Commercial Real Estate, Capital, Insurance, Leasing & Management

South Florida Flourishes

Published By: 

“About 80 percent of the new retail is going up in South Florida is in Miami, which is a testament to how strong that market is, and I don’t see it slowing down anytime soon," says Robert Granda, director of retail investment sales at Franklin Street.

Cranes are in the sky in and around Miami, and the pace of new development shows no sign of slowing. Billion-dollar projects like Brickell City Centre and Miami Worldcenter are edging closer towards completion, answering the demand of the rising population for more retail and restaurant space. 

Florida continues to absorb retail space, despite the abundance of mega-developments entering the market, due to its strong population growth. Over the past several years, absorption of space has outpaced new supply, meaning that a lot of older retail space is back in use.

In the first half of 2016 in Florida’s largest markets – Jacksonville, Orlando, Tampa, Palm Beach County, Broward County and Miami – net absorption was 4.8 million square feet while 2.8 million square feet of new retail space was delivered, according to CBRE.

Vacancy rates are low and rent growth is steady but leveling off around the Miami metro, according to Rod Castan, president of leasing and management services for The Courtelis Company. 

“High visibility, high traffic multi-tenant outparcel and street retail locations around Miami continue to command the highest rents of any market in Florida, says Castan, “The strength of the dollar and the Zika scare softened the tourist spending market this past summer, so this created some caution in the market and caused retailers to temper their sales estimates a bit.” 

The population is growing in Miami and retail development and investor interest is quickly following suit. “Miami is on fire. South Florida’s newest retail developments have a heavy concentration in Miami. A lot of it has to do with the sheer density in downtown, Brickell, Wynwood, Biscayne, Edgewater and North Miami Beach,” says Robert Granda, director of retail investment sales at Franklin Street. “About 80 percent of the new retail is going up in South Florida is in Miami, which is a testament to how strong that market is, and I don’t see it slowing down anytime soon.”

CBRE reports that there is nearly 2.5 million square feet of retail space under construction in the Miami area, with more than 1 million in downtown and Brickell alone. Other submarkets that have more than 300,000 square feet of retail space under construction include Medley/Hialeah, Aventura and Miami airport. 

The buyer pool for retail assets is also evolving to include more local investors. North Miami-based IMC Equity Group recently purchased West Sunset Square, a nearly 68,000-square-foot shopping center in Miami leased to Dollar Tree and Planet Fitness. IMC Equity purchased the property for about $18 million.

The company also recently purchased Sabina Plaza in Miami’s West Kendall submarket for $12.5 million. Additionally, Miami Beach-based Transamerican Development Corp. purchased an 8,500-square-foot retail strip center located at 16375 Biscayne Boulevard in Miami for $13.4 million. 

Granda has noticed that the investors looking hard and long at South Florida retail properties also include buyers based in the Northeast. 

“We’re seeing a lot of Northeast capital in transition as part of 1031 transactions. They’re selling properties in the Northeast and then transitioning their capital down here because Florida’s favorable tax structure and the pricing,” says Granda. “Every day I’m talking to a dozen different investors that are looking to do a 1031 and they need to place the capital. There’s a lot of capital, but he inventory is low.”

Recent transactions involving buyers based in the Northeast include Clarion Partners buying The Lincoln, a 161,824-square-foot mixed-use project in Miami Beach, from HQ Capital Partners for $109 million. The Lincoln features more than 40,000 square feet of retail space leased to eight retailers including Pottery Barn and Williams Sonoma. 

Another recent transaction includes the Lightstone Group, a private real estate investor and developer based in New York, buying a 22,030-square-foot, unanchored retail center at 915 Washington Ave. in Miami Beach, from Streamline Properties for $17 million. 

Development continues to be seen throughout the Miami area, with a heavy emphasis on mixed use. Brickell City Centre, a $1.05 billion mixed-use destination that features office towers and an upscale hotel, will add nearly half a million square feet of retail and restaurants to downtown Miami’s Brickell district. Co-developed by Swire Properties, Whitman Family Development and Simon Property Group, the project’s 500,000-square-foot, open-air shopping center is the last component of Brickell City Centre to open.

The shopping center will feature more than 80 retailers and eateries, including a flagship Saks Fifth Avenue, Cinemax, Coach and Porsche Design. Debora Overholt, vice president of retail for Swire Properties, says that roughly 53 retailers and restaurants will open during the shopping center’s grand opening on November 3.

