17 Jan Miami’s Real Estate Market Must Adapt to Retail Industry Changes
MIAMI’S REAL ESTATE MARKET PRESSURED TO ADAPT TO UNPRECEDENTED CHANGES FACING THE RETAIL INDUSTRY
By Ross Milroy | January 16, 2018
As we usher in 2018, analysts are debating what will be the next big shift within the real estate market. In addition to all other variables that will affect what will happen in the years to come, the change in the retail landscape will be one making an obvious impact.
This year saw the national closure of millions of square feet of space occupied by many of the retail giants. In addition to closing its iconic store in Downtown Miami, Macy’s laid off hundreds of workers and shuttered a good majority of its other stores around the county. The Limited has gone out of business for good; Sears Holdings detailed their plan to close hundreds of K-marts and 142 Sears stores; Toys R’ Us is on its last leg; Radio Shack has finally called it quits; and True Religion, which pioneered the $300 jean fad is done as well. It’s no secret that there are many elements that have lead to the demise of these giants, most prominently being the rise of online shopping. In addition to the cause, it’s important to look at the effect and how it affects local communities and Miami’s real estate market.
In Miami and Miami Beach, we’ve witnessed the retail landscape changing at the same furious pace as luxury condos have. As retailers and developers evolve, it’s more important than ever they pay attention, and cater to, changing consumer habits.
Miami is a tourist-centered city where regardless if residents are here long-term or if they fit more of the traveler profile, our culture is one of vacation and tourism. Miami is a young and ever changing city that has come to expect casual dining alternatives, fashionable beauty and service options, trendy fitness centers and stores unique enough to provide something that Amazon cannot.
In Miami, restaurateurs who open in emerging neighborhoods quickly find themselves priced out by what is new and trendy. Areas once thought to cater to locals are being taken over by high-paying art-galleries, luxury retail or national brands looking to get a piece of the pie. A few year’s ago, most would not have expected that an online retailer like optical giant Warby Parker would set up shop in Miami’s small arts district. But they did just that in Wynwood as well as in about 30 other cities. It’s interesting to note that the majority of these locations are on what a report from Cushman & Wakefield denotes as “cool streets.” The idea behind these Warby Parker stores as well as others is that even if a retailer does a majority of its business online, it still needs to have brick & mortar locations that enhance its reputation.
The revolving door of new restaurants and businesses has instilled such concern amongst small-business owners that the term “pop-up” has become something of the norm. This is often a temporary solution to developers and landlords who are sitting on empty spaces hoping to take advantage of sky-rocketing rents –- rather than keep the spaces empty, they offer short-term rentals to restaurants, art studios, event-spaces or small retail shops who are willing to agree to usually one year. In addition to keeping options open for the landlords, these short-term pop-ups also give the business tenants time to prove they can thrive in that location.
Miami’s visitors and residents satisfy their obsession with beauty, looks and style through the countless hair, nail & wax salons, barbershops, spin cycling, yoga, coffee shops and ‘of-the-moment’ fitness studios. At one time, every block in Miami had a tattoo shop – now every street has a juice bar, barbershop and yet another Cross Fit gym.
Catering to this trend of quick-fixes in 2018 will be the opening of several food halls and multi-markets. Coconut Grove will welcome the MKTplace at Goombay Plaza, as part of the revitalization of CocoWalk, offering a variety of vendors. The ‘Time Out Market’ will soon open in Miami Beach, which will offer 17 restaurants as well as pop-up kitchens and other purveyors. While Brickell will see the opening of not just one, but three Italian Markets (all within a few blocks of each other): Casa Tua Cucina, La Centrale, and Rosetta Italian Bakery.
These changes are contrary to the those we saw only a few short years ago when Miami Beach’s legendary hospitality venues such as the Van Dyke Café was taken over by LuLuLemon Athleisure wear, the famed Lincoln theater closed to make room for H&M discount clothing. Numerous small retail shops and restaurants were also closed to make way for the multi-billion dollar Brickell City Centre.
The future will show how retail spaces will adapt to accommodate the fact that more consumers are spending their dollars on experiences as opposed to goods like clothing, accessories and personal items. Over the past year, for the first time ever, consumers spent more on restaurants and bars than they did on groceries. And, even if they do shop for groceries, studies also show that consumers who don’t go to stores themselves spend less on groceries when they use delivery services such as Instacart.
When one door closes, another quickly opens. Whether these changes are positive or negative for the overall economy, it’s evident that consumers value quality, uniqueness and positive personal services over retail access to cheap clothes, big-box electronics or mega-discount stores like K-Mart and J.C. Penny that were institutions to our previous generations… especially when they feel they can get a better deal online.
In 2018, it will be crucial for landlords and developers in Miami to see eye-to-eye. Businesses must adapt to change and developers must create environments conducive to this new consumer in order for commerce, development and Miami’s communities to flourish.