially-zoned land are highest in South Beach and Brickell but are rising in other markets, Mr Katz said. When he first came to Avatar, land prices in Edgewater were about $100 per square foot but now have risen to $300 per square foot.

Now, Mr. Katz said, there are high-rise luxury condos along the Biscayne Boulevard corridor and a lot of retail coming. “There aren’t a lot of tenants, but a lot is planned for what will be a hot retail corridor.”

The market is getting back to normal as developers realize people want to live in a variety of buildings, whether high-rise or smaller, said Peter Mekras, Senior Vice President at CREC. “Demand is broader now.”

Pricing continues to increase in urban infill areas because residential demand continues, he said but suburban trends are on the upswing anywhere east of I-95 and close to main corridors. He pointed to Doral, parts of South Dade and Homestead as areas where demand is increasing.

There’s very little land left, especially in the urban core, said Jim Shindell, partner at Bilzin Sumberg and the firms real estate practice group chair. He said demand is growing for land extending from the Design District to the north and Coconut Grove to the south.

Mr. Shindell said the sale of a 1.4-acre site at 300 Biscayne Boulevard Way in July for $125 million caught everyone’s attention.

He said other prices have been “hefty” and it will take time before it’s clear what’s expensive, given that buyers have different objectives.

It’s not so much the closed land sales that drive value but, rather, how a parcel can be used, said Mr. Mekras.

In some areas, potential use is limited, Mr. Shindell said. “Condos give returns that will cover the cost of the land.”

He points to the increasing cranes on the skyline in Edgewater and said that area will be transformed.

Demand remains high for waterfront land, said Jeff Cohen, senior vice president of the commercial division for Avatar Real Estate services. “Prices are crazy,” he said. “there’s virtually no more land available on the waterfront.”

Mr. Cohen said areas where there’s current demand for commercially-zoned land include Miami Beach, Surfside, Coconut Grove and – although diminishing a bit – Sunny Isles.

People are paying to own assets in the urban area, Mr. Shindell said. “Prices increased when we came out of the downturn and the world got its feet under itself,” he said. “Then prices went up more substantially as land was acquired for condo development.”

The downtown area “got its legs and transformed itself to an area it wasn’t before,” Mr. Shindell said. “there’s an effect on an asset class now that people want to work and live there.

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