While there are mass retail closings around the country, in Miami, there is typically someone waiting on space to become available. Think about it: In Miami, there is actually a shortage of retail space.
Uber luxury markets in Miami are performing extremely well with Bal Harbour Shops (owned by Whitman Family Development) being one of the top retail complexes in the country, followed closely by Dadeland Mall and Aventura Mall. These malls are continuously reinvented and expanded, adding various entertainment and diverse dining options to their multi-level retail outlets.
The Dolphin Mall, a 1.4 million-square-foot mixed-used complex owned by Taubman Cos., continues to be its No. 1 performing mall in the country, with over 240 retail shops, dining and entertainment venues to choose from including Bass Pro Shops Outdoor World, Cobb Dolphin 19 Cinema, The Cheesecake Factory, Dave and Buster’s, Texas de Brazil, Bloomingdales The Outlet Store, Neiman Marcus Last Call and Saks Fifth Avenue OFF 5th.
Jeremy Larkin
Co-founder,
NAI Miami
Miami is cruising
There are several factors driving this phenomenon. First, Miami International Airport traffic is setting month-over-month and year-over-year records, according to the Greater Miami Convention and Visitors Bureau. Traffic in February 2019 was 5.7 percent higher compared to February 2018.
Cruise passengers embarking at Port Miami are also at an all-time high. According to Port Miami, there were nearly 5.6 million total cruise passengers in 2018, and a record 55,819 cruise passengers in one day in December 2018. In response to this, Royal Caribbean Cruise Lines, which had added another terminal recently in Miami, is expanding its corporate headquarters campus at the port. This expansion includes renovations of its existing building, as well as construction of a new 10-story, 350,000-square-foot office building built to look like a ship. Royal Caribbean predicts the new campus will double the current workforce and is projected to be completed by October 2020. A third cruise terminal is also included in these plans.
Similarly, MSC Cruises started construction on a second cruise terminal at Port Miami capable of holding an additional 7,000-passenger ship. MSC also plans to expand its current offices at Port Miami, as well nearly doubling its space it originally requested from Miami-Dade County’s Board of County Commissioners. MSC currently operates three cruise vessels out of Miami. With this new letter of intent, MSC estimates it would bring an estimated 1.5 million cruise passengers through Port Miami every year with construction being complete in 2021.
Norwegian Cruise Line also plans to open its new terminal at Terminals B and C in November 2019, which will hold two 5,000-passenger ships simultaneously. Additionally, Miami-Dade commissioners approved Virgin Voyages’ plans to build a terminal that is set to open in 2021.
With all this expansion, tourism traffic is projected to consistently grow at a healthy pace for the next decade, generating substantial increasing demand in the hospitality and food and beverage sectors, as well as in discretionary soft and hard good purchases.
Influx of residents
Another major factor driving the retail market is the Tax Cuts and Jobs Act of 2017. This reform, which placed limitations on deductions of state and local taxes, has created a significant increase in immigration of people from high-tax states like New York, Massachusetts, Connecticut, Pennsylvania and Illinois to Florida, along with the current immigration trend of people coming from South America and Puerto Rico. According to the U.S. Census Bureau, Florida had about 21.3 million residents as of July 1, 2018, overtaking New York and cementing Florida’s place as the third most-populous state behind California and Texas.
Florida also had the fifth-highest growth rate from July 2017 to July 2018. This combined growth in tourism and population is generating record hotel occupancy levels and revenues per room in Miami, despite hotel room supply growing by over 5 percent.
When you combine the fact growth in tourism and immigration is generating a continuing demand for retail space, while the prohibitive cost to build new space is constraining additional supply to be added, you obtain the net result of low vacancy, continued rent growth increase and high occupancy levels despite retail concepts turning over. These trends are expected to continue, albeit at a more moderate pace, for the foreseeable future.
— By Jeremy Larkin, Co-founder of NAI Miami. This article originally appeared in the May issue of Southeast Real Estate Business.