“Our biggest push has been moving the construction of the retail space and putting all of our efforts into the tenants that we can open for the holidays. We are running leases as fast as we can too, and we have a very interesting merchandising mix,” says Overholt. “Recently signed tenants include Iro, a luxury fashion retailer out of Paris, EPL Diamonds, one of the biggest Russian diamond jewelers, is also a new signee, and we signed a unique brand called Junk De Luxe out of Copenhagen. I’m very pleased at what we’re able to put together.”

One of the more interesting vendors within Brickell City Centre will be the Italian Food Hall, a three-story homage to Italian cuisine. Each level will have different dining venues and food specialties for the customer, including pizza, pasta restaurants, an espresso bar, gelato, juice bars, wine shops, chocolate bar, seafood restaurant and an urban winery and tasting room. 

“The Italian Food Hall will offer an authentic Italian experience,” says Overholt. “There will be some interactive classes with a demonstration kitchen. It’s going to be very special and we feel great about it anchoring our north block. The concept is very dynamic; there’s nothing else like it in Miami.”

Swire Properties is integrating the Miami Metromover transit system with Brickell City Centre with a stop that exits directly onto the shopping center’s third floor. The station has been operating throughout Brickell City Centre’s construction, serving the development’s office tenants and hotel guests at EAST, Miami.

“We expect to see the ridership of the Miami Metromover really increase dramatically once Brickell City Centre opens,” says Overholt. “There will ultimately be about 3,000 hotel rooms in the area. All that density will help make the Metromover a very convenient way to travel through Brickell and Miami.”

Brickell City Centre is one of the top headlines for South Florida’s retail landscape and a trendsetter as far as its mix of office, retail and lodging. South Florida is seeing its fair share of mixed-use projects take shape. Metro Miami alone has nearly 1.5 million square feet of retail space under construction within mixed-use developments, according to CBRE. 

“The Big story in South Florida is this push to create these live/work/play environments,” says Granda of Franklin Street. “Mixed-use is becoming more prevalent these days because consumer behavior is changing. The younger generation is more comfortable living, working and playing in the same area. People want to congregate to these types of communities.”

The successful mixed-use movement led Encore Capital Management to purchase Fashion Mall in Plantation for $37.7 million at auction in 2015. The Boca Raton-based developer is taking the 37-acre development and transforming it into a $300 million mixed-use destination with new retail and restaurants, upscale apartments residences and new offices.  The unnamed redevelopment hopes to lure retailers to the development because of its on-site residential and office tenants.

“Retailers are looking for built-in density within the target demographic,” says Granda. “And the target demographic is mostly looking for convenience.”

CBRE is working on the retail leasing of MiamiCentral – the new name for the All Aboard Florida Rail Station-centered project that will also include retail, residences and office space.  The station will serve as a departure and arrival point to Miami for Florida’s new train service, Brightline, which will serve as an inter-city connector. Approximately 170,000 square feet of retail space will be at MiamiCentral, according to Pasco Diaz, senior vice president of CBRE in Miami.

Other Significant projects in the area include the expansion of Bal Harbour Shops. Miami’s Design District and Wynood Art District are seeing new development of shops and restaurants. Another iconic area, Miami Beach’s Lincoln Road, has seen some slow down as of late, with about 150,000 square feet of vacant space, says Diaz.

“That is going to have an effect on the market’s rents,” says Diaz. “The rents have started to slow down because in order to afford $300 per-square-foot rents, retailers have to do some significant business.  Lincoln Road is dependent on tourism, and that has been affected somewhat by the strong dollar.”

“Miami has become a global city,” says Diaz. “It is a port of entry, we have great weather most of the year, we have steady tourism and we have good demographics.”

Rafael Romero, vice president at CREC, notes that many of the developments around Miami, like Brickell City Centre, are already full.

“Brickell City Centre was very hard to get to get into from the beginning,” says Romero. “The Brickell market in general is very tight. A lot of Folks want to be in there. The rates in markets like Brickell have gone up proportionately based on the demand for space, and vacancy is around 1.2 percent.”

Romero notes that Coconut Grove, Coral Gables and the Downtown CBD in Miami are all hot for retailers right.

“Coconut Grove has become a hot spot, which is a dramatic turn,” says Romero. “A few years ago, it was extraordinarily difficult to even envision Coconut Grove turning around, let alone Coco Walk being sold. The rents in the Grove in some areas – especially along Grand Avenue, Main and Commodore Plaza – have shot up a lot recently based on this new demand, especially for restaurants.”

“Coral Gables is extraordinarily strong, despite having Giralda Avenue and Miracle Mile under the streetscape project,” continues Romero.

The Miracle Mile and Giralda Avenue streetscape project currently underway is working to add pedestrian-friendly experience areas to the corridor, like gardens, outdoor dining, way finding and public art.

