Jeff Morr ()
Landing a deal with a large call center was a Margate’s landlord’s dream, but losing the lease was a nightmare—even though analysts say it doesn’t have to be long-lived.
The 90,000-square-foot space in the plaza at 5235 Coconut Creek Parkway in Margate was supposed to have been a fun workplace with exotic amenities, koi pond, parrots, basketball court and indoor putting green.
But when Saveology, the direct-to-consumer marketing company occupying the space, gave notice last year that it wouldn’t renew its lease, landlord Coconut Creek Companies Inc. was left in a bind.
“We spent hundreds and thousands renovating the plaza’s interior and exterior,” said property manager Jerry Spielman. “We renovated it just for Saveology.”
The call center had expected to create about 700 jobs and benefit from state and local government incentives, but its Broward expansion plans fizzled and Saveology moved its operations offshore to Jamaica.
With the anchor tenant gone, Coconut Creek Cos. faced losing more business. Today about 130,000 square feet of the 176,000-square-foot plaza stand empty.
“We’ll close if this keeps up,” Spielman said.
Despite a new façade, city support, on-site police presence, 1,250 parking spots and access to major roadways like Florida’s Turnpike, the plaza’s two largest spaces remain vacant.
“There’s a major risk in relying on one or two big clients,” said Jeff Morr, CEO of Majestic Properties and chairman of Master Brokers Forum in Miami. “In these cases, landlords need to do an adaptive reuse of the space. Sometimes they have to take the space a big-box used as a call center and split it into smaller spaces or create an entirely new concept.”
That’s what happened in Boca Raton when the city was reeling from the loss of its darling tenant—IBM, an economic force that drove transportation planning, public infrastructure and created about 10,000 jobs.
The technology titan buoyed the real estate sector from Boca to Delray Beach, before divesting millions of square feet of office and industrial during the late 1980s and ’90s. It had once owned the 123-acre T-Rex Avenue business complex now known as the Boca Corporate Center and Campus. But the company slowly let go of about 500,000 square feet of leased space on Clint Moore Road and about a million square feet of offices in Delray and Boca, before selling its massive office park.
“Everybody went through a lot of pain but it really was a blessing in disguise,” said Jeffrey Kelly, senior vice president in CBRE Inc.’s Boca Raton office. “We had 40 percent vacancy in office and industrial space because we were so dependent on IBM, but the glut of space opened up opportunities for corporate headquarters to relocate. You had engineers who were 35 years old getting nice severances to retire early and a lot of them were doing nice startups. You had a lot more tenants coming in and taking up the space, which made it a much more healthy market.”
New entrants—such as Rexall Sundown Inc., which purchased a former IBM site at 1297 Clint Moore Road in Boca in 1992—have continued to operate there.
“There are a number of examples like that of companies that came in, took advantage of the vacancies and just flourished,” Kelly said.
In Miami, investor Ofer Mizrahi is benefitting from a well-timed decision to reposition a large vacant space. When he first acquired the industrial site at 7610 NE Fourth Court in Miami, he assumed he’d get major tenants for the 100,000-square-foot site. But with rising rents forcing artisans out of the Design District, Mizrahi changed direction. He instead created Miami Iron Side, a trendy artist village with vibrant foliage, small showrooms and flexible space.
“The market is changing and the needs are changing faster than in the past,” Mizrahi said. “You have to work with what you have.”
Iron Side is now 80 percent occupied—largely by tenants who do business in or near the Design District.
“At the end of the day competition breeds success,” said veteran developer Adam Adache, managing partner of Cavache Properties in Pompano Beach.
In Margate, the landlord of the former Saveology Plaza is targeting medical centers, schools, call centers and other potential users to share the nearly 16.5-acre site.
“We’d like to see corporate headquarters,” Spielman said.