Another year in business in South Florida saw major changes in the region’s biggest industries: the opening of Cuba, a cooldown in the condo market, a boom in Broward’s hotel industry and a secretive South Florida tech startup finally starting to open up.
The Miami Herald rounded up the best business stories of 2015 for this week’s Business Monday.
We avoided the flash-in-the-pan stories in favor of trends that told the bigger picture and could continue into 2016. Here they are, presented in reverse order. We’ve also highlighted some stories to watch for next year.
10. Redesign of Lincoln Road
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Lincoln Road, Miami Beach’s iconic tourist destination, is getting a makeover from a high-profile New York architect. City leaders have approved a plan by James Corner to redesign the busy pedestrian mall first conceived by legendary South Florida architect Morris Lapidus. Corner’s firm wants to make the area more friendly to pedestrians and bicyclists. Corner envisions new shade structures, reorganized cafe seating and more areas for outdoor entertainment along the crowded space. He also plans to replace side streets occupied by delivery trucks and trashcans with more trees, bike lanes, new storefronts and sidewalk cafés. Vehicles would be prevented from entering certain roads and some street parking would be eliminated. Corner is best known for his work on the High Line, a popular linear park built on an abandoned elevated railway line in Lower Manhattan. The overall plan, city leaders say, will help make Lincoln Road a place residents want to spend time while increasing profits for local businesses that depend on tourist dollars.
Joey Flechas and Nicholas Nehamas
9. Turmoil at TotalBank
TotalBank has reported strong quarterly results and growth in recent years. So it surprised many observers when the Miami-based bank suddenly laid off 58 employees in November. It was the first time since 2012 (when Bank of America and BB&T/BankAtlantic each laid off hundreds of South Florida employees) that a local bank lost so many jobs. TotalBank chairman Jorge Rossell attributed the layoffs to “investments and improvements in technology and infrastructure.” A month later president and CEO Luis de la Aguilera announced he was leaving to take over competitor U.S. Century Bank, although he denied the move had anything to do with the layoffs. Former employees said the number of layoffs was closer to 100 and that the bank, which moved into new downtown headquarters and hired aggressively in 2014, had tried to grow too fast. They also said parent company Grupo Banco Popular Español, of Spain, wants to sell. It’s worth keeping an eye on TotalBank in 2016 to see if its troubles continue — and if it’s possible that South Florida’s wider banking industry is in trouble as Latin American markets struggle and costly compliance regulations bleed away profits.
8. A new wave of co-working spaces
The entrepreneurial ecosystem received foundational support with a new wave of co-working spaces and accelerators opening up, led by New York-based WeWork, the giant venture-funded co-working network, as well as the expansions of locally based Pipeline Workspaces and Buro Group. The 40,000-square-foot WeWork Miami Beach, which opened in the summer, will be followed up early next year with a 100,000-square-foot space in downtown Miami. Also on the runway for openings early in the year: Cambridge Innovation Center is opening a massive co-working and events center for startups at the University of Miami Life Science and Technology Park and startupbootcamp, a European accelerator, is coming to downtown Miami with a program focused on digital health. Silicon Valley’s 500 Startups also ran an accelerator program — focused on growth marketing — this fall and will be back next year, it said.
7. Developers duke it out with over-the-top amenities
Real estate is war — and for residential developers in Miami, luxury is the weapon of choice. The year saw luxury condo developers cook up some decadent amenities in order to attract wealthy buyers: from cigar lounges to dog walkers to sculptures by famed artist Jeff Koons. Elevators just for cars, full-service “resort-style” clubs and bowling alleys were also on the menu. Sales may have slowed but Miami’s evolution as a city (Art Basel, better restaurants, more shopping) means wealthy buyers want to spend more time in their condos, not just use them for weekend beach getaways. That means developers need to stand out from the crowd by offering year-round attractions in their buildings. Analysts call the battle Miami’s “condo wars.” And in 2015 there was a clear winner: Faena House in Miami Beach set a South Florida residential sales record when Chicago hedge-fund billionaire Kenneth Griffin bought a penthouse there for $60 million. The building offers what have become standard amenities for a luxury condo in this real estate cycle: fitness center with ocean views, private beach club, spa, playroom for children and a 24-hour building concierge.
