Businesses searching for space in Miami’s urban core have more options than they might think.

While vacancy rates are down across the board, significant chunks of space are available in several Class A buildings in downtown and the Brickell Avenue financial district.

“There are more alternatives available for those companies that take the time to appropriately investigate the market,” said Chris Lovell, a senior managing director with Savills Studley in Miami.

Leasing space on an upper floor with a view may be difficult since only six buildings on Brickell have a full floor above the 20th story available for lease. For tenants that can live without the view, there is plenty of open space to choose from.

Four downtown Class A buildings have at least 75,000 square feet of contiguous space available, one Class A building on Brickell has a 65,000- square-foot block — “and we don’t have tenants of that size standing in line t the claim the space,” Lovell said.

Savills Studley has found many of the large available blocks are in older downtown buildings.

“You’re always going to have buildings that are going to have certain pockets available,” said Tere Blanca, founder of Miami-based Blanca Commercial Real Estate Inc.

She said the market is responding well to the new Miami Central project, which is under construction with 60 percent of its office component pre- leased. The mixed-use development will serve as Brightline’s downtown train station and will add 286,000 square feet of office space in two buildings.

Blanca points to a steady stream of companies migrating to Miami. About a third of the lease deals inked last year in the county’s four major office markets, including downtown, Brickell, Coral Gables and the Airport West areas, were with new-to- market companies

“That has the potential of growing as we continue to mature as a city,” she said.

But Lovell said that’s not enough. Considering the city’s rapid growth, especially in terms of population, he questions why there hasn’t been a more significant move by companies to Miami.

Lovell said the lack of new market entries plays a role in the amount of available space found in top-tier buildings.

The availability rate in Class A buildings in downtown Miami hit near 26 percent at year-end, compared with 21 percent a year ago. The rate decreased slightly in Brickell to 14.4 percent.

What’s Available?

Over a quarter of downtown Miami’s Southeast Financial Center is available for lease, including a 134,000-square- foot block of space, according to Savills Studley.

Wells Fargo will vacate the tower and consolidate offices two blocks away at the Wells Fargo Center at 333 SE Second Ave. later this year. The move pushed the Southeast Financial Center’s availability rate to 28 percent at year-end, up from 16 percent in the third quarter. The two-tower complex at 200 S. Biscayne Blvd. recently sold for $517 million.

Over one-fifth of the space at the Miami Center at 201 S. Biscayne Blvd. and the Miami Tower at 100 SE Second St. is open, with availability rates of 27 percent and 21 percent, respectively. The SunTrust International Center, which lost Akerman as a major tenant last year, is 38 percent vacant, the highest among downtown buildings.

Akerman moved into smaller quarters at the new Brickell City Centre. The firm was able to shed 10,000 square feet by adopting a single-size office concept, said Blanca, who guided the firm’s move.

“In the last several years, companies have become increasingly efficient in their use of space,” Lovell said. “Even companies that traditionally would occupy large amounts of space per employee like law firms, for example, are moving to more efficient space and are occupying less square feet per lawyer.”

Businesses of all kinds are reducing their real estate footprints by 10 percent to 15 percent when they move, he said.

Because there aren’t many large users entering the Miami market and the established companies are giving back space, it will take some time for landlords to backfill the large downtown chunks. In many cases, landlords will divide floors and lease them to smaller tenants.

The availability of large spaces puts pressure on the market, which is a good thing, Lovell said. Landlords end up competing with one another on rental rates, which can lead to substantial savings for businesses willing to search for a better deal.

Philippe Houdard could be Brickell’s future: He has gone car-less.

Houdard, the co-founder of office-space sharing firm Pipeline, sold his Honda Accord when he moved to Brickell from South Beach last year. He walks when he goes to dinner. He takes Uber to meetings.

“Brickell has the density to do everything I need within several blocks,” Houdard said. “It’s completely changed.”

Just a few years ago, Miami’s financial district emptied into a ghost town when law firms and banks shut their doors at night. You could roll a bowling ball down Brickell Avenue without hitting a soul. But after the housing bubble burst, millennials seeking cheap rents flooded into Brickell, helping revive one of Miami’s historic residential districts. Now, with the population booming and expensive new restaurants, hotels, condos and shops popping up on every block, the neighborhood is changing fast. City officials, business owners and residents are trying to keep up.

Is this Brickell’s moment to transform into the hip, walkable, urban playground that boosters dream of? Or will the neighborhood mutate into a traffic-congested nightmare where only the rich can afford to live and party?