“There’s been no real exodus of tenants leaving the Gables in spite of the challenges of the streetscape during construction,” he says. “It’s a lot harder to drive through, walk through, park – it’s harder to do everything, but everyone sees the light at the end of the tunnel.”

Romero also believes downtown Miami to be strong moving forward. “I think that downtown Miami is a huge up-and-corner,” he says. “There is a very large disparity between the rents on the Brickell side of the bridge and the rents asked on the Downtown CBD side of the bridge, despite very little geographic difference. I think that’s going to create a huge opportunity. A quality restaurant or bar can capitalize on the density of Brickell in downtown.”

While a variety of large-scale development is underway in Miami, it can also be seen throughout the metropolitan area, Kimco Realty is hard at work on development for its 102-acre mixed-use Dania Pointe project roughly 23 miles outside Miami.

The Massive project, located near the interchanges with Griffin Road and Stirling Road with Interstate 95, will contain nearly 1 million square feet of retail when complete.

“This is an enormous project that is going to change the landscape of the greater Fort Lauderdale market,” says Paul Puma, president of the southern region for Kimco. “We are creating a new destination for the market. We are going to create an active and thriving community where people live, work, and play. It is that type of development; people can shop, dine and conduct their business and they can relax and be entertained.”

Dania Pointe will be developed in two phases. The first phase will contain big box and junior anchor retail on about 35 acres. The second phase will add 500,000 square feet of retail in a main street environment, along with 500,000 of Class A office space, 1,000 multifamily residential units and two hotels with a combined 350 rooms. Included in the second phase are a number of public spaces for live entertainment. Kimco is negotiating a ground lease with an apartment developer as well.

“We will have a balanced blend of retail,” says Puma. “we have leading fashion, accessories, home furnishings and others who will enjoy great exposure in a main street retail setting. Plus, we will have junior anchors and major big box stores on the periphery.”

More than 325,000 vehicles travel the past the site each day, and interstate 95 gives the center easy access to more than 1.1 million Miami-Dade and Broward residents within a 15-minute drive. In addition, the center is expected to be a tourist draw because of its close proximity to Fort Lauderdale airport and the Port Everglades cruise port.

“The interest from restaurants and entertainment is through the roof,” says Puma. “We are 50 percent pre-leased with the retail in phase one, and if all leases that are in negotiation are signed, we will be 20 percent leased for the second phase. We thought this was the right direction to go in, and the market has been proving our assessment correct.”

Kimco plans to build Dania Pointe over the next several years. MCG Architecture is designing the project, and Hoar Construction is the general contractor.

In Sunrise, ground has been broken for Metropica, the massive mixed-use project that will be near Sawgrass Mills and BB&T Center. The project will have 400,000 square feet of retail, which is among the first phase to be developed. Metropica has recently announced a number of strong retailers and restaurants that will locate at the project to satisfy the area’s demand.

Among the tenants are True Food Kitchen, iPic Cinemas, Fogo de Chao, Free People, Shake Shack, Kendra Scott, Kona Grill, Anthropologie and entertainment concept Kings. A fitness tenant and cycling tenant, as well as several home goods tenants and several fashion tenants are in the works as well.

“We’ve had extraordinary demand from restaurants at our intersection,” says Erick Collazo, managing member of MBA development, one of the partners in Metropica. The condominium project has already begun marketing, and has a lot of interest from foreign buyers, says Collazo.

American Dream Miami is another large project underway in the early stages. According to Bob Gorlow, head developer of Triple Five’s Florida operations, the proposed American Dream Miami project will be as large or larger than its Jersey Counterpart, with similar entertainment, dining and shopping options.

Located in Northwest Miami-Dade County at the intersection of Ronald Reagan (Florida) Turnpike and Interstate 75, the developers have secured all the land – a 200-acre site – and are in the process of procuring development approvals.

In addition to the one-of-a-kind entertainment, retail and dining options that are a part of American Dream at the Meadowlands, American Dream Miami will have an outdoor oriented Art Deco district to take advantage of South Florida’s warm climate.

Existing developments around the metro are also doing their part to fit in with the changing desires of today’s shopper with renovations and the addition of placemaking elements.

Aventura Mall in suburban Miami is expanding by 325,000 square feet, adding indoor/outdoor dining experiences and other features to the popular super regional mall by 2017. Sawgrass Mills, one of the largest outlet centers in the state, is also being renovated. The center is creating several gathering areas featuring new seating and charging stations.

In Hollywood Beach, retail and restaurants are thriving along the Broadwalk, according to Gorge Camejo, executive director of the Hollywood Community Redevelopment Agency (CRA).

