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The commercial real estate market outlook for Miami-Dade: Sunny, as long as more mass transit is on the horizon, said industry experts at the Building Owners and Managers Association of Miami-Dade’s 2017 Commercial Real Estate Outlook event.

In the office market, rents are at an all-time high in certain sub-markets, said Brian Gale, Cushman & Wakefield’s vice chairman of Brokerage Services who represents nearly 5 million square feet of office space in South Florida.

On Brickell, office space is hitting around $60 a square foot for Class A space; back in 2008 the high was in the upper $40s, said Gale, during the panel discussion at the East Miami in Brickell. Downtown Miami is just behind it, and Aventura and Airport West have also hit all-time highs, too, he said. Coral Gables presents a different story, he said. In 2007-08, rent in the trophy buildings was $46-$48 a square foot; today it’s the low $40s.

“For many years, Coral Gables was the darling of the office market. I would say it has a temporary black eye with less demand and blocks of spaces still existing. But Coral Gables also has the most to gain,” Gale said.

Gale sees the South Miami market as vaulting too, once new mass transit options fully kick in for the area.

“The traffic on Useless 1 is not getting any better. … Miami Beach needs to figure out a way to get light rail over there.” Gale said. “Rental rates will continue to increase in 2017. Looking further out, being a gateway city … there is no reason to believe we couldn’t be a $70 rental market in 2022.”

Growth in shared office spaces has exploded — for instance, WeWork recently leased 65,000 feet at Brickell City Centre and there are now more than 20 shared workspace centers in downtown Miami alone. Sometimes these shared office centers can act as an incubator for a building; when the companies grow out of the co-working space they take space on other floors, Gale said. In the broader office market, expect more smaller offices, with more open spaces and cubicle areas on the outside of the floor with the glass-walled offices in the center, he added.

In the industrial sector, with job growth projected to slow in 2017 and 2018, is that a concern with 1.8 million square feet coming online in 2017 and 1.4 million in 2018?

“That’s actually less than half of what we have seen in 2015 and 2016.” said JLL Managing Director Brian Smith, who led the team representing NBC Universal/Telemundo Enterprises in the record breaking lease of over 550,000 square feet for a world headquarters broadcast center in western Miami-Dade.

He said he looks more closely at population growth. In both the office and industrial markets, new-to-market tenants are pushing the records. The last three years have brought more than 700,000 square feet of new-to-market office tenants. But that’s more than the previous 15 years combined, Gale said.

The last two years saw 300,00 square feet of new-to-market industrial tenants, but this year it will be 2 million and perhaps 3 million square feet.

“John Deere, new names. We have quickly become one of the most important industrial markets on the globe,” said Smith. “Three large deals in the works may be the biggest ever, in addition to the NBCUniversal deal.”

To be sure, urbanization has transformed the retail landscape, with Miami’s downtown population now approaching 90,0000 people, a 30 percent increase since 2010, with an incredibly affluent demographic, said David Moret, president of Highline Real Estate Capital, which acquires and redevelops office and retail properties with capital partners.

Retail rents are in the stratosphere on Lincoln Road, surpassing $300 a square foot. They are hitting $200 in the Design District and Coconut Grove and Wynwood are flirting with $100 a foot, Moret said. How far will they go?

“I think we have gotten ahead of ourselves,” Moret said. “ I think there will be a reset. … We are already seeing resistance. We are seeing leasing volume way down on Lincoln Road.”

He sees the biggest impact coming from millennials, a group that will have the most spending power by 2017. This means tenant mix is more important than ever.

“Successful centers are going to be about creating experiences, to give people a reason to go there instead of click on their phone,” said Moret.

 

Source: Miami Herald

Rising Sea Levels

Parts of Miami Beach could be inundated with flood waters in as little as 15 years, and property values may slide amid the rising tide, according to nearly two dozen university heads and climate change experts who were on hand to answer questions on the effects of sea-level rise on South Florida during a Miami Beach Chamber of Commerce event at the W Hotel.

Flooding in Miami Beach

Flooding in Miami Beach

The purpose of the recent event, organized by land use and environmental attorney Wayne Pathman, was to warn business owners, developers, and contractors that the effects of sea-level rise will be impacting the property values fairly soon. Already, media around the globe are publicizing the fact that South Florida is “ground zero” for the adverse economic impact of sea-level rise, Pathman argued. Unfortunately, the region is still behind in preparing its infrastructure for the future.

“All eyes are upon us and South Florida isn’t ready,” said Pathman, co-founder of the Downtown Miami-based law firm of Pathman Lewis LLP and future chairman of the Miami Beach Chamber of Commerce.

Thanks to a slowing gulfstream, warming oceans, and ice flows submerging beneath the ocean from Greenland and Antarctica, the oceans are rising faster than ever, said Keren Bolter, research coordinator for Florida Atlantic University Center for the Environmental Studies. This has caused an increase in flooding events in recent years and it will only get worse. By 2100, the oceans are projected to increase by seven feet, Bolter added. At that level, The Keys, along with large chunks of Miami-Dade and Broward counties, will be inundated with sea water at high tide, destroying fresh water reserves, compromising underground sewage lines and septic tanks, and creating a host of other problems.

But you don’t have to wait 84-years to see the adverse effects of sea-level rise. Bolter said that in as little as 15 years, flooding in Belle Isle will grow much worse, especially at Island Terrace, a 16-story condo built in 1967. “It’s coming up not just at the sides,” she said while showing Lidar maps depicting future sea-level rise at Island Terrace and Belle Isle.