“Between 2003 and 2008, there was $13 billion in private investment in downtown Miami,” said Alyce Robertson, executive director of Miami’s tax- funded Downtown Development Authority. “The public sector has to catch up.

Nobody imagined it would grow that fast. I remember looking out my window back then and wondering, ‘Who’s going to live in all these condos?’” But the condos filled up. Brickell’s population has nearly tripled since 2000, to nearly 35,000 this year, making it the most populous neighborhood in Miami’s revived downtown. Trendy restaurants and bars now dominate the scene after business hours.

Brickell’s latest crown jewel is a 9.1-acre, $1.5 billion mixed-use project called Brickell City Centre.

The massive city-within- a-city is bringing two condo towers, two office buildings, a hotel and 500,000 square feet of shopping — including a Saks Fifth Avenue, an Apple store and a dine-in movie theater. Analysts have called the development a “game-changer” for downtown Miami. Signaling the shopping center’s ambitions, rapper Pitbull was drafted to make a guest appearance at its unveiling. So far, only a few shops have opened up as the project runs behind schedule. Massive construction in the area makes getting around tough.

“Once it fully opens up and the construction stops, the area will become much more pedestrian-friendly,” said Zach Winkler, a retail broker at CBRE. “The traffic is always going to be an issue. But Brickell City Centre fills a much- needed demand in the market. You have offices, you have condos, you have restaurants and bars [already in the neighborhood], but you don’t have traditional retailers.”

Saks Fifth Avenue president Marc Metrick said the mix of young professionals and foreign tourists in Brickell made it an attractive location for the luxury retailer’s seventh new store of 2016.

“Ten years ago, the Meatpacking District in New York City was dead at night,” Metrick said. “Look at it now.”

Traffic troubles

There’s no question the biggest roadblock to Brickell’s growth is traffic.

In the morning and evening rush, miserable congestion slows Brickell and South Miami avenues to a crawl. Even during non-peak hours, getting around can be tough. Oppressive heat and summer rainstorms make walking a risk. But the neighborhood is well-served by public transit, at least compared with other areas in Miami, with Metrorail and Metromover stops.

If traffic gets bad enough, and the city provides reasonable transit alternatives, the hope is that commuters and residents will give up their cars. More people will have to embrace walking, ride-sharing and public transit to create a true urban core. And although it may seem counterintuitive, traffic should eventually get better as people move into new condos and apartments and stop commuting in, said Mitchell Bierman, an attorney at Weiss Serota who chairs a committee on transit and infrastructure at the Greater Miami Chamber of Commerce.

“Most people looking at the problem of traffic consider density in the core to be a good thing,” Bierman said. “The worse the traffic gets; the more people will get frustrated and seek out the alternative. Density should reduce traffic because people are all in the same place. If you live in Manhattan, traffic isn’t a huge problem for you. You walk or take the subway.”

To that end, one DDA proposal envisions turning the traffic-clogged lanes of Biscayne Boulevard across the Miami River from Brickell into a wide-open, pedestrian- and bike-friendly greenway. City officials have also given their blessing for developers of smaller residential projects in areas served by public transit to build without providing parking spaces. Tri-Rail and Brightline connections at MiamiCentral in Overtown will make it easier for commuters to get into Brickell without driving. Walking trails along the river and Biscayne Bay are growing. And the Underline, another planned walking- and-biking trail, will stretch south from Brickell to Dadeland.

That’s not to mention the legalization of ride-sharing services like Uber and Lyft at the county level, as well an ambitious and expensive but still years-off plan for six new rail lines, including two that would connect downtown to Miami Beach and Northeast Dade.

“We are strangled by the fact that we aren’t able to build that subway system,” said Tere Blanca, a commercial real estate broker who leases office buildings in Brickell. “We need to find more ways to facilitate mass transit. We have to invest in that as a community.”

Chokepoint

Despite signs of progress, the arch-nemesis of Brickell business interests remains the dreaded Brickell Avenue Bridge.

When the bridge goes up, Brickell shuts down. Miami’s marine community has defended the need for the bridge to open regularly, citing the frequent passage of both pleasure vessels and commercial craft on a busy working river.

Miami Commissioner Ken Russell, chairman of the DDA, has lately played peacemaker between the office dwellers of Brickell Avenue and the boating industry.

“It’s tricky waters to navigate,” he said. “We do have a working river, and we have to value the businesses that are on that river. They’ve got to be able to work. … That being said, when that bridge is up, Brickell and downtown are crippled.”

Russell hopes to work out a compromise with the Florida Department of Transportation and the U.S. Coast Guard, which control the crossing, that will see the bridge stay locked during peak commuting times.

