White-knuckle gridlock, scarce green space, a booming population and dead malls in lively locales add up to one thing for retail developers in Florida — paradigm shift. The days of clearing a few acres, tapping utilities for a song and going vertical with a new project aren't exactly over, but urban-infill and other redevelopments are fast becoming status quo throughout much of the Sunshine State.
Cities and counties help drive the trend by providing subsidies and other incentives. Some aim to reduce traffic congestion by encouraging live-work-play environments. Others hope to remake dated downtowns. No amount of public help, however, will woo developers and retailers into money-losing locales.
They need robust populations with solid spending power — something revitalized Florida cities increasingly offer. “All of the downtowns in Florida — all of them — are seeing massive revitalization,” says John Crossman, a senior vice president and director of investment services in Trammell Crow's Orlando office.
People Power
Florida's population, which now tops 17 million, mushroomed a whopping 23.5 percent from 1990 to 2000, according to the U.S. Census Bureau. From 2000 to 2003, it grew by 6.5 percent, twice the national rate. “You've got 300,000 people a year moving to Florida,” Crossman says. “You need about 10,000 people to support a grocery store, and so just to keep up with demand you need 30 new grocery-anchored centers in Florida every year.”
New Plan Excel Realty Trust, which specializes in grocery-anchored retail, is happy to meet that demand. The New York City-based REIT now owns 33 centers in Florida and has redevelopments under way in New Port Richey, Jacksonville, Orlando, Fort Walton Beach and North Miami Beach. “The lack of developable space combined with other impediments to development make redevelopment much more appealing these days,” says Len Brumberg, New Plan's executive vice president for retail.
Finding well-located properties in demographic hotspots is the crux of New Plan's Florida strategy. A similar approach recently led Indianapolis-based Simon Property Group to join Jacksonville-based St. Joe in a major revitalization project in Panama City Beach, where the pace of redevelopment is frenzied. “If you drive down the beach headed toward Seaside and Destin, you see cranes everywhere,” says Mark Gambill, Simon's regional VP of development. (More on Simon's Florida joint ventures, page 64.)
Indeed, the city reports a 120 percent jump in construction permits in fiscal year 2002 to 2003. And from last October to March 2004 alone, construction permits exceeded $242 million. Planners say at least 9,578 condo units will replace 2,588 hotel rooms by 2008. “We've seen a change here where a lot of the mom-and-pop hotels that have been here for 40 years have decided to sell,” says Chamber of Commerce President Debi Knight.
In the joint venture, Simon bought 90 acres (with the option to acquire 125 more) from St. Joe to begin developing Pier Park, a 1 million-square-foot shopping, dining and entertainment complex within view of City Pier and the Gulf of Mexico. The project, which is adjacent to the newly built Aaron Bessant Park, replaces the old park and festival grounds. The first phase is slated to open in 2006.
Even with its fast-growing permanent population and nearly 7 million annual visitors, Panama City Beach is underserved by national retail, if not by seafood joints and t-shirt shops. “I think we're catching the crest of the wave,” Gambill says. So does Crossman, who predicts retail demand in the Florida panhandle will be “white-hot” for 20 years. “You've got a ton of people in the Southeast who are buying second homes and condos in Panama City Beach,” he says, “and that's where they'll retire.”
Tight Squeeze
Redevelopment is the order of the day as well in the South Florida corridor bounded by the Florida Everglades to the west and the Atlantic Ocean to the east. Out-of-date malls and strips are top targets for the wrecking ball.
“When you look at Broward County and greater Fort Lauderdale, they've already built out all the way to the Everglades,” says Drake Corrigan of Miami Beach-based New Florida Realty Advisors. “All the development going on there is actually redevelopment.”
In North Miami Beach, Corrigan recently tore down a 50-year-old strip center on 163rd Street one block from Biscayne Boulevard. The former Winn Dixie-anchored center “was a cruddy, ugly building that was an eyesore in the community,” Corrigan says. Its 33,000-sq.-ft. replacement will offer the first Starbucks within city limits as well as Subway, T-Mobile and 10 other national chains. “We were 100 percent leased at $35 per square foot before we broke ground,” Corrigan says. “Older centers nearby have trouble renting for $20 per square foot.”
