Greater Miami's commercial real estate market is riding a new wave of optimism, buoyed by a string of successful major international events and a feeling that the world's business leaders are finally beginning to understand it.
Perfect weather and crack organization marked big events: The Summit of the Americas, which brought leaders of 34 North and South American countries to Miami in December, and a spate of good publicity from the Orange Bowl and Super Bowl football extravaganzas. It was a shot in the arm particularly for tourism officials who were still struggling back from bad publicity about crime and several attacks on visiting tourists.
In November, Fortune ranked Miami 10th among the world's best business centers. And World Trade magazine ranked Miami No. 2 in its list of the 10 best U.S. cities for international companies. Meanwhile, police announced that crimes against tourists fell 62% during 1994.
"In the past two or three years there's been a reawakening of institutional interest in Dade County," says Howard Glass, president for the Southeast region of Sonnenblick-Goldman. "Now a lot of multinationals -- from import-export companies to Fortune 500 companies -- realize that the safest place to do business with Latin America is from Miami."
Industry experts are making cautious predictions of a new renaissance in downtown Miami -- not in terms of office towers as in the 1980s, but in terms of condos and apartments.
"The hurricane helped fill them, and they've stayed more or less full," says Jean Whipple, economic consultant for the Miami Downtown Development Authority.
Whipple cites new studies indicating that downtown could absorb 7,000 new living units in the next seven years -- most in Brickell, some in the Omni area just north of downtown, but also one or two buildings in Overtown/Park West.
And with the rapid residential growth in Brickell, Whipple says new studies are under way into finally providing the retail development the area needs.
And Miami's $139 million Performing Arts Center in the Omni area just north of downtown took a step forward as committees narrowed down the selection process for architects to three finalists.
Not all the news is good in terms of development, however. H. Wayne Huizenga's proposed $2 billion, 3,088-acre Blockbuster Park development of basketball and hockey arenas, hotels, golf courses, movie studios, offices and shops was canceled when the company was taken over by Viacom of New York.
Dade County's condo recession is over with a bang. After five years with little new construction, the beginning of 1995 saw construction under way on 22 condo projects priced at $175,000 a unit or more, and announcements of another eight projects that would bring the grand total to nearly 6,000 units.
So much construction is planned that fears are raised of a repeat of the overbuilding of the early 1980s that left Dade with a glut of 15,000 unsold units by 1986. Dade historically absorbs about 1,500 units a year, according to Lewis Goodkin, president of Goodkin Research, a real estate consulting firm.
"Hurricane Andrew gave apartment management companies the opportunity to maximize rental increases," says Charles Cook, Allegiance Realty Group's district manager in Miami. "The result is that even though the market has softened somewhat, we have achieved and maintained a higher street rent level than we did before Andrew."
In Miami Beach's hot South Beach area, Donald Trump announced in January he will take over development of a 12-acre oceanfront site owned by developer Thomas Kramer. Kramer had spoken of the possibility of a 44-story condo tower, twin 60-story condos and a 12-story hotel there; Trump's involvement is expected to help with financing. No firm plans were announced for what might be developed there now.
In Miami Beach, developer Stephen Muss in September sold his 855-unit Seacoast Towers apartment complex, built in the 1960s at 5100 Collins Ave., for $94 million to a group of European and American investors called Royal Coast Enterprises Inc. The new owners say they will renovate the building and keep most of its units as rentals.
Swire Properties now has $175 million invested in Brickell Key and plans to invest another $200 million there. "We chose Miami for these investments because of the potential role of the city, now accelerated by the Summit of the Americas, as the Hong Kong of Latin America," says Steve Owens, Miami area president for Swire Properties.
Offices rise from the trenches
Dade's office market continued climbing out of its glut, with overall vacancy rates for the year, ending September 1994, falling to 15.13%, down from 17.9%. Average asking gross rental rates rose to $17.08 per sq. ft., from $16.73, and 665,563 sq. ft. were absorbed, according to a report by Miami-based Terranova.
"It comes as no surprise," says Sally Marks of Terranova Corp., "that the Brickell Avenue submarket continues to experience the highest office vacancy rate in Dade, although the rate has come down to 26.88% from 30.26% a year ago.
"But what is particularly eye-catching is the substantial improvement in vacancy levels in the Biscayne Boulevard submarket. For the first time in recent years, the vacancy rate in this submarket has dropped significantly -- from 27.29% in 1993 to 19.81% in 1994," she says.
Also on Biscayne Boulevard, Ivax Corp., the world's largest generic drug maker, has signed a contract to buy a 15-story, 150,635 sq. ft. office tower at 4400 Biscayne Blvd. that had been vacant. Ivax paid $6 million for the building, which was built in 1985 for $25 million by Key Pharmaceuticals. It plans to move its headquarters there.
On Brickell Avenue, Terranova has begun a $2 million renovation of the 243,000 sq. ft., 1982 Interterra Building.
Also in the Brickell area, Rivergate Plaza, an office and retail complex, was bought by developers Ronald Schram and Frank Jay Hessel, who say they will renovate it and make it available at about $13 a sq. ft And Martin W. Taplin & Associates bought the nine-story, 72,000 sq. ft. Brickell Executive Tower from Sunbank for $4.4 million. "South Florida -- Miami in particular -- offers tremendous real estate investment opportunities," says Martin Taplin, president.
Only three major office projects are under way, Marks says: Parkside Corporate Center II, with 35,623 sq. ft. in the Hialeah/Miami Lakes area; the 5201 Waterford building, with 210,000 sq. ft. in the Airport/West Dade market; and 404 Washington Ave., in Miami Beach, with 57,000 sq. ft. Construction is stalled at two Coral Gables buildings, Douglas Entrance South Tower and 220 Alhambra, awaiting new tenant commitments.