“We have significant construction activity in downtown Hollywood, including the Hollywood Circle Project,” says Camejo. “That’s going to bring additional retail, a 104-room boutique hotel and residential space with a 48,000-square-foot Publix shopping center.”

Construction is set to begin on block 40 – a 19-story, mixed use development consisting of 166 residential units, a 103-room Hilton Garden Inn, a restaurant, retail and office space – and Costa Hollywood, a condo and hotel development featuring 30,000 square feet of retail, is heading towards completion in Hollywood.

North of Miami, West Palm Beach is seeing an influx of new retail. “We’re seeing steady, strong growth in West Palm Beach,” says Rafael Clemente, director of Downtown West Palm Beach. “We’ve had significant investment in the development of new commercial and residential projects around the city and we’ve seen steady rates and growth in occupancy for existing retail.”

Clement: notes that vacancy is low on the city’s main street, Clematis, and that chain stores are on the decline. “We’re not seeing a lot of national brands,” he says. “Locally-owned retailers are really filling the spaces in downtown West Palm Beach.”

Developers and owners in South Florida are retooling their tenant rosters to feature stores and restaurants that will generate repeat traffic. A CBRE report found that over the past five years, tenants that offer personal services, including restaurants, salons and fitness clubs, have accounted for 9 percent of retail space leased in Florida, up from 7 percent during the prior five-year period.

CBRE also found that Floridians are expected to spend 14 percent of their consumption expenditures – twice the national average – on food and entertainment in 2016, creating a huge market.

Retailers in South Florida are also doing their part to promote commerce in their stores. Companies are focusing on strong customer service and direct marketing to increase the flow of shoppers to their stores and build customer loyalty.

“Retailers are getting your emails when you’re in stores, they’re sending you private sales to try to drive you into their locations,” says Joe Gallaher, an associate at NAI Miami.  “Once there, it’s up to the customer service experience for them to really differentiate themselves.  I bought a suit about a month ago, and after a week I received a hand-written card from the manager thanking me for coming in.  That left an impression on me and made me loyal to that store.”

As retail centers evolve to feature more services that cannot be provided online, entertainment tenants and restaurants have more of a floor to expand in South Florida.  Local dining concepts are choosing to backfill existing locations for their expansions.

“Restaurants will be looking more for second-generation space to reduce the cost of their build-outs,” says Gallaher.  “The restaurant chains that were really popular 10 years ago are starting to fade out, which opens up second generation options that local concepts are backfilling.”

Retail is incredibly strong in South Florida, with parts of the market at 97 percent occupancy, says Diaz of CBRE.  A number of retailers are expanding in the market, seeing an opportunity with the area’s growing population and constant tourist traffic. 

Larger tenants like Ulta Beauty and Ross Dress For Less continue to seek locations, with some tenants adjusting their size to fit available spaces in the market.  Diaz’s team at CBRE, which includes his two sons, Paxti and Danny, represent several tenants who are seeking sites in the market.  Convenience store chain Wawa is one tenant eagerly looking to open 150 stores in South Florida; the retailer will be opening in Palm Beach and Broward counties in the second quarter of 2017 and will continue its growth from there, says Diaz.  Lucky’s Market, a medium-sized grocery concept that has a significant ownership by Kroger, is expanding in the market.

“More players in the grocery market here are welcomed, because we have been limited to Publix, Whole Foods, Winn-Dixie and The Fresh Market, and two Latin concepts, Sedano’s and Presidente,” says Diaz.  “Lucky’s has a 30,000-square-foot prototype that is upscale and attractive.”

The second Lucky’s Market location in South Florida will open in Plantation in December.  The Colorado-based chain already has stores in a number of markets in northern and central Florida.

Earth Fare is also expanding in the market with stores that are between 20,000 and 25,000 square feet.  CBS/pharmacy is also seeking locations in the market, according to Diaz.

“I think that Miami retail is going to improve tremendously over the next few years as new projects are opened and stabilized, and older projects are revitalized and brought back to life,” says Romero of CREC.  “As the population continues to increase, we continue to attract world class restaurants to our more urban corridors, bringing people in from outside of the state to visit.  We only have better days ahead and it’s interesting to say because we’re in a pretty good place right now, but I honestly don’t see us going backwards anytime soon.”

“The future is very promising for South Florida retail properties,” agrees Castan.  “Supply constraints will remain, and retailers continue to have success in many different sectors of the market.  The market’s diversity and position as a high profile global trade center and visitor destination promotes development and allows it to weather all types of storms.”

let's Connect

drop us a line