Restaurant Migration Creates Dire Shortage Of Eatery-Ready South Florida Space
Wife-and-husband restaurateurs Christie Tenaud, a chef, and Roberto Colombi, a sommelier and general manager, operated The Blue at the Boca Raton Resort & Club but wanted to open their own space somewhere in South Florida. They started looking in December of 2018.
"We looked from Wellington to Hollywood," Tenaud said.
In February of 2020, they homed in on the Fort Lauderdale area. Then the coronavirus pandemic hit. Even so, they didn't find anything suitable until December.
"The market was competitive. The prices were higher than we had anticipated. Even with so many restaurants going out of business, the cost per SF was still pretty high," Colombi said.
Finally, they opened Union Kitchen & Bar with Italian and Peruvian influences in Wilton Manors on Aug. 10.
“Second-generation restaurant space is a precious commodity right now," said Devlin Marinoff, co-founder and managing partner of DWNTWN Realty Advisors, referring to spaces already kitted out with grease traps and stoves rather than brand-new, empty boxes. "If you have any, consider it as good as leased."
Anywhere east of I-95 in Miami is thriving, he said, particularly in the urban core and Miami Beach.
"Anyone who has such space in Wynwood, the Design District or Miami Beach is going to get multiple full-price offers very quickly,” he said.
The countywide vacancy rate is 4.3%, and the direct asking rental rate was $36.70 per triple-net-leased SF, according to a Colliers International Q2 Retail Market Report for Miami-Dade County. In the Wynwood/Design District submarket, the asking rent was $64.06 and $82 in Miami Beach. In the suburbs, that figure was $37.54 in Coral Gables and $41.95 in Coconut Grove.
Chris Stewart, senior vice president of leasing for PEBB Enterprises, chalked it up to an influx of cool, high-end concepts from New York, New Jersey, Chicago, Boston and Washington, D.C. He cited the closure of more than 1,000 restaurants and bars since March 2020 in New York City. Similar closings expected in South Florida never materialized, thanks to landlord forgiveness and government subsidies, he said.
"Now I’m hearing from a lot of restaurant owners who are having better years in 2021 than they did in 2019, with far fewer people working with them now,” Stewart said.
Fort Lauderdale broker Jaime Sturgis, CEO of Native Realty, said summer is usually slow in South Florida, but this year has stayed busy and fall could set records.
"For good restaurants with a strong following, you likely have to make reservations weeks in advance," he said.
Advan Research Corp., a firm that analyzes cellphone data, looked at visitor traffic to Miami in three walkable neighborhoods with restaurants — Wynwood, Coral Gables and the South of Fifth area of Miami Beach — and saw that people have been steadily returning to these areas since a steep drop-off in March 2020, though not yet at pre-pandemic levels.
As restaurateurs look for space, top concepts with a lot of capital backing them will spring for first-generation space if it is in an A-plus location, Sturgis said. In the urban core and emerging neighborhoods, where parking is constrained, many landlords have also been moving proactively to get their properties approved for restaurant and bar uses in advance so tenants won't need to go through a conditional approval process, he said.
Sturgis said that some new developments, like Motif in Flagler Village, are making tenant improvement dollars available to operators to build out their spaces. Daniel Chaberman, director of leasing for Grupo Eco, which developed the Atlantic Village mixed-use lifestyle plaza in Hallandale Beach, is doing that, too, thus snagging tenants who have been searching for second-generation space.
In designing Atlantic Village, his team had a vision to recruit about 20 different types of restaurants at different price points. They installed a centralized grease trap system, exhaust systems and individual access to utilities such as gas, electricity, water and sewer.
"This is our way to compete with second-generation spaces and provide tenant improvements before leasing the brand-new space," Chaberman said. "We also made sure to include substantial outdoor dining and covered outdoor space."
He is getting ready to welcome an outpost of trendy Miami Beach restaurant Juvia, which is opening a rooftop concept, and another from New York-based Temakase.
Beth Azor, CEO of Weston-based Azor Advisory Services, which owns and manages retail centers in South Florida, said it isn't just newcomers who are driving demand; some local restaurateurs have expanded to second or third locations. She even noted an acute shortage of drive-thrus.
"More and more concepts that have always resisted drive-thrus because of the food freshness factor are now viewing them as a necessity," she said.
Chipotle and Shake Shack are actively looking for space in the local market, she said, suggesting that property owners could convert shuttered banks or open up exterior walls to build drive-thrus.
Marinoff said that if the delta variant continues to draw people to Florida as cold weather bears down on the Northeast, it could trigger another round of the boom.
“I just brought a Wynwood restaurant building to market for sale a few days ago," Marinoff said. "The building is under a long-term lease to a popular restaurant. I already have several offers way over the asking price. Before I can even get back to these investors, they are sending me offers. I’ve never seen anything like it.”