After a wave of high-profile bankruptcies during the downturn, the South
Florida retail market has been volatile, with a series of new entrants
to the area capitalizing on cheaper rents, along with the departures of
household names like Borders
and Robb & Stucky. Brian Kosoy is the president and CEO of
commercial investment firm Sterling, which is one of the largest owners
of retail real estate, both in South Florida and nationally. The Real Deal talked to Kosoy about
South Florida’s rapidly changing retail market, the difference between
the Borders and Robb & Stucky bankruptcies and the continuing
importance of Latin America.
What kind of impact do you think the Robb & Stucky and Borders bankruptcies will have on the retail market in South Florida?
I think obviously there will be some temporary softness, but I do think that opportunities will be created as a result of that for stronger retailers to enter the marketplace or continue to expand in the marketplace. Robb & Stucky was unfortunately a high rent payer, so if you’re an owner of a Robb & Stucky building, it’s going to be painful process. Borders was typically a low rent payer, and I think there’ll be opportunities for landlords in good infill locations with strong sales to increase and add value to help their properties, by bringing in tenants at higher rents.
You signed a lease with electronics retailer hhgregg last fall in Hialeah. How would you describe their entry into the South Florida market?
I think before the economic meltdown, they were very disciplined, which is why you did not see them aggressively in South Florida, because rents were just too high for their business model. I think as a result of key bankruptcies in their particular spaces, namely, CompUSA, and Circuit City, I think they have taken advantage of a market that was too expensive for them, too competitive for them to enter five years ago, and they have now positioned themselves nicely in what is one of the premier retail markets in the U.S.
Is there a geographic area in South Florida that has performed particularly well?
I would say Miami-Dade County is the strongest area. I think there are a few reasons for that. I think the fact that Dade County is truly an international and infill market is important. To the east you have the ocean, to the west you have the Everglades. There are significant barriers to entry. There’s no greenfield development, it’s densely populated, and under-retailed. The retail in South Florida, both per capita and per income, is particularly low in Dade County as compared to not only other parts of the state, but to retailers in much of the country.
How is Latin America impacting the South Florida retail real estate market?
The fact that South Florida, and Miami-Dade County particularly, Miami is a gateway city and the de facto capital of Central America, it’s softened the blow. If you look at the economy as a whole, even though South America was fazed, it never really went through the Great Recession the way we had it or Europe did. Brazil is particularly strong [and] Chile, Colombia [and] Argentina have done reasonably well. And a lot of those countries feed a lot of business and financial activity into South Florida.