“The pattern is clear… if you look at, for instance, the sales of homes and condos in excess of $10M, virtually all of them are in Miami Beach, Surfside, Bal Harbour, Sunny Isles, Golden Beach, and so that is where the greatest concentration of the wealth is going.” While noting “pockets” of sales in Coconut Grove, Coral Gables and Pinecrest, he said, “The largest concentration is coastal communities in the northeast part of the County.”
Neisen Kasdin, Managing Partner, Akerman LLP Miami office; former Miami Beach Mayor
That movement is leading to development projects “that are being geared to high net worth and ultra-high net worth individuals.”
“I think a lot of this will lead to development of office product in markets that have not been big office markets before but are close to where the wealth is” including in “Miami Beach, Coconut Grove, maybe Bay Harbor Islands, the Design District… the larger companies, I think, will begin to populate offices in downtown.”
Ultimately, he believes the relocations will lead to more jobs being created which will help mid-market residential development but, he said, “I think that’s going to be a little slower.”
Despite hotels being closed for an extended period of time, Kasdin said, the industry fared better than anticipated. “People were expecting that there would be a significant reset in the hotel market, that a lot of current owners would be bailing out." Between forbearance from lenders and government rescue programs, “It seems that most of the hotel owners have been able to hang on and the distress is not as great, I think, as has been anticipated," he said. "We’re not seeing the impact on the economy nearly as severe and I think people are beginning to – a little bit to my surprise – people are vacationing now.”
The wealth migration that has been widely talked about recently “was already underway before the pandemic,” Kasdin said, but the pandemic accelerated it. “Now it’s become a little bit of a mania, people following what other people are doing, but I think it’s fundamentally a very good thing because it’s bringing money into the area. It’s creating some jobs. It will create more jobs as the offices of these hedge funds and private equity firms – the Starwoods and the others – are moving their offices here. Family offices are moving here. I think most of the movement will be in the area of the financial services, private equity funds, venture capitalists. I know there’s a lot of hype about tech. I don’t see as much of the techies as I do the financial services.”
“Generally,” he added, these firms will create “better paying jobs so this is a good thing for the economy of the region.”
“I think that the commercial real estate market is very well positioned to thrive because of the consumer demand that’s really evolved over the pandemic.”
David Berg, Partner, Infinity Real Estate
“The pandemic has been two sides of the coin, the ‘haves’ and the ‘have nots’ and Miami Beach has clearly been one of the ‘haves’ groups because of the fact that the economy was really open for the majority of the pandemic,” Berg said. Add to that the weather and the “year-round outdoor experience for the most part,” and Miami Beach is “positioned well for people who are looking for unique experiences and to enjoy food and social settings in an outdoor environment.”
With international travel curtailed, Berg said, as domestic travel resumed “travel here has been unparalleled to any city in the country. Hotel occupancy rates and occupancy levels since, really, the third quarter have been surprisingly strong on a relative basis given the situation and a lot of food and beverage establishments are hitting 2019 revenues as of the third and fourth quarters of 2020.”
The retail market is “similar to the ‘have’ and ‘have nots’ of cities,” he said. “There’s so much residential demand to live in South Florida right now that neighborhood retail should be thriving… What’s really struggled has been the high street retail and that I think will continue to have to redefine itself into a little more experiential driven and probably food and beverage directed because the high street retail has moved to ecommerce.”
Berg isn’t one of those who thinks the wealth migration will fizzle. “I do think it’s going to continue, absolutely, because of the weather, because of the tax environment, because of the economic environment.”
The pandemic has proven people can work successfully remotely, he added, and that “is going to drive the migration to better weather climates, more active climates that promote physical activity and walkability.”
Another thing the pandemic underscored was the City’s reliance on tourism revenue which has led to calls to diversify the economy. Berg said, “Miami Beach needs to focus on better zoning and policies to promote residential and office uses in Miami Beach. There’s too much of a focus on retail and hospitality.” He supports zoning changes in the South Beach Entertainment District, now being rebranded as the Art Deco Cultural District, that would incentivize historic properties now serving as hotels and entertainment venues “going back to what their designed uses were which were residential and office.”
