From the ocean to Alton Road, there are 25 vacant storefronts (not including the large Anthropologie space now vacant and under construction in the retail space under the movie theater). There are 13 vacant storefronts on the half blocks on either side of Lincoln Road in that same stretch (not counting the 8 vacancies on the north side of Michigan in a building the owner is trying to get Historic Preservation Board approval to renovate). [View our methodology here.]
In the ten blocks surveyed, some fare better than others. The blocks with the largest vacancy rates are:
- Collins to Washington with 5. The new Ross store opened in this block recently.
- Pennsylvania to Euclid, 5 vacancies.
- Euclid to Meridian, 5 vacancies. Not counted as it has a tenant is one storefront with a “Coming Soon” sign for a Häagen Dazs at 665 Lincoln Road.
- Meridian to Jefferson, 5 vacancies.
So what’s going on?
In May, the Real Deal highlighted stagnating rent rates and increasing vacancy rates on some of “the nation’s most trafficked retail strips.” Citing Cushman & Wakefield’s 2016/2017 Main Streets Across the World report and additional research conducted by TRD, the publication generated a list of the top 10 retail strips, noting rent rates for 2016 and vacancy rates for the first quarter of 2017. Lincoln Road’s average monthly 2016 rents were $325 per sq. ft. with an 8% vacancy rate.
John Guarnieri, CEO of KNR Hospitality whose Quattro is located at 1014 Lincoln Road, told RE:MiamiBeach, “I think rent hikes on Lincoln Road have reached a tipping point and we are beginning to see the price per sq. ft. begin to drop. Unfortunately, many restaurants caught in the crossfire of this during the time their leases were up for renewal suffered either in shutting down or relocating to another more affordable location off the beach.”
The Lincoln Road Business Improvement District, which according to its website was “formed with the purpose of stabilizing and improving the Lincoln Road retail business district”, spans the area from Washington to Alton on Lincoln Road. Executive Director Ivannia Van Arman says the BID represents 75 different properties, whose tenants include over 200 boutiques, national retail stores, restaurants, cafes and bars, the Colony Theatre, ArtCenter/South Florida and New World Concert Hall. She told RE:MiamiBeach, “Lincoln Road is a dynamic destination that has been the cultural and civic spine of Miami Beach for decades. The district is much more than a traditional shopping mall and there is not a normal vacancy rate for a comparison. We are not a ‘mall’ and that makes Lincoln Road such a treasure.” She noted the recent openings of “Mr. Bing ice cream, the new 31,000 sq. ft. Nike flagship and Lebo Art with much more in store for the coming months.”
The City is in the design phase of the redevelopment of Lincoln Road from Washington Avenue to Lenox, including Meridian, Drexel, and Pennsylvania Avenues between Lincoln Road and 17th Street. The design phase, based on the approved Master Plan, is expected to be completed next summer. Construction is expected to go block by block to minimize disruption to businesses.
To pay for the plan, the City needs to come up with about $40M in funding. We asked Commissioner Ricky Arriola who chairs the Commission’s Finance and Citywide Projects Committee about the recent turn of events on Lincoln Road. He compared the current situation to similar ones in New York City where high-end shopping centers become victims of their own success. It’s known as “high-rent blight” as explained in a 2015 article in The New Yorker magazine on the West Village.
“‘High-rent blight’ happens when rising property values, usually understood as a sign of prosperity, start to inflict damage on the city economics…” according to the article.
It has happened on Lincoln Road before. Arriola said, “Lincoln Road at one time was the Fifth Avenue of the South and over the decades, it became a mall for wig shops and orthopedic supply stores… it happens.” Right now, he said, the high property values are impacting Lincoln Road again. “All the properties traded at very high prices over the last decade. What that does is it resets the assessed value of the property. Commercial buildings don’t have homestead protection. They get reset and [their taxes] go up every year. In normal landlord tenant relationships operating costs like taxes get passed through.” As the prices, taxes, and corresponding rents have escalated Arriola said, “The only tenants that can pay that are the big national chains and you chase off all the mom and pops.”
And that creates a further decline according to Guarnieri. “The influx of commercial grade A retail companies taking over is a very delicate balance in creating the ideal socio economic environment where all business type owners can prosper,” he said. “For example, our expectation with the Apple Store opening was that it would create a lot of foot traffic and, therefore, increase revenues. What we discovered was that the consumer heading to these stores to purchase the high priced iPhone or new release of Nike shoes lent zero value to the increase in social dining and entertainment which was Lincoln Road during its prime.”
As The New Yorker article stated, “If national businesses, not local ones, come to fill a neighborhood, the area may become merely an importer of goods and services supplied by CVS or Dunkin’ Donuts. Local wealth isn’t created, and the economy of the area begins to match the less-inspiring examples of suburbia.”
Arriola said, “My personal feeling is Lincoln Road remains a major tourist draw and locals like to go there.” But, he said, it has to remain competitive. In addition to competition from Bal Harbour Mall, the Design District, Brickell City Center, and Merrick Park, the challenges faced by brick and mortar retail are well documented, he said. With regard to the redevelopment project, he said, “To stay competitive with everything going on in the market, it needs a facelift and it’s probably a good investment for the city to help it stay competitive. It attracts a lot of tourists, funds our resort taxes, and is an important economic driver for the City.” He is hopeful the reopening of the Convention Center next year will support more tenants but he also is looking to the landlords.
Arriola pointed out why closely held retail centers like Bal Harbour and the Design District succeed. “They’ll throw a bone to a Books & Books who couldn’t afford to be there. They’re very smart. They know they need a small independent bookstore in their mall. They give breaks to restaurants to be there. If it’s just high-end chains, people will stop going there.”
As to Lincoln Road, he said, “I hope that the landlords get more aggressive, not just sitting on the properties, but partnering with local mom and pops and entrepreneurs and help give them an opportunity to open on Lincoln Road and not just hold out for the highest bidder and larger national chains.”
Guarnieri is aware of the proposed improvements and the potential created by the new convention center opening. But, he says, for Lincoln Road to be successful, the City has to step up its efforts "to support restaurant operators in creating and maintaining a culinary destination for tourists and locals alike."
Van Arman said, the Lincoln Road BID, meanwhile, is scheduling “free events and activities focused on community and culture that take Lincoln Road well beyond a shopping destination” to attract more people to the district.
Stay tuned. The rest of this story has yet to be written.