“It comes up from underground. That’s partly because the limestone that South Florida land is predominately made of us is extremely porous. Because of this, not even sea walls will stop the flow of water,” Bolter said.  “By 2060 the oceans are projected to rise by two feet. At that level, “the western half of Miami Beach is under water.”

“As the oceans rise, the cost of insurance will skyrocket,” Pathman said.  “Meanwhile, in an attempt to cope with the new reality, community leaders will raise taxes while property taxes are declining. As for the infrastructure of future residential and commercial projects, Miami Mayor Tomas Regalado recently declared on a radio show that the financial burden will fall on developers. However, at least some of the negative impacts of sea level rise can be mitigated if the business community takes a leadership role now. Many places around the world have already started adapting.”

Among the invited guests at the chamber event were Florida International University President Mark Rosenberg, Florida Atlantic University President John Kelly, and University of Miami’s Rosenstiel School of Marine and Atmospheric Science Dean Roni Avissar. They argued that their respective colleges are already training scientists and engineers who are not only studying the future effects of climate change, but also figuring out solutions on how communities like South Florida can adapt.

“We are very fortunate that we have a strong university system and a strong system of public education,” argued Matthew Welker, principal of MAST Academy at Florida International University’s Biscayne Bay campus. “That’s a very valuable resource.”

Josh Sawislak, global director of resilience for the Los Angeles-based engineering firm AECOM, said Miami could even replace Amsterdam as the true innovator of anti-flooding solutions.

“The brand can be, ‘This is a resilient city… Don’t go to Amsterdam to see how to prevent from being cut off by the sea, although they’ve got tasty cheeses. Come to Miami and see how to live with water,’” Sawislak declared.

One innovative idea has already been hatched in Miami. Rather than fight sea level rise, Bolter of FAU pointed out that “one student from the University of Miami” came up with the idea of simply making western Miami Beach “floodable” with the creation of new bays and living shorelines along with new boardwalks and flood-adapted buildings. (The UM student in question who developed that plan is Isaac Stein, who now works for the urban planning and landscape firm West 8.)

Besides speeches from experts, the event included an hour-long breakout session where business leaders sat at tables and asked questions to the assembled experts, some of whom flew in from other parts of the country to be there. The media, however, was ushered away from the session. Upon hearing that reporters were even present at the event, Donald Kipnis, founder and CEO of Brickell-based Development Service Solutions, walked out. Dozens of other chamber members left before the session even ended.

Harold Wanless, chair of the Department of Geological Sciences at the University of Miami, didn’t think the breakout session was long enough. Experts barely had 10 minutes to answer business leaders’ questions or lay out what needs to be done.

“We need to be planning, that is the bottom line,” said Wanless, who has long studied past sea-level rise events in Florida.

Following the breakout session, Jessica Goldman Srebnick, CEO of Goldman Properties, applauded the panel’s efforts. She also urged some restraint. Showing slides that show Miami Beach being submerged is what “gets picked up by the news.”

“We have to be very… strategic about how we discuss the reality of sea level rise,” Goldman said.

Pathman said the purpose of the event was just to “whet everyone’s appetite.” On September 14, the chamber plans to hold a roundtable discussion with “leading political and civic leaders about current and future strategies for sea level rise in South Florida” at a location to be announced.

 

Source: The Real Deal

It’s up to developers and city officials to protect projects in Miami Beach from the threat of global sea level rise, architect Reinaldo Borges warned an audience gathered inside a conference room at the W South Beach on Thursday.

“Developers need to change their perspective,” Borges said. “They go in with a short-term investment mentality. That mindset has to change.”

Business leaders discuss sea level rise at the Miami Beach Community Resiliency Summit

Business leaders discuss sea level rise at the Miami Beach Community Resiliency Summit

Borges, a principal of Borges & Associates Architects, lamented that hotel projects his firm worked on like the Royal Palm Miami Beach and the Bentley Beach Hotel will be negatively impacted by sea level rise. Before new projects break ground, Borges suggested city officials find ways to provide developers with incentives if they build structures at a higher elevation.

The Miami-based architect was part of a panel of business community leaders at the Miami Beach Community Resiliency Summit Friday morning. Other speakers such as Wendy Kallergis, president and CEO of the Greater Miami and the Beaches Hotel Association, and Gabriole Van Bryce, a member of the association’s sustainable hospitality council, talked about successful efforts to convince builders and owners to make their properties greener.

“We have really helped hotels reduce the impact of climate change by reducing greenhouse gas emissions,” Van Bryce said. “We want to further reduce the effects of greenhouse emissions by promoting a cool roof initiative to place local gardens on rooftops.”

Al Roker, host and weatherman for NBC’s “Today Show,” kicked off the summit by providing attendees with a few cold hard facts about climate change. “In the next 50 years, Miami’s high tide will be five feet higher,” Roker said. “At the city’s 100th anniversary concert last night, I told the crowd, ‘I hope you’re enjoying this now because where you are standing now will be underwater one day.’”  The popular morning show personality also said the mainstream media made a mistake by coining the term “global warming,” instead of using “climate change.”

Following his presentation, Roker told The Real Deal that developers, city officials, and residents have to work together to address the real threat of climate change. “Everybody should be concerned,” Roker said. “Are buildings ready? Is the infrastructure ready? Those are all real concerns condo owners, private property owners, businesses and everybody should be concerned about.”

 

Source: The Real Deal