Why Hotels, Offices Help Retail Thrive in South Florida

Retail properties do better if they’re near a good mix of residential, office and hotels, experts said during a panel discussion at The Real Deal’s Miami Real Estate Forum Wednesday.

The panel, moderated by TRD reporter Francisco Alvarado, featured Comras Company founder and CEO Michael Comras, JLL’s South Florida executive managing director of retail brokerage Zach Winkler, and Brett Damato, COO of Pura Vida Miami, a Miami-based restaurant chain that is expanding in the tri-county area.

Residences alone aren’t enough to create the critical mass needed for a popular retail district that’s active most of the day, especially on weekday mornings, Winkler said.

“More of everything is just better,” Winkler said. “So, if I look to bring in hotels, it’s just going to bring more people to the market during the morning hours, which will benefit [business owners].”

Damato said the ideal for a Pura Vida location is in hotels, offices or condo buildings, where there is an ever-present customer base. One of Pura Vida’s most successful spots is in the Loews Hotel at 1601 Collins Avenue in South Beach, he said.

Critical mass is harder to come by in even high-end retail locations such as the Design District, where there are plenty of high-end luxury real estate projects but not so many hotels, said Comras, who redeveloped Cocowalk in Coconut Grove with Federal Realty and Grass River Property. But as more hotels are built in the area, the variety of retail and restaurants will change.

A Miami neighborhood that has already struck the right balance of hotels and residences for retail to flourish is Coconut Grove, Winkler said. 

Urban vs. suburban

South Florida has one of the strongest suburban markets in the United States when it comes to retail, Winkler said.

“As we see pricing getting crazier and crazier in the urban areas, you’re seeing a lot of these companies, whether it’s restaurants or retail, look at these other markets where you have this really strong customer base,” he said.

The island of Palm Beach is one of the most sought-after luxury markets in the nation, where vacancies are minimal and rents have grown 200 percent in the past two years, he said.

Another high growth market is Boca Raton.

“It’s such a big territory as a whole, with a lot of opportunity,” Winkler said. “I personally see more New Yorkers moving to Boca than I do in Miami.”

Lincoln Road rebound

But Comras said his attention is focused on Miami-Dade County, particularly South Beach, where he is developing NoLi Lane, a 150,000-square-foot adaptive reuse project at 723 Lincoln Road that will include 40 small spaces.

The project will provide compact retail in a section of South Beach where, contrary to current market demands, larger anchor-sized retail spaces dominate, he said.

“Given the retail apocalypse that happened over the last several years, there’s been a shift in the style of retailing,” Comras said. “What we’re really catering to is smaller boutique-type tenants, private spaces, which are not otherwise available on the main part of Lincoln Road.”

NoLi Lane will add a pedestrian promenade on what is now a service alleyway that Comras hopes will become a premier “street off the street.”

“In Los Angeles, you may think of Melrose Avenue, and what we’re creating, I would refer to as Melrose Place,” Comras said.

Lincoln Road was a booming shopping district filled with national stores. But the strip “lost its cachet” after the pandemic, when tenants started leaving. Rents fell from a high of $325 per square foot in 2016 to asking rates of between $150 and $225 a square a decade later.

But Lincoln Road is showing signs of a comeback as retail spaces are filling up. 

That’s because rents are a bargain compared to other shopping destinations that are gaining popularity in South Florida, Winkler said.

“When you look at the prices on Lincoln Road today, compared to some of the area malls or other neighborhoods in Miami, Lincoln Road is something that is really, really attractive to brands,” Winkler said.

Winkler said Lincoln Road never lost its popularity.

“One of the things that everyone seems to forget is that Lincoln Road in Miami Beach has never stopped being busy,” Winkler said.  “The market suffered a bit, but it’s still where everyone goes to spend a night when they travel into the city.”

Inflation, death and rebirth

Retail is doing very well in South Florida, Winkler said. Unfortunately, the pace of inflation has derailed retail ventures in the tri-county area, he said.

“Everything is too expensive: rent, construction, and coupled with the permitting process, it just makes it harder for everything to get done,” Winkler said. “We have seen a lot of retail products that may not get built or get stalled because they’re too expensive to [complete].”

Inflation has had a negative impact on tenants, landlords, employees and customers in South Florida, especially when it comes to dining, Comras said.

“I’ve gone to restaurants in New York, and it almost seems they’re less expensive than Miami,” Comras said. “So, I think [rising costs] is something that we really need to get our arms around.”

That’s why it’s important for restaurant and retail operators to adapt by leasing smaller spaces, Damato said.

“A lot of brands can reset themselves and take a little smaller space, make it a little more economical, a little easier to operate. At times like this, to me, that’s the best approach,” Damato said.

It’s a strategy that Pura Vida has embraced. Its restaurant spaces range between 1,500 to 6,000 square feet, he said.

“Ultimately, inflation is not top of our minds when we’re thinking about selecting a site or negotiating a deal,” Damato said. “It truly comes back to, is this the right community? Do we feel that this is the right fit for the brand?”

Yet even if a restaurant operator does everything right business-wise, or provides good food and service, that won’t necessarily prevent it from shutting down in the future, Comras said.

“A lot of times it has nothing to do with the food. It could be the lease terms. It could be a change of ownership. It could be a variety of different things,” Comras said.

The silver-lining, though, is that the space a defunct restaurant leaves behind makes it easier, and more affordable, for a new restaurant to take its place.

“Building out a restaurant from a raw space takes a lot of money and a lot of time. A lot of people really don’t want to take that on, especially if they’re not from here,” Comras said. “So, I think the opportunity exists and continues to exist for new restaurants to come in, take over pre-existing restaurants, and develop new products.”