The South Florida real estate industry’s favorite cliché is that Miami is a “global city.” Like New York, London, Paris and Tokyo, the word “Miami” can now be found in gilt letters below luxury brand names from around the world.
Hackneyed or not, it is precisely Miami’s ever-growing appeal to international investors and pleasure seekers that is breathing new life into the area’s retail sector.
“To quote another saying, Miami’s best attribute is that it is so close the United States,” said Louise Bendix, an office and retail broker at ComReal Miami. “It is really servicing the South American market. Every holiday, I see South Americans heading home with planeloads worth of merchandise.”
While South Florida’s retail market remained relatively stable from 2012 to 2013, the hundreds of thousands of square feet currently being developed tell the real story of the region’s rebounding economy.
There are seven projects totaling over 1.5 million square feet of retail space already under construction in Miami. And that does not include multiple planned developments, expected to add another 2 million square feet to the market, according to CBRE’s Miami Retail MarketView, published in late 2013.
As new businesses eager to serve Miami’s growing population enter the market, retail brokers are reporting a shortage of quality retail space throughout the county. The market has a 4.3 percent vacancy rate, a 1 percent decline from the 2012 fourth quarter, according to CBRE.
Developers are stepping up with a wave of new construction, including expansions at Turnberry Associates’ and Simon Property Group’s Aventura Mall – soon to be the second largest shopping center in the nation – and Whitman Family Development’s Bal Harbour Shops. The expansions will add a combined 490,000 square feet of retail to the market.
And in the coming years, two massive downtown projects are slated to bring more than 1 million square feet of new retail space to the heart of Miami. Construction is scheduled to begin at the end of the year on the largest project, Miami Worldcenter, a mixed-use development planned by the Forbes Company and Taubman Centers. Worldcenter designs include 750,000 square feet of retail. Anchor tenants Macy’s and Bloomingdale’s have already inked leases at the development.
Nearby, the 5.4 million-square-foot mixed-use Brickell CityCentre is already under construction. The Swire Properties project is slated to include 615,000 square feet of retail, with the project spanning 9.1 acres in Miami’s financial district. It is scheduled to wrap up construction in May 2015.
On the smaller end of the development spectrum, Florida East Coast Industries is planning to build its Downtown Miami station for All Aboard Florida, a $1 billion passenger rail service connecting Miami to Orlando, blocks away from Worldcenter. The project is expected to include about 175,000 square feet of new retail space and is slated to open in 2016.
In addition, Miami’s up-and-coming Design District is set to see a $312 million redevelopment, through a partnership between Dacra and L Real Estate, that includes some 160,000 square feet of new retail.
“What we are going to see in the next year or two is that the majority of the new [retail] development in South Florida will be urban,” CBRE senior vice president Paco Diaz said. “There are major retail centers being developed right now in the suburbs, but the focus going forward will be on the urban market.”
Attracting luxury brands is a common denominator for the new developments. Worldcenter, for example, is dedicating 30,000-to-40,000 square feet to luxury retail. But the broader Miami market is seeing interest from retailers of all kinds, according to Diaz. “Miami is not specializing,” he said. “It is attracting absolutely everybody.”
The area’s appeal is reflected in current pricing. Average asking retail rents in Miami climbed to $37.61 per square foot in the 2013 fourth quarter, a $5.77 per square foot increase from the year before. In Miami Beach, average asking rates jumped by $30.53 to $155 per square foot, the largest increase in South Florida, according to CBRE. Premier retail spaces along Lincoln Road are fetching as much as $300 per square foot.
“The economy is stronger nationwide,” Diaz said. “That means that people aren’t simply parking their money in condos; they are also establishing businesses.”