Downtown retailers could face challenges, panelists say
By Eric Kalis
A substantial retail inventory is in the pipeline for downtown Miami to follow the recent residential building boom, but several glaring uncertainties loom in how the market will play out, experts say.
About 4.2 million square feet of retail space, about twice the area of Aventura Mall, is planned or under construction downtown, according to commercial real estate firm CB Richard Ellis, which includes Brickell in its downtown reporting area. The actions of the public sector will help shape the downtown retail landscape, according to several panelists at last week's Urban Land Institute Downtown Miami Retail Renaissance event.
One virtual certainty is that the downtown population — and the average household income — will increase in future years, said Dario Moreno, director of the Florida International University Metropolitan Center. Using the Downtown Development Authority's boundaries, the downtown population will increase from about 20,000 now to 70,000 in 2030, Mr. Moreno said. The average household income of a downtown family will rise by 2010 from $62,586 to $81,460, he said.
"More units will be available as people stop flipping and move into units," Mr. Moreno said. "Downtown is gaining new residents with higher income and education levels. The population's average age is now younger than the rest of" Miami-Dade County.
Despite the expected boom in residents, retailers could be hurt by snowbirds who buy condos downtown but only spend portions of the year in the area, said Paco Diaz, senior vice president for CB Richard Ellis. "One threat is that much of the local population could be seasonal," Mr. Diaz said. "A lot of people up north buy condos as second homes. We don't know who will occupy all of the homes being built."
A crowded retail inventory and the repetitive nature of ground-floor retail space in residential projects are potential obstacles to the market's prosperity, Mr. Diaz said. While much of the space comes from major retail projects such as Mary Brickell Village and The Shops at Midtown Miami, about 1.7 million square feet is planned for the ground floor of residential projects, according to CB Richard Ellis. About 30% of 246,042 square feet of retail space is vacant downtown, most attributable to empty ground-floor space, the company's report states.
Developers who finish projects and fill retail space before their contemporaries should have less trouble dealing with these issues, Mr. Diaz said. "The ones that come to the market first will have an easier time leasing space than those who fall behind," he said.
If the retail market becomes a race to get space filled, some projects will fail due to poor timing while others thrive, said Greg Masin, senior director of retail services for Cushman and Wakefield. However, that scenario ensures "there will be winners," he said.
The competitive and growing retail landscape represents a new era in which the longstanding vision for downtown can be advanced, said Dana Nottingham, executive director of the Downtown Development Authority. In the next seven years, more than half of the worldwide population will live in urban areas, he said.
The challenge becomes balancing a desire to "be selective while attracting the quality retailers we want," Mr. Nottingham said. "Everything we do is managing an experience. We have the potential to be the premier urban tourism destination in the world, but we have to catch up to our brand."
Downtown investors are becoming more sophisticated, so the public sector must be up to date on consumer spending patterns and economic trends, said Lisa Mazique, economic development director for the City of Miami. "The market is already evolving. The public sector has to make sure not to impede the progress and have the workforce to support the retailers."
The public sector's best bet is to "get back to the basics," said Marcos Freire, general manager of The Shops at Mary Brickell Village. "Make sure the drain lines are clear so when it rains, we do not get flooded. Get more police on the streets. With the amount of taxes we pay, there should be more cops around."