TAKING A STROLL THROUGH the heart of Miami's downtown business district after sundown in search of a bite to eat or a bit of jazz can be an exercise in futility. You'd save time by swimming across the bay to Miami Beach, where tourists and locals crowd into trendy South Beach to drink Cosmopolitans, dance Salsa and forget the workaday world.
That will change if a few key developers have their way. The hectic daily commute from endless suburban sprawl surrounding South Florida's downtown areas has given way to a new urbanism sweeping the region, where a 24/7 downtown lifestyle is slowly becoming a reality. While downtown Fort Lauderdale already established a nightlife centered around the Las Olas business and entertainment district, downtown Miami was slow on the uptake due in part to fierce nightlife competition from the neighboring urban playground South Beach (or SoBe to the locals) and nearby Coconut Grove.
In the past few years, a few late-night restaurants and nightclubs were the first businesses to open amid the office buildings in Miami's cavernous central business district, known for shutting down at 5 p.m. But now several multifamily developers are lining up to build projects downtown.
There is a geographic reason behind the urbanization trend. Put plainly, there is little land left to develop. Bordered by the Atlantic Ocean to the east and the Everglades to the west, development is limited in South Florida. Infill is the new answer to the land shortage.
So developers who were once comfortable simply pouring money into a sure bet such as South Beach are now gambling on downtown Miami. They are plowing money into residential projects and other amenities aimed at transforming downtown Miami into a 24-hour work-play-live Mecca, with Fort Lauderdale keeping up the pace.
Miami CBD Re-Birth
Downtown Miami has reigned as the king of the workplace, where folks arrive in suits and dresses, loafers and heels — an image not usually associated with Miami's other more enviable districts, such as hip South Beach.
But developers are betting that the kind of new urbanism that has taken root in cities such as Denver, Phoenix and San Diego will work in Miami as well. “We're rediscovering the urban areas of Miami,” says Michael Cannon, managing director at Miami-based Integra Realty Resource-AREEA/South Florida. “Middle America is rediscovering it. People don't like to go through 57 traffic lights to get to work.”
Miami, as well as other cities in the region such as Fort Lauderdale and Boca Raton, are beginning to cater to what Cannon calls “contemporary urban singles” who are moving in from the burbs. And the South Florida urban worker has plenty of urban housing options to choose from, ranging from the traditional mid- and high-priced condos to condo/hotels and lofts.
One developer leading the way is Jorge M. Perez, chairman of Miami-based Related Group of Florida. Perez is developing the $300 million condo project One Miami on one of the last pieces of waterfront land at the north end of the Miami River and Biscayne Bay. One Miami has condo units priced at $150,000 to $400,000, which are affordable when compared with neighboring projects. The Four Seasons condos, for example, are priced at $690,000 for the condominium residences, which range from 1,000 sq. ft. to 4,000 sq. ft.
Another popular product downtown is the condo/hotel, in which residents own an individual unit, while the hotel takes care of the housekeeping and rents the unit to visitors when the owner leaves.
Toronto-based Four Seasons Hotels & Resorts is one of the hotel chains delivering this option in Miami. The $380 million Four Seasons Hotel and Tower Miami is heavy on convenience and amenities. The company says the project is bringing a “five-star residential lifestyle to Brickell Avenue.” The tower includes 186 luxury residential condominiums (the tower residences), a 222-room hotel and 84 Four Seasons condo/hotel units (the hotel residences). Prices start at $480,000 for the fully furnished hotel condominiums. The 70-story tower also will include 200,000 sq. ft. of office space and 10,600 sq. ft. of retail. New York-based developer Millennium Partners expects the project to be completed in the summer of 2003.
Catching the Shopping Bug
Brickell Village, just west of the Brickell Avenue business district, is getting its own share of attention with mixed-use development at the forefront.
Paris-based Constructa, whose American operations are based in Miami, Sau Paulo, Brazil-based Brasilinvest Group and Miami-based Emerson Fittipaldi, a former race-car driver, teamed up for the $90 million, 192,000 sq ft. retail/lifestyle center and 350-unit residential tower called Mary Brickell Village. Tenants include P.F. Chang's China Bistro, Oceanaire Seafood Room and Publix Super Markets, which is the anchor tenant. The rest of the tenant roster has yet to be finalized. Mary Brickell is scheduled to open in late 2003.
The region's top-performing mall is being renovated. Indianapolis-based Simon Property Group's 1.4 million sq. ft. Dadeland Mall, which maintains market dominance in South Miami with $720 per sq. ft. in sales, is undergoing a $30 million redevelopment and renovation to keep up with new competitors Dolphin Mall and the upcoming Village of Merrick Park.
“Dadeland still seems to be the mall of choice for the moneyed Latin community in South Florida,” says Deutsche Bank Securities Inc. analyst Louis Taylor.
With the Village of Merrick Park, developed by Columbia, Md.-based The Rouse Co., set to open in September in nearby Coral Gables, Taylor says competition for top tenants could become fierce. The 435,000 sq. ft. project, to be anchored by Neiman Marcus and Miami's first Nordstrom, already has cleared a competitive hurdle in settling a federal antitrust suit against the locally based owner of the nearby Bal Harbour Shops.
Urban oasis
Although some might argue that Broward County's downtown Fort Lauderdale is ahead of downtown Miami in urban redevelopment — due largely to the fact that Fort Lauderdale never faced competition from nearby cities — there are many similarities between the two markets.
For one, the New River in downtown Fort Lauderdale is supporting robust condo growth. The quaint Las Olas neighborhood is lively at night and pedestrian-friendly, but urban condos are a relatively new concept that developers are now pouncing on.