Another priority: the preservation and creation of affordable housing in Brickell and surrounding neighborhoods.

It might seem like a fool’s errand. Land costs for developers have soared, eating into profits for all but the most expensive luxury housing. The average price of new residential construction in Brickell stands around $650 per square foot. The average rent for a condo exceeds $2,500. And it’s not like the working class can afford or expect to live in, say, downtown Manhattan’s financial district. But mixed-income communities produce better results for children in school and reduce traffic by saving low-income workers a grueling commute, Russell says.

“It’s not just a city for the wealthy; it’s not just a city for investment,” he said. “If you really want to be a thriving metropolis, you’ve got to have a youthful energy. … [And] you can’t expect that to just thrive organically. You have to plan for it and allow for it and incentivize.”

For instance, Pinnacle Housing, an affordable and market-rate developer, was able to build a mixed-use, mixed-income project called Brickell View Terrace near Brickell station. The 23-story tower offers 100 affordable units and 76 market-rate units, as well as 7,300 square feet of retail. (Developers bought the land before prices spiked and received government tax credits, helping to make the finances work.)

It’s the first mixed-income project in Miami, and it could be a blueprint for future development.

“If left completely to the market, affordability has no chance,” Russell said. “There has to be some thumb on the scale to make sure that the city remains livable.”

Developers completed more than 2,200 luxury Brickell condos in 2016. Another 3,300 are under construction.

Residents of East Little Havana — already being marketed as West Brickell by some Realtors — are nervously watching the luxury towers grow. They’re worried about development creeping into their affordable neighborhood.

Efforts to promote affordable housing will have to be subsidized by the public.

“As a function of land cost, the land is too expensive for voluntary development of mixed-income housing,” said Anthony Graziano, senior managing director for Integra Realty Resources and a consultant for the DDA.

More mixed-income projects are worth the price tag, said Adrian Madriz of the non-profit Struggle for Miami’s Affordable and Sustainable Housing “Brickell and the rest of Miami do not have to become exclusive playgrounds for the elite,” he said. “They can start a trend of equitable development that can create prosperity for all Miamians.”

Stepping into the limelight

Brickell has been in the spotlight before. When “Miami Vice” featured sexy Brickell Avenue condo buildings designed by local firm Arquitectonica in the 1980s, the area’s global profile soared. But this time feels different.

The big change happened after the housing bubble burst.

Millennials seeking cheap rents and convenient commutes swarmed Brickell’s empty condos. Developers responded by building new projects marketed to foreign buyers, reviving the local housing market much faster than expected. As rents soared again, nightlife moved in. Retail follows rooftops, brokers say. For instance, restaurant sales in greater downtown Miami rose 78 percent in 2014, according to a DDA study.

“We saw huge potential: a lot of young professionals moving in and nothing too edgy as far as nightlife in terms of cocktails, dancing and live music,” said Dan Binkiewicz, owner of Blackbird Ordinary, a buzzing bar in Brickell that opened in 2011 and attracts more than 1,000 customers on Saturday nights. Binkiewicz says he’s not worried about rising rents or redevelopment pushing out his bar, as happened to Tobacco Road, a neighborhood stalwart from an older, more colorful era. Blackbird Ordinary has a long-term lease, and its landlord is also a business partner, he said.

Thanks to trendy new nightlife options, downtown neighborhoods are also attracting a growing share of visitors to Miami-Dade County. And for businesses, the appeal of a swanky Brickell address is undeniable.

When Eddy Arriola launched Apollo Bank in 2009, he dreamed that one day its Brickell headquarters would be in the heart of Miami.

“We thought we were ahead of the curve by 10 years,” said Arriola, who recalled having to drive out of the neighborhood to find an after-work drink or meal. Now, he said, Brickell is “a destination where clients want to come visit us.” Roughly 30 percent of Apollo’s Brickell employees use public transit, Arriola said, a number he expects to grow.

Eric Groffman, an office-space broker at JLL, said it’s not just law and financial firms looking for space. Companies want to be “where their clients want to see them and where their employees want to live,” Groffman said.

Tech companies including Uber, Facebook, Expedia and Skyscanner chose Brickell for their South Florida offices. Class-A office vacancies in Brickell have dropped from 15 percent in 2014 to 9 percent this year, even as new inventory hit the market, according to Blanca Commercial Real Estate.