6. Regulators reject Staples-Office Depot merger
Boca Raton-based Office Depot is getting no love from federal regulators on its proposed $6.3 billion takeover by competitor Staples. In December, the Federal Trade Commission rejected the merger, saying it would raise prices for consumers. Staples has coveted Office Depot for years. Lawyers for both companies have contested the FTC’s ruling. They argue any delay will kill the deal. A federal judge must settle the dispute. In the meantime, sales at Office Depot have fallen as the chain closes stores around the country. Analysts have questioned whether the South Florida company can survive if the merger is blocked.
5. A hotel boom in Broward
Broward County’s hotel market is booming as improvements at Fort Lauderdale International Airport and Port Everglades spur growth in the tourism industry. Add in the availability of beachfront land at cheaper prices than Miami-Dade and you have a developer’s dream. So far, the 349-room Margaritaville Hollywood Beach Resort (a Jimmy Buffett-themed project) has opened its doors and other high-profile projects are in the works, including a Four Seasons and a Conrad Hotel in Fort Lauderdale. A total of 54 projects with 8,910 rooms are under construction, with another 117 projects with 13,815 rooms in the final stages of planning. In 2014, Broward hotel occupancy reached an all-time annual high of 77.9 percent. The boom likely means the end for the county’s beachfront motels because developers are eying every piece of available land to build luxury projects.
Hannah Sampson and Nicholas Nehamas
4. More REALity for Magic Leap
The secretive South Florida startup developing “mixed reality” technology finally made one of its first public appearances: A “groundbreaking” ceremony in October with state, local and national officials celebrating its impending move into 260,000 square feet of new offices, clean rooms and other manufacturing facilities in the old but soon-to-be-reimagined Motorola campus in Plantation. The company has raised more than half a billion dollars in venture capital so far and is rumored to be raising another $827 million (which would value the company at a whopping $3.7 billion). It is also moving along in the process to secure $9 million in incentives from state, county and city officials. A peek at the technology — of which Magic Leap will only describe as something that enables “people to interact with the world in ways never before possible … defining the future of computing, entertainment, communication, education and play” — will have to wait.
3. Stonegate enters Cuba
Given the cultural ties between South Florida and Cuba, it wasn’t a huge surprise when a local bank announced it would be the first to do business with the island nation since President Barack Obama reopened relations. But it was a shock when the bank turned out to be Pompano Beach-based Stonegate Bank. Wall Street-backed Stonegate does hardly any international business and is headquartered in Broward, not Miami-Dade. But not having to rely on Miami’s Cuban exile community for business actually turned out to be a plus. Magic City bankers said they were afraid of losing customers if they got involved with the Castro regime. Stonegate now handles the accounts for Cuba’s diplomatic missions in the U.S. and has a correspondent banking relationship with Cuba’s central bank, making it easier for clients to transfer money there. In November, the bank announced a deal with MasterCard that will allow clients to use a debit card when traveling in Cuba. These are still baby steps and more activity is expected next year.
2. Cruise lines set sail for China
After a stable 2014, the cruise industry set its sights on an ambitious goal: opening up the fast-growing Chinese market. Miami-based Royal Caribbean International announced that its brand-new 4,180-passenger ship Quantum of the Seas would be based year-round in Shanghai. Between 2012 and 2014, the number of passengers from mainland China grew 79 percent per year, from 216,700 to 697,000. China’s recent financial crisis may put a damper on travel but several cruise lines are still going full steam ahead with their plans. Doral-based Carnival Corp. has said it will deploy six vessels to China in 2016. And in October Miami-based Norwegian Cruise Line announced it was building a 4,200-passenger vessel specifically for the Chinese market in 2017.
Hannah Sampson and Nicholas Nehamas
1. Downtown condo market cools down
Miami’s hot condo market is finally cooling after years of heady growth — but experts predict this cycle will end in a soft landing, not an economy-busting crash like 2008. Sales have slowed as economies in Latin America and Europe struggle, hurting the wealthy foreign buyers who have fueled the latest boom. Several downtown projects have been shelved or canceled altogether and others are lowering the deposits buyers must put down before closing. In the last bust, developers flooded the market with condos because their customers were speculators and flippers relying on easy credit. This time around, they’re building for real buyers who can put down cash. That meant builders had to do a better job of matching supply with demand. The end result? Experts say the slowdown won’t leave Miami with a glut of unsold units.
Stories to watch for 2016
The opening of Cuba: Apart from Stonegate, local businesses have proceeded cautiously when it comes to Cuba. The opportunities are there but many South Florida companies are nervous about getting entangled with complicated regulations. Even so, cruise lines and ferry companies have pounced. Apartment-renting service Airbnb has also set up shop in Cuba. Airlines may be next with the potential resumption of commercial air service between the two countries. Sources say the Miami River could serve as a headquarters for small-goods trade with the island nation, as it does with many Caribbean countries.
