A look at the retail and commercial markets in South Florida
By Jodi Macken
With the economic climate cooler every day, you really have to work harder and smarter to survive in real estate. Yet, even the most effective Realtor is increasingly challenged, not merely because of the housing slump but because technology and concern for the environment are changing the way people look at their places of work and where they spend their money.
The fact is, people want to work closer to home, and if they can work at home, that’s even better. They save on gas when they avoid long distance commutes to the office and when they shop locally. Remote access and video conferencing are now popular ways to conduct business, and Internet shopping makes things more convenient. These phenomena change the dynamic of the market since office buildings in residential areas become more desirable over remote office parks or congested urban centers and neighborhood retailers become more frequented.
The right combination of location, price and product still reigns supreme in the commercial market. Prestige also plays a role in where businesses and retailers decide to settle. However, even when all the factors are in place the office market overall is facing tough times.
For offices to be able to compete in today’s market, the most important factor is flexibility. If the building accommodates different types of users by offering varying sizes and shapes of office spaces, it is likely to be more marketable. This is the reason office condos have done well in general. They work because they provide a turnkey solution to the business owner who will likely cooperate with the developer to build out the space to their needs.
When the office condo concept fails, however, is when the cost basis becomes unreasonable. You want to make money, not figure out what you have to do to make money in designing and building your space. It is complicated to build out an office, but overall you will still be in a better position if you buy versus rent because of the tailored aspect, and because of the equity you build as an owner over the long run.
The retail segment of the industry speaks to spending money. It is directly affected by the economy because people are more reluctant to spend when times are rough. What is interesting about retail, though, is that it closely follows residential development. Therefore, in certain locations when the retail market is underserved, a retail building becomes an opportunity even when the economy is weak.
The tenacity to remain afloat and weather the storm during market slowdowns can really be seen in family-owned businesses. Small neighborhood shops tend to be more personal in nature and afford local residents a greater opportunity to purchase goods and services that are more regional. Typically, big box retail centers offer fewer additional tenants, although, they are an attractive portfolio piece. For the developer, however, big box retailers generally don’t pay market rents. And lately, it has been harder to depend on them as the market sours, as too many of them have had to close their doors. Unfortunately, when management chooses to close stores, the workers and people in the community are adversely affected. It is interesting to note that with franchises, those people have the big-name company behind them, but the franchisee is generally more invested to stay open, even during leaner times.
In addition to the residential concentration, traffic patterns make a difference for retailers. Palmetto Gardens Plaza, for example, is located in Miami Gardens right off the Palmetto Expressway, a highway that is traversed by 120,000 cars daily. The brand new shopping center offers the greatest frontage in the area, and since visibility and accessibility are key, retailers are flocking to the site to inquire.
Palmetto Gardens Plaza also underscores the point about retail thriving in underserved markets at any point in an economic cycle. Located near Dolphins Stadium, a racetrack, Florida Memorial University and St. Thomas University, the shopping center has been embraced by the Miami Gardens community, which is only five years old. This vibrant community built its own infrastructure and now has its own city government, police department and building department. As a result of this structure, the community is demanding stable businesses like those existing in other South Florida communities. The combination of an ideal location, unparalleled visibility and easy traffic access along with the birth of this new city makes this project a desirable place to own a business.
Jodi Macken is the associate director of Macken Realty. Contact her at 305.933.3800, or visit mackenrealty.com for more information.