"Lending for speculative new office construction has ceased," she says, "and very little new construction is anticipated through 1995."
Miami's downtown office market is improving from its lows in 1989, when two major bank failures there triggered negative absorption; the area's vacancy rate improved from 21.34% in 1993 to 18.37% in 1994. And a report by Allen Morris Co. predicted that Dade County's office vacancy rate, which peaked at 23% in 1992, should fall to 13% in 1995, and to 8% by 1997 before rising to 17% again in 1999.
Hospitality struggles for gains
Dade County hotels continued to struggle back from occupancy losses blamed on bad crime publicity and increased competition from Caribbean tourism destinations. Overall occupancy for 1994 was estimated at 71.5%, down from 74% in 1992, although the 1992 figure was artificially inflated by local homeowners seeking refuge after their houses were damaged or destroyed by Hurricane Andrew.
Average room rates were $94 per night and are projected to rise slightly to $95 in 1995, according to Patrick D'Sa of PKF Consulting.
Miami Beach granted rights to two developers -- Jonathan Tisch, chief executive of Loews Hotels, and Bruce Ratner, chief executive of Forest City Ratner Cos. -- on a lot at Collins Avenue and 16th Street for a 16-story, 830-room, $165 million hotel that the city hopes will spark a spate of new hotel building on the beach and help bring business to its recently renovated convention center.
Trump's South Miami Beach project might include a 12-story hotel; Margulies' Key Biscayne project includes a 450-room hotel. And a group of investors in January announced progress on building a new convention hotel in Miami Beach.
Peter Cain, a vice president with American Express, is one of four businessmen who formed HCF Group Inc. to build a $44 million, 265-suite hotel. The city has put up $10 million to buy the land, Sheraton Hotels has agreed to operate it and local banks are putting together a package to help finance it. Still, the partners are seeking new investors to help them come up with their share.
Dade County's generous spurt of retail sales to homeowners rebuilding after 1992's Hurricane Andrew waned in 1994, but experts predicted new sales gains in 1995 anyway.
Retail development planned
In major developments, Federated Department Stores says it will open a Bur, dines, a Bloomingdale's and 100 new specialty shops in North Dade's Aventura Mall. And Macy's will open a store in The Falls shopping enter in 1996.
In West Dace, the Mall of the Americas, which recently underwent a $25 million renovation, was sold by Balcor Co. to The RREEF Funds for $75.2 million.
In South Miami, city commissioners in December approved plans for an $85 million project to revamp the struggling 350,000 sq. ft. Bakery Centre mall. Comras Co. of Miami Beach will put on a new facade, expand its movie theater from seven to 24 screens and add 100 apartments.
An $8 million renovation is under way at Kendall Mall, Southwest 107th Avenue and Kendall Drive, which was recently purchased by Lefmark Florida Inc. from Travelers Insurance, which had foreclosed on its previous owners.
In Florida City, victim to major destruction in 1992's Hurricane Andrew, the Florida Keys Factory Shops outlet mall opened in September 1994. Baltimore-based Prime Retail says a second phase of the project will add 25 new stores.
Industrial parks continue to boom
Dade's industrial market, which stayed strong even during recent recessionary times, also continues to boom, according to Ford Gibson, president of Codina Development.
"It's still a good market," Gibson says. "We focus primarily on export-import, on the Latin American market; it's been strong for the past three or four years."
"We're still experiencing the frenzied activity levels of the past two years," adds Mike Silver, industrial specialist for CB Commercial. "We have continued absorption throughout the market, particularly in suburban industrial areas. The Airport West area is strong, and so is Medley, just to the north.
"Medley is more pure industrial space with dock-high distribution buildings. Its rents are $1 to $2 per sq. ft. less than the [$6 to $7 per sq. ft.] prices in Airport West," says Silver. "Vacancy rates throughout Dade County are about 6%."
New developments under way or planned include:
* The Gables, in Coral Gables, by Kovens Development, with 204 units priced at $500,000 to $1.5 million.
* Grove Hill, Coconut Grove, by Terremark, with 80 units at $325,000 to $1.5 million.
* Sunset Harbour, Miami Beach, by Pacific International Equities, with 503 units at $145,000 to $900,000.
* Williams Island, Aventura, by the Trump Group, with 274 units at $300,000 to $1 million.
* Maison Ted Lapidus, Miami Beach, by Edel International, with 30 units at $398,000 to $500,000.
* Ocenia Island, two luxury, 18-story condo towers at Collins Avenue and 163rd Street, Miami Beach, with 306 units priced at $200,000 to $1 million.
* Tresor, a 10-story, 45-unit "boutique" condo complex at 155 Ocean Drive in South Miami Beach, from $250,000 to $800,000, with principals the developers Morris Richter and Robert Barnes and architects Bernardo Fort-Brescia and Laurinda Spears.
* Grove Hill Tower, a $43 million, 21-story waterfront condo on Coconut Grove's South Bayshore Drive with 80 units from $340,000 to $1.7 million, by Terremark's Manuel Medina.
* 1500 Ocean Drive, a $50 million, mixed-use oceanfront residential high rise and entertainment retail plaza, designed by Michael Graves and developed by Paris-based Constructa Inc., with condo units from $180,000 to $750,000.
* A 143-unit condo in Key Biscayne has been announced by developer Martin Margulies as the first phase of the new Grand Bay Resort and Residences, costing a total of almost $350 million. The project eventually will include a second condo tower, 57 single-family houses and a 450-room hotel.
* Courvoisier Courts, a 26-story, $35 million, 272-unit condo complex, broke ground in January on Brickell Key by Swire Properties of Hong Kong.
* A first tower at Tequesta Point, a three-building condo project, also by Swire on Brickell Key, that will total $150 million, with units priced. from $125,000 to $750,000.