In the first sign that South Florida’s retail development sector still has a pulse since the recession took hold, Flagler Development and AMB have announced plans to move forward with The Shops at Beacon Lakes, a new 45-acre retail development planned for west Miami-Dade. Plans call for a 470,000 ‘big box’ shopping plaza that will draw national retailers and smaller tenants alike. According to Alan Esquenazi at Continental Real Estate Companies, “We’re seeing retailers take interest in South Florida again, as long as they can afford it.” The news marks a bright spot in a retail sector that saw new project completions fall by nearly 50% nationwide in 2009, with only 70 million square-feet of retail product slated to deliver in 2010, the lowest level on record, according to national industry research. More, from the Miami Herald’s front page story…
Plans for new malls may signal a retail revival
By Elaine Walker
In the first sign of life the South Florida retail market has seen in years, two major developers are dusting off plans for new big-box shopping centers and looking to recruit tenants.And another developer has recently signed contracts on land for two more retail projects. The earliest any of these Miami-Dade projects — Gables Station and The Shops at Beacon Lakes — would be ready for shopping in late 2012 or 2013. But some developers think it’s time to start testing the waters again.
It’s the first activity since new development ground to a halt in 2008, a victim of the recession and the credit crunch. Flagler and AMB Property Corporation are feeling confident enough to revive plans for The Shops at Beacon Lakes, which may be the first big box shopping center in Miami-Dade or Broward counties to move ahead since the recession. Workers have spent the past month clearing a 42-acre tract on the north side of State Road 836 west of Florida’s Turnpike.
“The timing is good right now,” said Alan Esquenazi, senior vice president of Continental Real Estate Companies, which is handling leasing for Flagler. “We’re seeing retailers taking interest in South Florida again, as long as they can afford it. As retail demand comes back, so does development.”
Local real estate brokers say that most of the retailers looking to expand in South Florida are successful existing chains like Target, Marshall’s, Bed Bath & Beyond and Total Wine. The market also is presenting opportunities for newcomers like Bye Bye Baby, Dick’s Sporting Goods, ALDI and hhgregg.
The key reason for the interest in South Florida — and Miami-Dade County in particular — is that it remains an underserved market for many big-box retailers and one where average sales volumes well exceed the national average. In Broward most of the current retail leasing activity is about filling vacancies in existing shopping centers. What has changed dramatically are the rent prices retailers are willing to pay. Prices could easily be 30 to 40 percent lower than they were pre-recession. Plus, retailers are no longer willing to gamble on a nontraditional site that doesn’t conform with their prototype.
“There is much stronger scrutiny made on deals and are they going to generate enough sales to offset the cost,” said Beth Azor of Azor Advisory Services. “If not, the retailers will go to Peoria.”
While Beacon Lakes may be the first out of the starting gate, developer Jeff Berkowitz is close behind. Plans are back on the drawing board for Gables Station, a vertical big-box shopping center with four floors of retail planned for a 4.5-acre site at 4811 Le Jeune Rd.
“Now is the time to commit, in order to get projects delivered in three years,” said Berkowitz, who hopes to begin construction in a year on the 300,000-square-foot project, which would include about six anchor stores. “One would expect the economy will be back in three years,” Berkowitz said. “At least to the extent, that retailers can move forward to fill major gaps in their market plan, especially in a market like Coral Gables that has such a high barrier to entry.”
Bob Shapiro, president of Master Development, is feeling confident enough that in the last 45 days he put two sites under contract on Flagler Street. The locations: a 31-acre former golf course at West Flagler and 92nd Avenue and a 37-acre former mobile home park at West Flagler and 102nd Avenue.
“The market is dethawing, but it’s not totally unfrozen yet,” Shapiro said. “I think there are do-able deals. Everybody is going to have to take a little bit less, including the developer. There are not going to be any grand slams, but there will be some singles and doubles.”
But the stumbling block for any of these projects could be the ability to make a deal with retailers that works financially. A litmus test of the market will come next week, when developers and retailers from around Florida gather in Orlando for the International Council of Shopping Centers convention.
“Deals are starting to happen, but very slowly and infrequently,” said Stephen Bittel, chairman of Terranova, a Miami Beach retail real estate firm. He is particularly skeptical about the viability of leasing a project the size of Beacon Lakes in the current market. “You can always fill it up,” Bittel said. “But can you fill at at a price that makes sense?”
Developers like Flagler and its partner AMB expect to have an advantage because they’ve owned the property at 1970 NW 129th Avenue for nearly 10 years. That’s a key reason Flagler decided to develop Beacon Lakes on its own, unlike last time when plans called for selling the property to Regency Centers.
“We have the lowest cost basis so we can delivery a quality project at a cost that makes sense for the retailer,” said Brian Latta, senior project manager of development at Flagler. “Depending on demand, the project can be built in phases.”
The current plans call for about 450,000-square-feet, including two major anchors, plus about five additional big box stores and more than a half-dozen outparcels for restaurants and banks. When Regency Centers pulled out of a similar design in late 2008, they already had lined up commitments from at least four tenants: Target, Kohl’s, Ross Dress for Less and T.J. Maxx. Some brokers believe those previous commitments will make it easier for Beacon Lakes the second time around. `
`Those tenants believed in the market at some point,” said Greg Masin, senior director of retail with Cushman & Wakefield. “The rooftops are still out there and there is still a need for that kind of use in the marketplace. These tenants are willing to do business — it’s a question of, under what terms and conditions?”