In downtown Miami, start at Biscayne Boulevard and walk west on Flagler Street.
A perfume shop gives way to a restaurant with outdoor seating and a discount luggage shop. Several jewelry shops later, you’ll have seen shuttered storefronts and plenty of graffiti, some invited.
After going past the historic Alfred I. DuPont Building and the vacant Macy’s, head north, and the Virgin MiamiCentral station features a modern design with slanted white pillars.
This contrast between the old and new downtown, historic buildings and futuristic structures is reflected in the neighborhood’s architecture as well as its retail market.
“For me, when I look at downtown Miami, it’s a tale of two cities,” said Christos Costandinides, a director and South Florida market economist for CoStar Group in Miami. “Downtown Miami has ended up having this very divided picture. Like it’s kind of the dated shops and projects, and then now we have all these incredible new developments that are coming out of the ground.”
Of all the retail markets in Miami-Dade County, downtown has the highest vacancy rate and some of the highest asking rents.
About 21.5% — more than 3 million square feet — was open space in the fourth quarter. Yet the average direct asking rent per square foot was $59.43 triple net, the fourth highest in the county, according to Colliers International data.
The new MiamiCentral and Miami Worldcenter are pushing up asking rents even with the breath of empty downtown stores, Costandinides said.
“These projects are much newer, so if you are a business that goes in there, you have much more ability to draw in customers so rents are much higher,” he said.
The new space is arriving as smaller retailers have been closing, just like in other markets.
“The rents are from the newer development, and then the vacancy has increased because a lot of people are swapping product from downtown Miami,” Costandinides said.
The Mana Effect
There also is the Mana effect. It’s another reason for the vacancies, said Mika Mattingly, who has brokered the majority of Moishe Mana’s downtown acquisitions.
The Israeli-born entrepreneur best known in Miami as a Wynwood redevelopment pioneer has amassed about 50 properties for more than $350 million along and near Flagler Street.
Not all of his holdings are retail. But because Mana owns a high portion of Flagler properties but still is working on making his vision come to fruition, that’s pushing up overall downtown vacancies, said Mattingly, executive managing director, urban core, at Colliers International South Florida in Miami.
“The vacancy is there because it’s calculated,” she said.
The plan is for a technology hub — a ”Silicon Valley of Latin America” — although there also will be some retail such as restaurants and clothing shops with a feel that’s reminiscent of some European cities, Mana told the Daily Business Review.
Retail is reinventing to survive and his retail won’t be run-of-the-mill, Mana warned. Also, as a way to make it more affordable to tenants, he said he is considering shared-space concepts where two retailers can share a space.
Mattingly said the first step of Mana’s project will be a move by Miami International University of Art and Design from 1501 Biscayne Blvd. into Mana’s 13-story building at 155 S. Miami Ave. next summer.
Also, bitcoin and blockchain technology pioneer Nick Spanos plans to set up an office at Mana’s 100 E. Flagler St. building, Mattingly said.
“He is to be the ground zero for bringing people, other blockchain companies here,” she said.
Mattingly expects Mana’s properties to quickly fill up and bring down the vacancy rate, retail and other, after he makes other moves.
Old Meets New
Downtown Miami — roughly from Biscayne Bay west to Interstate 95 and from the Miami River north to Interstate 395 — experienced unbridled growth in the 1920s and then plenty of ups and downs through the rest of the 20th century. In the 1960s, some decline tied to suburban flight prompted more businesses to relocate.
It remains home to an eclectic mix of architectural styles, from the Art Deco DuPont building to the International Style of the Macy’s building and the Classical Revival civil courthouse.
In the 1980s, discount luggage, apparel and souvenir shops dominated.
“You are really going to see those disappear. Probably within two years you are really not going to see that tenant anymore,” Mattingly predicted. “They are paying $14 to $20 a square foot. They are really just remnants of either just waiting until you do something with the building, until you change the tenant, or the person who owns the building has owned it forever and isn’t that concerned about the lease rates because their basis is so low.”
If Mana’s tech-hub vision pans out, the techies will prompt more retail evolution, she said. The downtown retail that’s thriving, mainly restaurants, relies on the daytime traffic from office tenants.
“When you have young tech people hitting the streets, you are going to have to have retail that will meet their needs,” Mattingly said. “Now you have tech people who are going to live, work and play there. For the first time, the bars are thriving at night.”
North of Mana’s assemblages, crews are busy working on MiamiCentral and Worldcenter, the only significant new downtown construction. They are bringing new retail as well.
At the station, 85,000 square feet of retail space includes Joe and the Juice and Parliament Coffee, and the 40,000-square-foot Central Fare food hall is promised soon. At the 3 MiamiCentral office tower, an Einstein Bros. Bagels has opened and a grocery store is expected.
At the 27-acre Miami Worldcenter, 300,000 square feet of retail will be divided mainly between two high-street promenades.
Both projects will stand high above the rest of downtown, much of it historic. Mattingly considers that good news — the old and the new together implies natural growth instead of the neighborhood gentrification so often seen in Miami, she said.
“In downtown, it’s just going to happen organically,” she said. “In that juxtaposition you are not seeing the usual suspects, the usual retailers popping up.”