South Florida Year In Review: The Top CRE Stories Of 2018
The year 2018 is almost a wrap. Commercial real estate pros across the country spent much of the year marveling that the economic expansion has gone on for a decade, wondering how much longer it could possibly last, and enjoying the spoils for as long as it does. South Florida saw high rents, high land costs, continued population growth, and thankfully no hurricane. Plus, climate change hasn't put us underwater yet. Other than that, these were topics that had the market buzzing this year.
10. Everybody wanted industrial
The rise of e-commerce has been a boon to warehouses — a trend that is only expected to continue, especially in South Florida, where geographic land constraints make industrial parcels especially hard to find. An Avison Young report from Q3 said that “rental rates have increased to an average of $8.24 psf, an impressive 11% increase from the previous year.” Vacancy rate in the county was 2.8%. With Florida's active ports and busy highways, “the state has become like one big distribution market,” Duke Realty Regional Senior Vice President Ed Mitchell said at a Bisnow event this year.
9. EB-5 limped along
The federal EB-5 program, which allows foreign investors to obtain green cards and eventually citizenship if they put $500K or more into certain U.S. development projects, was crucial to helping South Florida’s real estate market rebound from the 2008 housing crash. But as fraud has beset the program and investors have cried foul, regulators have been reauthorizing it for only short periods of time. Local developers have begun to wean themselves off it in favor of other sources of funding.
8. We reached peak coworking, maybe?
Every flavor of coworking company has set up shop in South Florida by now — behemoths like WeWork, research-focused incubators like the Cambridge Innovation Center and small shops like Fort Lauderdale’s Collective Ventures. In fact, Miami is the city with the highest percentage of coworking spaces — 3% — according to Cushman & Wakefield Vice Chairman Brian Gale.
“Literally every single building in downtown and Brickell has a coworking element,” he said at a Bisnow event in October.
But big landlords know how to poach a good thing when they see it, and industry leaders warned that the next trend would be for building owners to cut out the middleman, and offer more shared and flex spaces themselves.
7. Megamall OK'd on edge of the Everglades
The numbers are almost too big to comprehend: 3.5M SF of retail, 1.5M SF of entertainment, 2,000 hotel rooms, 30 million visitors per year. The American Dream Miami complex — a $4B theme park and shopping center to be developed by Canadian company Triple Five and set to include an indoor ski slope and submarine rides — has been in the works for years but won key approval in June.
Although some environmentalists hope to derail it as it moves through additional legal hurdles, Miguel Diaz de la Portilla, an attorney with Saul Ewing Arnstein & Lehr who represented Triple Five in the permitting process, said the “landmark decision” will benefit Miami for decades to come.
“This project will create 25,000 jobs, improve roadways and inject billions of dollars into the local economy,” he said.
6. Wynwood entered a new phase
Wynwood has been gentrifying for years. In the past decade, warehouses were replaced by galleries, which were then replaced by small businesses and trendy retailers. This year seemed to bring a hard shift. Artsy neighborhood enclaves Wynwood Yard and O Cinema announced plans to close, while sleek buildings by big players rose skyward. Related Group is working on an office building, apartments designed by Lenny Kravitz's firm and a mixed-use project.
5. David Beckham's soccer plans got revived
David Beckham’s dream of bringing a Major League Soccer team to Miami was just about dead when, in January, MasTec founder Jorge Mas joined his investment group and injected life into the venture. After exploring, then abandoning, various possible stadium sites, the group is now focused on redeveloping the city-owned Melreese golf course into a billion-dollar mixed-use complex. It scored a major victory in November when voters agreed to let city officials bypass regulations and negotiate with the team.
4. FIU's brand-new pedestrian bridge collapsed.
The world’s attention turned to Miami when a brand-new bridge that was supposed to be a modern engineering marvel collapsed on top of cars during midday traffic. Six people lost their lives in the incident near the Florida International University campus. A National Transportation Safety Board investigation is still ongoing, and various entities involved in the bridge’s design and construction are tied up in litigation.
3. Miami was a finalist for Amazon HQ2
Miami is far removed from most of the mainland U.S., it has subpar public transit, and it is known more for boob jobs than its brain trust. Still, the city is well-poised for growth and we made the cut when Jeff Bezos’ team put the city among its top 20 sites for a possible second headquarters for Amazon. No, we will not stop bragging, even though we lost.
2. Investors came running to our opportunity zones
The Opportunity Zone program, which will allow people to pay little or no tax on capital gains that are reinvested into economically depressed census tracts, made headlines all around the country, but especially in South Florida. where capital likes to flow. Attorney Ronald Fieldstone, who focuses on opportunity zones developments, told Bisnow that "the program should be beneficial for the region because opportunity zones in South Florida include areas that are experiencing a transformation.”
Skeptics, however, worried that the program could have unintended negative effects on certain communities where gentrification is already underway and locals are struggling to afford rents.
1. Brightline launched service
Miami-Dade County has for decades been studying how best to expand its train offerings. Sixteen years ago, it began collecting taxes to fund rail expansion. And this year, when it could have made a key decision to finally expand Metrorail south, it nevertheless opted for buses instead.
In contrast, the privately owned Brightline was announced in 2012, got its stations and trains built and running, and this year launched service between South Florida's three major cities, with cocktail service to boot. That’s why billionaire Richard Branson wanted a piece of the action and became an investor. Look for Brightline’s rebranding as Virgin Trains USA in 2019 and future expansions to Orlando and Tampa.