With an eye on the financial services businesses fleeing higher taxes in New York, Connecticut, and New Jersey, City Commissioner Ricky Arriola wants Miami Beach to look at ways it can incentivize the firms to locate here.
“With so many businesses moving out of high income states, particularly the hedge fund and other financial institutions, Miami Beach has a golden opportunity to land some of those businesses,” Arriola told RE:MiamiBeach. His fellow Commissioners agreed that the City should explore its options and voted this week to issue an RFLI (Request for Letters of Interest) to develop Class A office space.
“This would help strengthen and diversify our local economy from being purely tourist driven,” he noted. “It will create jobs for our City and support all the ancillary businesses that feed off of the financial services industry – from law firms, accounting, and banking companies to catering firms, hotels, event organizers, couriers, restaurants etc.”
“The Wall Street crowd all have second/third/fourth homes in Miami Beach. We just want them to bring their companies and employees here. It will be a big win for us.”
“If we can create our own hub of investment firms – it can create the lifeblood for start-ups and local entrepreneurs,” he said. “Imagine having 3 or 4 of the top hedge funds or private equity firms in New York City relocate to Miami Beach? What would that do for our local economy? Right now, they don’t have the Class A office space they need. So, they go elsewhere.”
Last year, Barry Sternlicht received approval to build Class A office space at 23rd and Collins for a new headquarters for his Starwood Capital Group (rendering above) and, recently, Carl Icahn announced he was moving his hedge fund to Sunny Isles.
The Tax Cuts and Jobs Act of 2017 placed a limit on state and local tax deductions, precipitating the move by many wealthy individuals to Florida, but, at the Commission meeting this week, Arriola said, they’re not coming here to retire. “They’re moving their businesses, particularly folks in the financial services industry, hedge funds, private equity funds. It’s my hope that we can capture the lion’s share of that economic migration. These folks are definitely buying homes here but their offices are elsewhere.”
“I think if we’re intelligent about this and we can provide suitable office product for these folks, we can create whatever you want to call it, a Miami Beach hedge fund mecca, Silicon Valley-type local ecosystem."
His proposal: Start with City-owned surface parking lots on Lincoln Road because desired amenities such as restaurants are already in place and the City is about to embark on a major restoration of the pedestrian mall.
“Because we’re going to be investing somewhere of $70 million on the renovation, I want to make sure that we’re successful in resurrecting Lincoln Road and so, if we’re going to have the Convention Center hotel and some new hotels going there, if we have office space there, that pretty much almost guarantees that Lincoln Road’s going to have daytime and nighttime economic activity,” Arriola said. He noted an RFLI does not commit the City to anything but an exploration of the idea.
While Commissioners wanted to explore the idea more broadly to benefit other areas of the City as well, they acknowledged the appeal of Lincoln Road to initial investors.
Commissioner Micky Steinberg said, “I love it. As far as the location, I thought when I first read it, it made a lot of sense because we’re building this campus here and it’s going to have the vibrancy, not just in the day but at night as well.” She advocated putting out a broader request for interest but added, “The truth is, the only way it’s going to work is if it’s one of our lots and we don’t have that many left. There are some in North Beach but you also have to be careful when we’re attracting Class A office space and the type of businesses that come with that, they’re going to want some infrastructure already in place.” She wondered if there were incentives that might be offered to attract office space to other areas and asked to explore those ideas in the future.
Miami Beach Economic Development Director Bo Martinez said the City has about 3.8 million sq ft of office space but only 791,000 sq ft of that is Class A office space. As a comparison, he noted, Brickell and downtown Miami have over 22 million sq ft of office space. “We can be different. We can focus on certain sectors like finance, medical, IT, and other industries that we want to bring to the community,” Martinez told Commissioners of the City’s recruitment efforts. “But we have to start from somewhere.”
Arriola emphasized the ancillary benefits of attracting the financial services firms, the businesses that support them as well as those who travel here to meet with them. “That’s thousands, tens of thousands of jobs,” he said. “It really firmly puts us on the map. I think this could be a boon for us. We know they’re coming but they’re not setting up their offices here and if we can get their offices here, everyone’s gotta come visit them. They stay in our hotels. They eat in our restaurants. All the ancillary support services that feed off of these firms get embedded here in our community.”
In November, voters rejected incentives to increase allowable floor area (FAR) for office space on Washington Avenue and Alton Road. RE:MiamiBeach asked Arriola why he thinks it was voted down.
“I think some voters didn’t understand the issue. People are typically skeptical of FAR increases. They failed to realize, however, that FAR wasn’t being increased – just the use of buildings. For example, a developer can build a hotel or apartment building and get a .5 FAR bonus, but not get it if it’s for office use. This is why we have so many hotels being built on Alton and Washington.”
“We need more office space so the Commission wanted to put office space on the same playing field as a hotel or apartment building. We missed a great opportunity. Right now, if residents want office space, they have to drive to Brickell, Wynwood, Biscayne, Doral, Coral Gables etc. This increases traffic and commute times for locals.”
The RFLI to consider office space on City-owned properties may be ready as soon as the Commission’s January 15 meeting, February at the latest.
Miami Beach Looks to Increase Class A Office Space Inventory:
Targets include the financial services industry
Temporary art installation for Art Basel coming to an end
City and art fair mark 18 years together