Real Estate

Retail real estate: The more things change, the more they stay the same…

George, a labrador-retriever mix, relaxes as musicians from the New World Symphony hold a concert on Lincoln Road on Dec. 12. “Our cultural shift back to art, music, and other humanities is a driving force in our desire to gather.”
George, a labrador-retriever mix, relaxes as musicians from the New World Symphony hold a concert on Lincoln Road on Dec. 12. “Our cultural shift back to art, music, and other humanities is a driving force in our desire to gather.” pfarrell@miamiherald.com

CNBC reporter @CourtRegan wrote a Jan. 5 article headlined “Retail Wreckage: Here are the numbers moving retail stocks” and then proceeded to outline the horrible retail news to start 2017. The leadoff read, “It was a tough holiday at the mall.” The erosion of sales at Kohls, Macy’s, L. Brands, Barnes & Noble and others are leading to severe earnings outlooks across major retailers. Store closures and layoffs are well underway, and brokers are working hard to re-imagine how to position each retail asset.

Meanwhile, the industry death-watchers have now turned to the topic “Is retail a dying asset class?” What are the near- and long-term outlooks of shopping centers, malls and other retail forms of development if everyone continues ordering everything online? What are we going to do with all these huge spaces?

Most of us have lived through a time where an old mall was demolished or an otherwise-older area of town reinvented itself. I think back on the introduction of CocoWalk into downtown Coconut Grove; now, pushing 30 years later, the center is working on transforming itself again. The celebration of the recent launch of Brickell City Centre in downtown Miami is a feat of beauty and elegant mixed use tied to the infrastructure of the city. We have Lincoln Road and Aventura Mall flourishing, while the Bal Harbour Shops is trying to reinvent itself, although community resistance over its expansion has stalled efforts. South Florida, and Miami-Dade in particular, is a dominant and competitive retail market, drawing huge buying power from the local community with about 2.7 million people, coupled with over 15 million tourists annually.

But our retail dominance is not immune to online forces. So how do we put the Internet genie back in the bottle? The short answer is that we can’t.

What we need to recognize about the future of retail is that everything that worked in the past can work again. The Internet can’t change the fact that people need a place to gather. The Greeks called it the agora, the market — the assembly of people for entertainment, food and education.

But our cultural shift back to art, music and other humanities is a driving force in our desire to gather. Take the recent Coconut Grove Arts Festival; 55 years old, it remains one of the highlights people look forward to year after year. Our festival culture in South Florida is pervasive — from Art Basel, Beaux Arts, SOBE Festival, all the way to the KISS Country Chili Cookoff, 32 years strong in Pembroke Pines. Observable fact: South Florida residents turn out for festivals.

The question retailers should be thinking about is, How do we tap into what makes these weekend-long festivals so much fun and incorporate that energy into the retail experience?

Part of the equation is entertainment. A resurgence of artists and musicians back into our retail spaces would be a welcome return to form. Older forms of entertainment are also coming back. I took my daughter to The Falls mall last week and rented one hour of Xbox time for the two of us, and I was transported back to 1981 playing Space Invaders at the Mall Arcade. The only difference was that we were sitting in reclining chairs as if we were in our own living room. WeWork should open up a retail format soon enough called “WeHang” where everyone pays a monthly fee and they enjoy a series of common living rooms, video games included.

Movie theaters are undergoing their own transformation but remain important players in the retail space. Transformed by the home theater, there’s still something to be said for “seeing it on the big screen,” at least for now. Grocery stores are also undergoing a transition, in many ways becoming smaller and more customized as consumers start buying bulk items online or at Costco. These two dominant classes of anchor will change dramatically in the next 10 years.

The critical ingredient remains the experience. When you think about successful retail today, think about whether it delivers on the experience. Costco delivers never-ending tasting stations and enough gizmos and home goods to keep the average family entertained for a few hours. Starbucks transformed into the place you hang out, have an $8 cup of coffee and surf the internet for three hours working on a term paper or a business plan. Marshalls (TJX) delivers on the predator instinct of finding the rotating inventory deal of the week. Figure out what will hold us for three hours of passive or active entertainment, and your retail will succeed.

This means we need more pottery studios; more art schools, more gymnasiums, more community kitchens, more stages for performances. As a community, we need to support efforts to restore — as an example, the Coconut Grove Playhouse — because these historic downtown theaters are the venues that bring people together; they offer children the chance to perform and engage us with one another. The theater becomes part of the retail experience, just as Actors’ Playhouse in Coral Gables anchors Miracle Mile. The Mile is getting a huge facelift to deliver authentic street retail, hopefully by 2018, as the new streetscape starts to transform the Mile once again.

So I want to hear from you, my readers. I’ve listed seven top retail markets in Miami-Dade, and the ranges in retail rents for the top 20 percent of buildings in the submarket. Since rent is generally tied to retail sales, the higher the rent, the more people tend to spend at that location. So what areas deliver on the retail experience, and which areas seem overpriced (or underpriced), given your experience? Tell me your favorite South Florida retail location and what makes it special to you. Email SwamiGraz@gmail.com.

In the meantime, settle down with all that online ordering. We want to have a place to visit this Saturday for a little gathering at the market.

Anthony M. Graziano is senior managing director for Integra Realty Resources-Miami/Palm Beach, based in Coral Gables. He has been involved in the real-estate field since 1986. He can be reached at amgraziano@irr.com and irr.com.

▪ This is a column that appears monthly in Business Monday magazine of the Miami Herald.

Read more:

▪ Driverless cars, machine-learning, robotics: The tech that will change real estate is all around us

▪ Where do we begin to solve the affordable housing problem? Here are some suggestions

▪ Einstein’s lesson on real estate

▪ A good time to sell in real estate? What’s your timing?

▪ Sustainable cultural diversity will help South Florida’s real estate value

Miami-Dade top retail submarkets

This reflects figures for the markets as of Feb. 22.

Midtown/Wynwood

Brickell

Design District

Coconut Grove

Miracle Mile

Lincoln Road

Collins/

Washington

Regional Malls

Retail area (sq. ft.)

1,537,625

1,685,639

735,631

1,195,724

1,262,681

1,376,122

1,679,355

Varies

Occupancy

88%

79.60%*

93.30%

95.40%

95.90%

92.60%

95.80%

Varies

Avg rents (sq. ft.)

$60

$100

$115

$44

$43

$101

$81

$225

Top-end rents

$65-$80

$75-$125

$100-$200

$50-$70

$50-$60

$200-$300

$75-$130

$75-$300

*Reflects Brickell City Centre absorption

Source: CoStar Group, compiled by Integra Realty Resources

  Comments