Corrigan isn't the only developer to notice 163rd Street's potential: About a mile west of his center, New Plan is spending $20 million to transform another dead property, The Mall at 163rd Street, into a 765,000-square-foot power center anchored by a Home Depot and a Wal-Mart Supercenter. “The five-mile population count is over 425,000 people,” says Brumberg, who calls the shuttered mall “a poster-child for obsolete retail.”
Built as an open-air center in 1956, The Mall at 163rd Street was enclosed in the early 1980s by Equity Property & Development of Chicago. It was South Florida's first regional mall and for years served as the business heart of northeast Miami-Dade County, says manager Paul LeMay. It declined in the late 1980s, eclipsed by nearby Aventura Mall. A rash of retail bankruptcies in the 1990s was the death knell.
New Plan's urban-infill project entails knocking down much of the old 1 million-square-foot mall to make way for the new boxes and Wal-Mart, which paid the REIT $13 million for a 21.5-acre parcel. The grand opening is planned for next May or June.
Urban Imperative
Perhaps Florida's most ambitious urban-infill project is Midtown Miami, a $1.2 billion mixed-use complex that could take 10 years to complete. The Florida East Coast Railway once stored freight cars on the 56-acre site, located in a largely immigrant neighborhood near Little Haiti that lost 19,000 jobs to globalization in the 1980s and 1990s, says Keith Carswell, Miami's director of economic development.
“The project will consist of 600,000 square feet of retail space, about 400 apartments, several restaurants and bars, two public plazas, a hotel and spa, a 2,900-space parking structure and approximately 3,000 condo units,” Carswell explains. The city will fund the $51 million parking deck and has created a $25 million debt reserve, he adds.
Developers Diversified Realty recently broke ground on the vast project's 26-acre retail component, The Shops at Midtown Miami. The Cleveland-based REIT plans to open three separate blocks of big-box retail sometime in 2006. The neighborhood, like much of Miami, is undergoing strong residential growth, notes DDR spokesman Scott Schroeder.
The scale may be smaller, but similar mixed-use infill projects are under way in major cities throughout the state. “There's $1 billion in construction projects in Downtown Orlando right now,” says Frank Billingsley, director of Orlando's Downtown Development Board. These dense developments reflect the practical needs of Florida's urban planners, for whom “live-work-play” is no empty slogan, says Marnie Connor, a senior advisor for Irvine, Calif.-based Sperry Van Ness-IRG Commercial. She uses the term “infill suburbia” to describe recent mixed-use suburban developments in Central Florida and elsewhere. “Trying to get people off the roadways is a major thing driving this,” Connor says. “We've got to get people living and working and shopping in the same general vicinity.”
FLORIDA CITIES GET SAVVY
Forget about a booth at ICSC — just hire a broker.
Retailers and developers bang their heads against the wall trying to get local-government officials to understand demographics and other basics. “I was dealing with the mayor of a major city once who was complaining that Publix wouldn't come to his downtown area,” recalls John Crossman, a senior vice president and director of investment services in Trammell Crow's Orlando office. “I said, ‘You've got to have people first,’ but he couldn't get that concept.”
Increasingly, however, Florida officials get it. Frank Billingsley, director of Orlando's Downtown Development Board, says booming Orlando puts people first, paying close attention to the numbers grocery and drug chains require. “Our downtown is very close if not already there,” he says. And how's this for savvy? The City of Winter Park recently hired Crossman and other brokers to scout for retailers at ICSC. Why bother with a booth?
DEMOGRAPHIC OVERVIEW
- Population 2003: 17 million
- Population Growth 2003: 6.5%
- Percent of Population That is Hispanic: 16.8%
- Median Household Income: $38,819
- Home Ownership Rate: 70.1%
- Persons Per Square Mile: 296.4
Source: U.S. Census Bureau
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Since 2000, Downtown Orlando has added more than 2,000 residential units, often attached to huge projects such as The Plaza on Orange Avenue. It's Central Florida's largest mixed-use redevelopment, with street-front retail and more than 20 residential towers.
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Panama City Beach's 2,200-acre Community Redevelopment Agency — the largest in Florida — is partly responsible for the city's renaissance. It pays for underground utilities, sidewalks, trails, public parking facilities and more.
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Panama City Beach's population in 2002 was 140,938, with an average household income of $48,738 — but those numbers don't include 7 million annual visitors.
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In their Pier Park joint venture in Panama City Beach, Simon brings national retail expertise. St. Joe, Florida's largest private landowner, will help Simon plan the project and jump through local-government hoops.