The Real Deal Miami

Lincoln Road is still country’s fourth-priciest retail market — but for how long?

Pressure to cut costs and heat from Wall Street have helped put Lincoln Road on edge
By Sean Stewart-Muniz | November 17, 2016 03:00PM

Lincoln Road (Credit: Phillip Pessar) and Greg Masin

Lincoln Road (Credit: Phillip Pessar) and Greg Masin

A flurry of investment deals over the last year helped propel Miami Beach’s Lincoln Road toward the forefront of North America’s most expensive retail markets.

But a new report from brokerage Cushman & Wakefield shows the street’s meteoric rise has leveled off amid a changing retail landscape.

According to the report, asking rents on Lincoln Road haven’t budged from the $325 per square foot reported last year. And while that rate makes the street North America’s fourth-most expensive retail strip for now, Cushman expects rents to stay flat — or, in some cases fall — in the near future.

Cushman Senior Director Greg Masin opined in the report that global retailers, which are a staple tenant on the street, have come under pressure to manage their costs and reevaluate how they can best reach customers. Notably, Williams-Sonoma and Pottery Barn shuttered their Lincoln Road stores in favor of new, cheaper locations nearby.

Publicly traded clothing stores are also getting heat from Wall Street to close underperforming locations, according to the report, and that has particularly affected high street retail strips like Lincoln Road.

Miami isn’t the only city with an evolving retail market. New York’s Upper Fifth Avenue, by far the world’s most expensive retail strip at $3,000 per square foot, has seen lessened demand from brands looking to open flagship spaces.

Though not mentioned in the report, the Zika virus could also be hampering tourism on Lincoln Road, as the street — and much of Miami Beach — are an active transmission zone for the mosquito-borne virus. Zika has been linked to birth defects like microcephaly, and the Centers for Disease Control has issued a travel advisory for pregnant women to stay away.

Lincoln Road was undeniably hot in 2015 as investors swooped in to buy prominent real estate on the strip. The year was capped by Zara founder Amancio Ortega’s massive $370 million purchase of an entire block.

“The larger question, for 2017 and beyond, will be the unrelenting rebalancing of sales origination – bricks and mortar versus e-commerce,” Cushman’s Gene Spiegelman wrote in the report. “The urban retail sector will continue to benefit from global brands seeking tangible connections with the consumer while the pressure will build upon enclosed malls and open air shopping centers to continually enhance their shopping experience.