“When you have a city that doesn’t die at night, lots of things develop,” said Suzanne Amaducci, an attorney at Bilzin Sumberg. Her firm raised eyebrows in 2010 when it moved from its offices near the Miami-Dade County Courthouse to the south end of Brickell Avenue. Other big firms have followed, including Akerman Senterfit, which leased seven floors at one of the new Brickell City Centre towers.

Landlords are also rethinking existing spaces.

At the 21-story office tower at 801 Brickell Ave., a no-frills cafeteria on the ground floor could barely pay operating expenses.

So, the owners embarked on a multimillion-dollar renovation project to make the space suitable for a trendy restaurant.

“We saw what was happening with all the cranes,” said Stephen Rutchik, the building’s leasing agent and a broker at Colliers International South Florida. “Brickell is the place everyone wants to be.”

Last year, Miami nightlife impresario Dave Grutman (who runs Liv and Story in Miami Beach) signed a lease for his new $15 million, pan-Asian restaurant Komodo, which opened this spring.

Hotels are moving into Brickell, too.

Four hotels with more than 770 rooms have opened or are set to open by year’s end, according to the Greater Miami Convention & Visitors Bureau.

Another 290 rooms are projected in 2017.

SLS Brickell Hotel & Residences, a partnership between the Related Group and sbe Hotel Group, has sold all but two of its 450 condos and done a soft launch for a 124-room hotel. Reviews so far have been positive.

Carlos Rosso, president of Related’s condo division, said the proximity of Brickell City Centre and other new amenities has boosted interest in the project.

And he said Brickell is now catching up to Related’s pre-construction marketing pitch.

“When we started putting these people in brochures, the mom with the stroller, the businessman walking to work, it wasn’t a reality yet,” Rosso said. “Now all the people we put in our renderings are finally living in Brickell. The lifestyle is becoming a reality.”

December 1, 2016

CUBE Wynwyd, the first office tower to rise in Miami’s Wynwood Arts District, won’t be the neighborhood’s last.

RedSky Capital announced plans this week to build the eight-story building in the heart of the district — a project brokers are welcoming with open arms.

“There is tremendous demand across the board for unique properties that have something to offer,” said Tere Blanca, CEO of Blanca Commercial Real Estate, which has been tapped to lease CUBE. “We are constantly receiving inquiries from companies that really want to be a part of that really special neighborhood.”

RedSky, a Brooklyn-based development company that has quietly amassed a large portfolio of Wynwood property, plans to break ground in January and deliver in 2018. The company purchased the site for $5.85 million about a year ago, but development plans were secret until now.

Arquitectonica designed the LEED-certified tower, a contemporary structure that will feature a rooftop terrace, ground-floor breezeway and Wi-Fi connected common areas. Retail will occupy the building’s street level.

Blanca said her firm is targeting technology and professional services firms, but she expects the property to attract a wide spectrum of tenants. The Wynwood neighborhood is brimming with hip retail stores and art galleries, its streets lined with tourists and Miamians looking for a taste of homegrown eateries and cafes. A new zoning code has fueled a flurry of activity beyond retail development. More than a dozen projects have been proposed this year, mostly residential.

“What’s fascinating to us as brokers is in the past six to nine months corporate America has begun looking there,” said Stephen Rutchik, an executive vice president with Colliers International. “The majority of tenants in South Florida and those new to market want to be in a well-amenitized area. That means live, work, play. That’s where the urban core is achieving a lot of its success today because the companies are chasing the workforce.”

Miami-Dade County’s central business district experienced significant office absorption during the third quarter, according to research by Colliers. Vacancy rates range from 16 percent in downtown Miami to 6 percent in Coconut Grove.

When tech companies look at South Florida, the one place they get excited about is Wynwood, said Rutchik, a Miami office broker.

“Certainly, there’s enough demand right now to support more than this project,” he said.

Joseph Furst, chair of the Wynwood Business Improvement District, said offices are necessary for the neighborhood’s growth.

While the community is known for its retail, food and beverage and entertainment experiences, Furst and other stakeholders originally lured people to the once-sleepy industrial district by converting warehouses into creative office space for small companies.

For a city that’s trying to grow its economy, investing in new office product is key, and Wynwood is poised to become “the space for creative offices,” he said.

CUBE at 222 NW 24th St. will offer 79,548 square feet of office space and 10,155 square feet of retail space. Leasing rates will start at $50 per square foot, Blanca said.

With each floor spanning 11,000 square feet, small-scale companies have the option to occupy a full floor.

“You will see several new office developments over the next five years arrive in Wynwood,” Blanca predicted.

