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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.