Inside Real Estate Realities of South Florida’s Dining Boom

For Michelin-starred restaurateur Alvaro Perez Miranda, signing a restaurant lease is more than a contract.

“When you sign a lease, it’s like a marriage, it’s a partnership,” he said. “The most important thing for me is that my landlord understands the value of what we’re bringing. If the landlord doesn’t understand, then I don’t want to work with people like that.”

The APM Restaurant Group founder said one of the secrets to success is operating in more emerging neighborhoods where rent is affordable and the customer base is year-round, instead of trendier neighborhoods where business dies down in the off season.

Perez Miranda is among a select group of Michelin-starred operators that have managed to stay open as a wave of restaurant closures sweeps South Florida, affecting newer concepts and longtime establishments. His portfolio includes the 900-square-foot Japanese restaurant Ogawa in Miami’s Little River neighborhood and the 1,300-square-foot Cuban eatery Emelina on Park Place in West Palm Beach.

Rent is one of the biggest expenses for restaurateurs, he said.

“Between your rent and the CAM [common area maintenance], you have to be very careful before you sign a lease,” Perez Miranda said, declining to disclose how much his restaurants pay. “You don’t want to work just to pay rent.”

Being an early entrant to Little River in 2023 helped him land favorable lease terms compared to pricier nearby areas like the Design District and Wynwood, he said.

Restaurants operate on razor-thin margins, which are squeezed by rising food costs, labor expenses and rental rates.

Felix Bendersky, founder of Miami-based F+B Hospitality Brokerage, said the average restaurant operates on a 3 percent net profit margin. A common industry benchmark is for rent to account for no more than 10 percent of projected sales, he said.

Bendersky expects more closures this summer, a period he refers to as the “ghost summer.”

The term refers to restaurants that quietly disappear without publicly announcing their closure.

He said rather than issuing formal statements, some operators suddenly stop service, reduce operating hours or claim they are temporarily closed before ultimately shutting down for good.

Brickell has seen some of these closures recently.

Mediterranean-Asian fusion restaurant Kaori abruptly closed after earning a coveted star from the Michelin Guide in May for a third consecutive year.

The neighborhood also lost Dirty French in the same month, the Major Food Group steakhouse from the New York hospitality giant behind Carbone and ZZ’s.

Baby Jane publicly announced its closure at 500 Brickell Avenue in an Instagram post, citing unsuccessful lease renewal negotiations after a decade in business, closing on May 31.

Representatives from the restaurants did not immediately respond to The Real Deal’s requests for comment.

The trend unveils a reality often overlooked by diners.

Culinary accolades, media buzz or local fandom may elevate a restaurant’s profile, but it doesn’t keep them open for business.

“It’s just a rough time because the rents are out of control,” Bendersky said. “Michelin, James Beard — none of that means anything when summer’s coming up.”

Some restaurateurs are heading north to Orlando and Tampa, or all the way to North Carolina, because they can afford to make money there, he said.

Restaurant rents in South Florida that once hovered around $60 per square foot have climbed above $100 per square foot, while asking rents in premier locations can exceed $200 per square foot, Bendersky said. Most restaurant lease agreements are for 10 years and typically jump at least 3 percent annually.

Those spikes can quickly upend a restaurant’s business model.

“All a landlord needs is one comp to take rent from $60 to $130 and that’s it. Now your math is completely upside down. A lot of these guys are just working to pay the landlords,” Bendersky said.

The operators that have weathered the market typically secured favorable leases before or during the pandemic, are backed by deep-pocketed investors, and attract customers beyond seasonal visitors or generate revenue through multiple channels, such as supper clubs, he said.

A bad real estate decision can sink a restaurant long before the first meal is served, he said.

Lengthy permitting timelines and construction delays can strain operators before opening day, leaving some owners with substantial rent and carrying costs long before their first customer arrives.

For restaurants inside luxury hotels, the model can look different.

Hive Hospitality owner and chef Ryan Ratino’s 6,000-square-foot Chef’s Counter at MAASS at the Four Seasons Hotel and Residences Fort Lauderdale earned Broward County’s only Michelin star this year. He said residential- and hotel-affiliated restaurants benefit from a built-in customer base that standalone concepts often lack.

The hotel-backed Michelin crowd includes The Surf Club Restaurant at the Four Seasons Hotel at The Surf Club in Surfside and Tambourine Room by Tristan Brandt at the Carillon Miami Wellness Resort in North Beach.

Ratino declined to discuss MAASS’s lease terms at the Four Seasons, but he also owns Michelin-starred Ômo by Jônt in Winter Park, where CommercialCafe reported retail rents average $37 per square foot, a fraction of what restaurateurs can face in some South Florida submarkets.

But not all restaurateurs find hotel leases sustainable.

Michael Beltran, executive chef and owner of Ariete Hospitality Group, which operates Michelin-starred Ariete in Coconut Grove, said on a podcast that many hotel restaurants have come and gone, and chefs around the world are taking notice.

“The hotel treats it like they treat the pool. It’s an amenity, it’s not a focus,” he said. “Good food doesn’t really matter to hotels. All they really care about is what name is on the door.”

Beltran did not immediately respond to The Real Deal’s request for comment.

Recent hotel restaurant closures include Stephen Starr’s Mexican eatery El Vez at the W Fort Lauderdale, which will be replaced by Motek’s first Broward outpost, and Cipresso, the Italian fine-dining restaurant at the Seminole Hard Rock Hotel & Casino in Hollywood, which is set to close July 18 to make way for a Major Food Group concept.

Representatives from El Vez and the Hard Rock did not immediately respond to requests for comment.

Dacra founder and CEO Craig Robins said the Miami Design District, home to South Florida’s highest concentration of Michelin-starred restaurants, including Le Jardinier, L’Atelier de Joël Robuchon Miami and Cote Miami, is fully occupied and has a waiting list of prospective tenants.

Robins declined to discuss rental rates or lease structures in the Design District, though the area’s supply-and-demand dynamics offer an explanation for its asking rents in the range of $200 per square foot, according to an online listing.

While high-income earners keep the design district cooking, wealth migration to South Florida expanded the pool of diners willing to spend on high-end meals, helping support upscale restaurants in a broader mix of neighborhoods.

“For me, the Design District is unaffordable. It’s very expensive to operate,” Perez Miranda said. “I have learned one thing over the years: People like to eat good food. They travel wherever.”