South Florida Region Experiencing Retail Resurgence Tight little island: office space on Miami Beach scarce

In Focus – High Stakes in South Florida

Women’s Wear Daily | In Focus
Miami is riding an unprecedented roller coaster.The city rebounded from the recession only to
be hit by economic downturns in Brazil and Russia, major sources of tourism and second-home
owners for the region. Rising sea levels threaten to engulf it within the next century — if not soon-
er — but that didn’t stop a hedge-fund manager from buying two units at Faena House in Miami
Beach for a record $60 million. The Panama Papers’ leaked shell companies and offshore bank
accounts have led to cash purchases of condominiums in gleaming new residential towers,
which seem to multiply here like cells in a Petridish. Retail is also on fire in “Mall-ami,” while
commercial property sales are breaking records.

 

“The market clearly reflects consumer demand for high-quality retail experiences,” said
Michael Comras, president of a namesake commercial real estate firm in Miami Beach. Comras’
entire block on the north side of Lincoln Road, 78,000 square feet in total that he owned with
Jonathan Fryd of Fryd Properties, sold for $370 million last year. “It was the largest retail trans-
action and the second-largest of any real estate deal in Miami-Dade County history,” he boasted.
Talk to any developer or leasing broker and it’s the same story about how the city was under-
served for too long. Drew Schaul, executive vice president of RKF, a New York-based retail real
estate firm with offices in Miami, said there were 11 square feet of retail per capita when he moved
to the city in 2005, compared with a national average of 22 square feet. When LVMH Moët Hen-
nessy Louis Vuitton yanked its store portfolio from Bal Harbour Shops about four years ago
and moved it to Aventura Mall and the Miami Design District, it set a trend for brands to consider
emerging neighborhoods and evolving centers.

 

Northern states have watched populations trickle down to Florida for a while, but the city’s
retail offerings really began booming at the turn of the Millennium, helped by the arrival of Art Basel
Miami Beach and the construction of luxury residential high rises and hotels designed by star archi-
tects. Their collective impact lured high-net-worth individuals, and brands streamed in soon after.
“Miami was just a place for fun in the sun before Art Basel gave it global substance,” said Craig
Robins, chief executive officer and president of Dacra, the Miami-based real estate development firm
with a large stake in the Miami Design District. “It’s much younger, too. There were four hospitals in
Miami Beach when I grew up and now there’s one. It’s gone from 80-year-olds to 35-year-olds.”
According to the City of Miami Beach Tourism Culture and Economic Development, the city’s
median age fell from 65 in 1980 to 40 in 2014. In 1980, 49,000 people of a total population of
96,000 were over 65. In 2014, seniors made up 15,000 of 91,000.

 

Residential rent is also high in Miami. According to Zillow, the national average rent will be
$1,407 by February 2017, while the average rent in Miami will be $1,899, a 3.3 percent forecasted
increase from February 2016. It also ranks Miami metro third in percentage of income going to-
ward rent, after Los Angeles and San Francisco. New York is fourth, according to Zillow data from
the fourth quarter of 2015.
Younger generations, struggling with high rent, are influencing the city’s transition — from
a car culture to taking public transportation, walking and biking. As population and traffic
increases, distinct neighborhoods — Coconut Grove, Wynwood, the Art Deco District — are
tightening into all-inclusive, hyperlocal hubs in which to live, work and play. Some are already
fully served, while others fill in missing components, like retail in downtown and Brickell, or
residential and hospitality in Wynwood. Big-box chains are creating controversy as they creep into
former bohemian districts to service residential growth. Michaels and Marshalls plan to open in
South Beach, and Wal-Mart’s forthcoming store in Midtown Miami borders Wynwood.
“Developers and consumers are placing their bets on the full lifestyle package. People don’t
want to spend their entire lives in the car,” said Rafael Romero, an associate vice president for
retail at CREC real estate firm in Coral Gables. “They’re also staying single longer and having
kids later, so they can live in urban areas with disposable income to blow.”

 

The hottest markets — from Brickell to Sunset Harbour — target young professionals by hitting
the fashion, fitness and food trifecta. Chef-driven restaurants, which got a late start in Miami and
now open on a weekly basis, have paved the way for gentrification and the rampant rise of street
retail as opposed to the city’s historic preference for air-conditioned and covered, open-air malls.
“More than revitalization, the next decade is about connectivity as all these areas gel and roll
into one another,” said Comras of the effort to convince residents to leave the car at home or get
rid of it altogether. “These pedestrian pockets are even happening in suburban areas like Doral.”
With strong ties to Latin America, Miami retail is adjusting to different circumstances than
the rest of the U.S. Malls report tourism and second-home owners drive 70 percent of sales in the
area and people, no matter where they’re from, splurge on vacation.
The Greater Miami Convention & Visitors Bureau reported record-breaking travel and tourism
numbers last year with a 5.4 percent increase in overnight visitors to Miami and the Beaches
during the 12 months from September 2014 to August 2015 — 15.1 million overnight visitors, up from
14.2 million for the same period the previous year. This boosted the economic impact to $25.1 billion
from $23.5 billion, a 7 percent increase.

 

Retailers aren’t as affected by online shopping either; whether because of cultural preferences or
lack of Internet access, international tourists and part-time residents prefer brick-and-mortar stores.
A typical scenario is a family of four from Quito, Ecuador, flying in to buy back-to-school wardrobes.
Having seen its middle class shrink long before the rest of America, Miami’s economy mir-
rors those of Southern Hemisphere nations more closely than it does neighboring states.
“Miami functions more like a third-world society with extreme wealth versus poverty,” said
Schaul, “so you’re seeing an abundance of new luxury and discount or fast-fashion retail.”
Here is a snapshot of some local projects and neighborhood developments. ■