“There’s a lot of renewed energy and interest in Miami Beach and I think the City has helped foster an environment that is inviting to invest in and for businesses to establish and operate in a business-friendly environment.”
Christina Cuervo, Executive Director, Development and Acquisitions, Mast Capital
Cuervo who does “a lot of business from Lincoln Road to South of Fifth” said, “There’s a lot of renewed interest” in the area. “It’s refreshing to see this level of interest and renewed enthusiasm in Miami Beach.”
While the region as a whole, “just offers so many advantages,” she said, Miami Beach “is just a true gem.”
“I think it’s multiple facets that are positively impacting our region,” Cuervo added. “It’s not just one single industry. I think it’s an overall acknowledgement that we’re business minded, we’re culturally sound, and that there’s just a lot of economic opportunity here.”
The combination of the public and private sectors working together “has contributed to the success we’re experiencing now and we should capitalize on that by supporting all the industries overall,” Cuervo said.
Lyle Stern, President of Koniver Stern Group; Board member, Lincoln Road Business Improvement District
Stern said it’s too soon to draw conclusions about the health of the retail market in general, not just in Miami Beach, but he’s encouraged by what he’s seeing. “New restaurateurs have set up shop here and I think that will inspire other restaurateurs,” and that, he believes, “will make some great neighborhoods even better, certainly Lincoln Road, South of Fifth, the Design District, and Wynwood, chief amongst them.” In addition to already announced restaurants, Stern said, “More deals are in the works that aren’t public yet that will further embolden that statement.”
“The attention that we’re getting and the phone calls that we’re getting and the potential interest that we’re getting from soft goods tenants that weren’t even looking in the market before is interesting,” but, Stern said, except for the discount retailers, “It’s been a year for retailers to try to figure out what’s their growth model.” From reducing square footage, closing some stores, adjusting lease terms, and assessing how best to deploy growth capital, the future path “is very much unfolding” though “there’s no question” that Lincoln Road, the Design District, Wynwood, and the Aventura Mall “will continue to be the beneficiaries of what has just been a horrible period.” With the exception of Aventura Mall “which was already a rocketship,” Stern said, the movement to South Florida “took the other areas and accelerated their growth and importance.”
Moving forward out of the pandemic, he said, “I really believe that the MXE [District] from 5th to 15th, from Washington to Ocean needs to be thoughtfully rezoned with the seminal question that should guide us [being] ‘What is it we want to see here?’”
“If we want a spectacular five-star hotel of appropriate scale and truly respecting the architectural integrity of the [historic] district, then what’s the appropriate zoning response?” Stern asked. The answer may include densification and allowing properties to be combined. He pointed to the success of development incentives that are now transforming Washington Avenue.
“We keep asking ourselves what we don’t want to be,” he said, running down a list of things the City has said it doesn’t want: big drinks, hawking, noise, scooters, certain types of umbrellas, etc.
“Until we ask ourselves seminally ‘What do we want to be and intelligently zone into that – until we intelligently do that and do it with a short sunset period, send out a trial balloon and get investment capital in, we’re just never going to know,” Stern emphasized.
The South of Fifth and north of fifteenth neighborhoods are “spectacular,” he said. “We have this little piece in between and we have to figure out what we want. Enough of the ‘We don’t wants.’ What do we want?”
“I really think we’re in an incredibly fortunate position right now that we should not squander.” Stern urges the City to be “assertive.”
“We should not be afraid to make big, bold moves within the context of who we are as a city,” he said. “But we cannot change things here without enticing – intelligently and responsibly – capital, whether it’s the Aman or Michael Shvo [Raleigh] or the Bulgari Hotel” developments along Collins Avenue and the Moxy and Goodtime Hotels on Washington that “came about because of tweaks in zoning that allowed significant capital to come in and change what is there and the city benefits from it.”
Photo courtesy Scott Diffenderfer