Take, for example, Richard Zipes, chairman of Albany, N.Y.-based Omni Development Co. Inc., who moved down from New York to develop the ambitious $180 million, 42-story Las Olas River House, a 280-unit condo tower with 40,000 sq. ft. of retail space. The residences, which start at $400,000, are nearly 65% sold. The project is expected to be completed in 2004.
Projects like Zipes' attract residents to La Olas, says Tom Kates, president of Fort Lauderdale-based Stiles Realty Co. And bringing in residents creates more opportunity for other sectors, such as office — a Stiles specialty.
“What's interesting about downtown Fort Lauderdale is that the one component that has been missing is residential,” Kates says. “Now it is finally coming to Fort Lauderdale and people who are commuting from west Broward County or Boca Raton are going to have an opportunity to live and work in the same area.”
Office: A Stagnant Swamp
The office vacancy rate in all of Broward County — which includes the city of Fort Lauderdale and outlying areas — is on the rise. Vacancies increased from 14.6% in the second quarter of 2001 to 20% in the second quarter of this year, according to Miami-based Cushman & Wakefield of Florida Inc.
“It's the same problems you're seeing across the country, which includes low demand, downsizing of companies, default of tenants on office leases and the huge volume of subleases that have come on the market,” says office leasing specialist Randy Goodman, associate director at Cushman & Wakefield of Florida.
New office construction in downtown Fort Lauderdale — and Sunrise, Plantation and Miramar to the west — have not helped the situation. Leasing activity was also down by 30% from last year.
The market is faring only slightly better in Miami-Dade County. Vacancies increased from 9.4% in the second quarter of 2001 to 13.4% in the second quarter of this year, according to Codina Realty Services Inc. In the Miami CBD, the office vacancy rate rose from 10.5% in the second quarter of 2001 to 13.1% this year.
But these grim numbers are not deterring optimistic developers gambling on mammoth office towers downtown. In addition to the 200,000 sq. ft. of office space planned for the Four Seasons tower, the 36-story, $160 million Espirito Santo Plaza, owned and developed by Miami-based Estoril Inc., will feature 300,000 sq. ft. of office space. The building is scheduled for completion in summer 2003.
In the City of Sunrise in western Broward County, Miami-based K-Group Holdings Development and Codina Group, one of South Florida's leading full-service commercial real estate companies, recently unveiled plans to develop a mixed-use office, residential and retail complex called Metropica on 39.8 acres of land. The cost of the project was not disclosed.
Phase I will consist of a whopping 500,000 sq. ft. of office space. There will also be 363 apartment units and 62,000 sq. ft. of space for restaurants and retail. The property is adjacent to Sawgrass Mills Mall.
“We envision a downtown destination for people who want to live and work in Sunrise,” says Joseph Kavana, chairman and CEO of K-Group Holdings. Work on Phase I is slated to begin in December 2002 and will be developed over a seven-year period.
An End to the Multifamily Building Boom?
Out of all the real estate sectors in southeast Florida, high-end multifamily projects have been developing at the most feverish pace.
Charles Kimball, a veteran South Florida real estate analyst, says he is leery of the high level of multifamily activity in the Miami-Dade and Broward markets. In fact, the big question is how much is too much? Even developers like Zipes of Omni Development suggests, “The bubble has to burst sometime.”
Still, other developers are not deterred. Perez of the Related Group of Florida, has his eyes on downtown Fort Lauderdale. He also once coveted a piece of Las Olas land for a condo development but was disappointed when he learned about the city's plans.
“The city wants to make a park out of the land,” he sniffed.
Wendy Doscher-Smith is a Miami-based writer.
SOUTHEAST FLORIDA-BY THE NUMBERS
POPULATION:
City: 362,470
Metro area: 3,876,380
Source: U.S. Census Bureau
UNEMPLOYMENT:
7.5% (metro)
Source: U.S. Department of Labor
VACANCY RATES (Metro Area):
Office:
13.4%, 2Q 2002
9.4%, 2Q 2001
Rent per sq. ft.: $23.63 2Q 2002; $22.04 2Q 2001
Source: Codina Realty Services Inc.
Multifamily:
4.0% vacancy, 2Q 2002
3.4% vacancy, 2Q 2001
Rent per unit: $866 2Q 2002; $811 2Q 2001
Source: Marcus & Millichap
Retail:
7.9% vacancy, 2Q 2002
7.2% vacancy, 2Q 2001
Rent per sq. ft: $18.92 2Q 2002; $18.58 2Q 2001
Source: Marcus & Millichap
Industrial:
8.8% vacancy, 2Q 2002
7.2% vacancy, 2Q 2001
Rent per sq. ft.: $6.43 2Q 2002; $6.57 2Q 2001
Source: Codina Realty Services Inc.
Hotel:
67.3% occupancy, 2Q 2002
74.3% occupancy, 2Q 2001
Source: Hospitality Research Group
MAJOR PROJECTS:
Four Seasons Hotel and Tower, a 70-story hotel project that includes 222 hotel rooms and 186 condos
Location: Brickell Avenue
Owner/Developer: Millennium Partners
Cost: $380 million
Estimated completion: Summer 2003
Espirito Santo Plaza, a 300,000 sq. ft., 36-story office building
Location: Downtown Miami
Owner/Developer: Estoril Inc.
Cost: $160 million
Estimated completion: Summer 2003
Metropica, a 39.8-acre mixed-use complex that will include 500,000 sq. ft. of office space
Location: Sunrise
Owner/Developer: K-Group Holdings Development and Codina Group
Cost: Undisclosed
Estimated completion: 2009