Real estate watch: What happens between the time buyers sign contracts and actually have to close should worry developers. If economies abroad don’t recover and the U.S. dollar keeps getting stronger, foreign buyers may find they don’t have enough dollars to close. At the very least, many will need bank financing to bridge the gap. In the meantime, many builders including the Related Group are turning their eye to Fort Lauderdale, where the beach isn’t totally built up and land prices are lower. Broward is also more popular with domestic buyers than is Miami-Dade.
The China solution: As Latin American and European condo buyers dry up, some developers say China will provide the newest pipeline of customers. The Miami Association of Realtors and several builders have traveled to Shanghai and other parts of the Far East to pitch their projects. Some report strong early sales from Chinese buyers, whose numbers have doubled in South Florida since 2012. But they still make up a tiny percentage of international buyers and many developers are skeptical, saying China’s purchasing power will likely be limited by a financial crisis in addition to the sheer inconvenience of travel from Asia to Miami. Look out for Miami International Airport opening an air route to Beijing. That would be a huge step in drawing the Chinese to South Florida. But is the demand there?
Economic outlook: Several factors remain in Florida’s favor for another strong year for business in 2016: good weather, low taxes and strong net migration that saw the state’s population overtake New York. But continued trouble in Latin America could spell trouble for South Florida, which is tied to our southern neighbors’ economies. Miami-Dade’s unemployment rate has held steady but key local industries are showing signs of slowing down. The construction industry has actually lost jobs over the last year as the building boom draws to a close. And retail, trade and hospitality are also growing at a slower pace than in the state as a whole. While political and business leaders stress the diversification of the local economy, Miami-Dade remains dependent on low-wage construction and tourism jobs to fuel growth.
Traffic: Traffic, traffic everywhere! And not an inch to move. The downside of a strong economy and cheap gas is more cars on the road. People are driving to work, going shopping and taking vacations. That has left roadways across South Florida jammed and business owners hopping mad. Major construction projects are widening the busiest expressways. County leaders are talking about installing express bus lanes. Cities are encouraging “transit-oriented” residential development near rail and bus stations. Parking requirements for some new buildings may come down. Can South Florida finally come to grips with its dreadful traffic problem?
Beckham stadium quest: If at first you don’t succeed, try, try again. That’s been the motto for international superstar David Beckham and his Miami United team in their quest for a stadium. Beckham has tried and failed to place his stadium on land at PortMiami, on a prime waterfront lot on Biscayne Boulevard and next to Marlins Park in Little Havana. Now Miami United says it has finally found a solution with a parcel of land in Overtown near the Miami River. But the issue has become a political foot … er, soccer ball in the Miami-Dade mayoral race between incumbent Carlos Gimenez and challenger Raquel Regalado, whose father Miami Mayor Tomás Regalado recently questioned a lack of parking at the new site.
Sea level rise: Will this be the year developers finally wake up to the threat of sea level rise? Real estate prices don’t seem to have caught up to the fact that Miami could be underwater by 2050, putting property owners at risk of losing billions. But business leaders in Miami Beach, where flooding is worst, are worried about their shops and hotels being submerged. In response, city leaders have begun a $500 million project to install pumps and raise roads and seawalls across the city. But it’s not clear that will be enough because rising waters will likely bubble up through the porous limestone that lies beneath much of South Florida, flooding cities and threatening our fresh water supply. And county and state leaders have been slower to act. A recent rainstorm deluged South Dade with floods, causing Zoo Miami to close for several days. Some scientists say it may already be too late to stem the rising tides.
Tech district watch: Will they build? This year, two large live-work-play development plans with strong tech components were unveiled. In May, Michael Simkins’ group proposed the 10-acre Miami Innovation District, which includes nine towers with 7.4 million square feet — more than half of that earmarked for tech office space, plus retail and “micro-unit” housing — west of the planned Miami Worldcenter. But the district’s planned 633-foot billboard tower has run into political and regulatory roadblocks. Last month, we learned Wynwood landowner Moishe Mana wants to redevelop 24 acres into a mini-city of large-scale industrial-style buildings designed to lure major tech and creative companies. Like the Miami Innovation District to the south, the plan also envisions expansive communal areas and green space. Both proposals have a long road ahead.