Why Big Retail Brands Flock to Miami

MIAMI—South Florida's retail landscape is not only posting rapid growth, it's also seeing plenty of diversification. Major new retail centers like the $2 billion Miami Worldcenter and $1.2 billion Brickell City Centre are putting an exclamation point on that growth and diversity.

At the University of Miami's (UM) fourth annual Real Estate Impact Conference in February, an expert panel of industry leaders assessed the evolutionary and revolutionary nature the dramatic changes taking place in the increasingly international and eclectic South Florida retail market.

The Retail Evolution and Revolutions panel featured: Robert Cohen, president of retail leasing and investment sales brokerage firm RKF's Southern California division; David Forbes, a partner at the Forbes Company, an owner and developer of iconic regional shopping centers and co-developer of Miami Worldcenter's mall; Matthew Lazenby, president and CEO of Whitman Family Development; and Erich Melsheimer, senior director of Real Estate at The Gap Inc. Michael Comras, president and CEO of Comras Company, who is largely credited with shaping retail on Lincoln Road, moderated the discussion.

“Miami is now the third-biggest market after New York and L.A. for luxury retail,” said Forbes. “There is enough room for all these projects not just to open but to be successful.”

Melsheimer was bold enough to say what industry watchers are thinking: Los Angeles and Miami are competing for the number two retail trade market after New York.

“The demand is so high for retail in Miami right now with all the international travelers, all the international business, all the incredible places to stay, and the art and entertainment,” he said. “It's the hottest spot in the country today for luxury. It's the place to be.”

Lazenby is now developing over 500,000 square feet of retail space at Brickell City Centre, said Miami is unique among U.S. cities. “We have such a wonderful diverse global customer base,” he said. “But it's really the tourist base that we rely upon most.”

As Miami comes into its own as an international gateway city, Forbes added, the strength of the global demographic and a local population continues to bolster the thriving growth of the markets.

“There is a combination of both of those sectors that are looking to buy,” Forbes said. “For a long time we have talked about a hole in the donut. In Downtown Miami to Midtown Miami where there wasn't much retail to speak of.”

All that is changing with Miami WorldCenter, Brickell City Centre and other developers that are rising in and around the urban core. Lazenby said the heart of Brickell will thrive with a mix of retail tenants that appeals to both tourists and a local customer base that currently has to get in the car and drive outside their immediate area to go shopping. Most industry watchers expect both projects to perform strong.

The realities of Miami's attractive, historically underserved retail market are driving up rents. Cohen said retail rents have doubled over the past six years and called “sustainability” a big word in terms of continued rent growth.

“Given some recent land prices of $300 per square foot for dirt and $600 per square foot for buildings, you need a good rent there,” Comras said. “I'm not sure the rents-to-sales will come out of that location yet.”

The Gap is taking destiny into its own hands. The apparel company built a 29,000-square-foot building on Lincoln Road that opened last June.

“We took the opportunity to develop our own building, have some extra space where we can really know what our future looks like long-term,” said Melsheimer. “It was a great way to show we are capable of developing and what are stores are capable of doing as the market continues to grow with the Latin American influence. It's a great road ahead for our brand.”