With Zika worries gone, a look at deals shaping the trendy nabe

October 05, 2016

Wynwood made international news this summer when it became the first area in the continental U.S. to report locally transmitted cases of the Zika virus. The issue was a constant focus of conversation and anxiety among the area’s commercial property owners and their tenants as foot traffic slowed. Some restaurant and bar owners reported as much as a 50 to 60 percent drop in sales right after the Zika announcement, when tourists and local regular patrons alike sought to avoid the district. When Gov. Rick Scott proclaimed Wynwood Zika-free on Sept. 19, the neighborhood breathed a gigantic sigh of relief.

Now, Wynwood — once known for its tired warehouses and discount retail storefronts — could once again focus on its emerging status as a flourishing commercial and residential center.

The transformation of the one-time industrial corner of Miami dates to the 2002 debut of Art Basel Miami Beach. In the intervening years, the international jet set drawn to this art show has often sought out the artists working in studios inside of Wynwood’s converted warehouses. This artistic influx contributed to Wynwood’s evolution from a district filled with tired warehouses and discount retail storefronts to a neighborhood on the cusp of becoming a flourishing commercial and residential center.

The neighborhood achieved a new status in 2009, when Tony Goldman, who had already spearheaded gentrification efforts in New York and Miami Beach, created the Wynwood Walls, an open-air mural project with contributions from globally known street artists like Shepard Fairey and Ron English. Soon other big-name New York developers like David Edelstein and Moishe Mana were following Goldman’s lead.

Development in the district took a huge leap forward in 2015, when Miami created the Wynwood Neighborhood Revitalization District, a zoning overlay to encourage the construction of more condominiums, rental apartments and retail shops. Since then, a slew of high-density mixed-use projects have been proposed. Altogether, they could add about 1,000 residential units and 3.9 million square feet of retail space.

Local lawyer Alex Perkins, who has worked on many deals in the neighborhood, said the area is living up to the high expectations the development community had when the special district was created. He said the transformation is occurring more quickly here than it did in the nearby Design District. “I think investors will do quite well on their returns,” he said.

Wynwood’s funky allure has attracted many hip, up-and- coming retailers. In June, Amsterdam-based Scotch & Soda announced that it would be closing its Design District store and relocating to a 2,300-square- foot space at 219 Northwest 23rd Street, a Wynwood building that the Comras Company of Florida, founded by Michael Comras, bought for $1.6 million in 2011. The retailer will become neighbors with clothing store Kit & Ace, which has leased 1,500 square feet in this building. At nearby 2399 Northwest Second Avenue, the hip Detroit-based watch, bicycle and leather goods retailer Shinola took a 1,300-square- foot corner store in 2015.

Naturally, the high demand for retail space has been boosting rental rates. In April, retail rents in the area ranged from $40 to $100 a square foot, up sharply from an average of $15 a square foot in 2010, according to the Commercial Industrial Association of South Florida.

And the rising rents have spurred commercial investment. In August, New York-based Atlas Real Estate Partners sold a corner retail building on 23rd Street and North Miami Avenue for $8.5 million, more than twice the $3.6 million the company had paid for the property in July 2014.

Atlas is not the only big-name New York real estate player bullish on Wynwood right now. Israeli-born entrepreneur Mana has spent in excess of $20 million acquiring roughly 25 acres where he plans to build Mana Wynwood, a massive cultural and international trade-focused mixed-use project. And Brooklyn-based RedSky Capital submitted plans in July for 222 Wynwood, an eight-story loft building on vacant land the company purchased for $5.85 million in 2015.

Jonathon Yormak, a principal of New York-based East End Capital, which recently completed the retail building Wynwood Arcade at 50 Northwest 24th Street, said his firm went on a $100 million buying binge in the district for a nine-month period in 2014 and 2015. “We’ve invested in Williamsburg and Soho,” he said, “and Wynwood has the same DNA.”

David Polinsky, a principal of Fortis Development Group and the developer of the condo at 250 Wynwood, said the projects in the pipeline have the potential to transform the district into a true 24-hour neighborhood. “The train is still rolling in Wynwood,” Polinsky said. “It’s the right number of projects going up at the right time.”

As the commercial popularity of the area grows, the challenge will be keeping the tenant mix eclectic enough for Wynwood to retain its trendy reputation, said Tere Blanca, founder and CEO of Blanca Commercial Real Estate.

“It would be great for developers in Wynwood to select retail tenants that not only contribute to the bottom line, but can also integrate with the unique experience of the neighborhood,” she said. “I think owners like RedSky and East End have that experience and really understand what has to happen to shape the neighborhood.