Legacy of a Boom

The recent construction boom changed the character of Miami’s downtown

By Debra Wood

During the past few years, all areas of Miami’s downtown – from the central business district to the media and entertainment corridor – have experienced tremendous growth. Construction continues on several projects, including major office buildings, but with the housing bust and the recession, new starts have come to a standstill.

Photo courtesy Aerial Photography Inc./www.api4.com

“Downtown Miami has been through a lot of cycles,” says Hank Klein, director of business development for Cushman & Wakefield in Miami, a member of the Miami Downtown Development Authority Board and a resident of the city for the past 51 years. “This boom started six to eight years ago. It started with residential condos and went into retail and office space.”

Klein adds that he believes growth will return.

Alyce Robertson, executive director of the Miami Downtown Development Authority, says that since 2004, “19,000 residential units have been completed and 4,500 are under construction in downtown. There has been $13 billion in development investment since 2002.”

Downtown condominiums are closing at higher rates than units in outlying markets, Robertson adds.

Alan Ojeda, founder and CEO of Rilea Group of Miami, developer of 1450 Brickell, an office tower now under construction, and One Broadway, an adjacent apartment complex, says Miami is the “only truly urban city in Florida, where people walk to work.” He says people can get good deals that won’t be available a year or year and a half from now. And residents now living downtown have brought new activity to the city.

Robertson agrees that residents now living downtown have brought new activity to the city.

“The Brickell area is bustling, especially Mary Brickell Village (a retail and restaurant complex),” says Robertson, who acknowledges a need for more retail in the central business district.

However, the area is already lively, says Tony Puente, senior vice president of Fairchild Partners Commercial Real Estate Services in Coral Gables.

“The vision our forefathers had for a 24/7, live-work-play area is coming to fruition,” Puente says.

Tom C. Murphy, vice president of preconstruction for Coastal Construction in Miami, which is building the $140 million, 38-story, 1450 Brickell for Rilea, says the downtown slowdown is due mostly to the current financial situation.

“Right now, development depends on financing,” he says. “I don’t know that it’s the downtown Miami or Biscayne corridor as much as it’s financing in general.”

Ojeda places much of the fault for the glut of condominiums with lenders.

“If you wanted to buy, there was always a lender willing to lend,” Ojeda says. “Now that has changed, for the time being.”

Klein says the Adrienne Arsht Center for the Performing Arts has stimulated interest at the northern, arts section of downtown. Nearby, developer Argent Ventures of New York is converting the Omni shopping center into class A office space, and the 500-room hotel is being upgraded to a Hilton.

“Eventually, that whole area will develop,” Klein says. “We’re having an economic hiccup, so it’s taking a little longer than we anticipated, but eventually it will all happen. The recession will last maybe another year, and then we will see people looking at the market again.”

Ricky Arriola, chairman of the performing arts center, says the economy has forced some developers to hold off on new projects, but he expects during the next five years significant development will occur to give center attendees places to go before and after a show.

“The next wave of construction will be around the center,” he says. “We’re bringing a lot of people to a downtown that used to be empty after dark, and that’s a positive sign. Now you are seeing restaurants opening, cafes and wine shops opening, and that’s not [just] because of the performing arts center.”

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Current projects

“The downtown corridor is going gangbusters right now, in terms of construction,” says Andrew Rudzinski, co-managing director for South Florida CB Richard Ellis in Miami.

Moss & Associates of Fort Lauderdale continues work on Mint, a $129 million, 52-story, 1.3-million-sq-ft condominium. The company finished the neighboring $109 million, 45-story Ivy for the same developer, Key International Development of Miami.

Suffolk Construction of West Palm Beach is building the $306 million Met 2 project. The development measures more than 2 million sq ft, and includes a 47-story office tower next to a 41-story hotel project with a 19-story shared podium. Construction began in October 2007 for MDM Development Group of Miami and MetLife of New York.

Project manager Scott Prince says the three segments are rising simultaneously: the post-tensioned hotel tower, the podium and the structural steel office tower.

John Moriarty & Associates of Florida, based in Hollywood, began construction in October 2007 on the $150 million, 40-story, 602,000-sq-ft Brickell Financial Centre for Foram Group of Miami. The building features a hybrid steel and concrete frame to expedite construction.

“This round of construction will probably eliminate any future buildings being built until these are absorbed, and it will depend on demand, which is slower right now due to the economic times,” Puente says. “You will probably have enough inventory for the next few years to meet the demands of tenants and businesses growing in Miami.”

Latest Trend: Offices

The recent wave of high-profile office buildings will have a significant impact on the city. Met 2, the Brickell Financial Centre and 1450 Brickell will add 1.8 million sq ft of class A office space to the city’s existing inventory of 11 million sq ft, something community leaders report as sorely needed but likely to flood the market in late 2009 and early 2010.

“Right now the vacancy rates are low, everything is full and rates are at an all-time high,” Cushman & Wakefield’s Klein says. “That will probably change as the new buildings come online. The buildings are signing up new tenants, but I know when they open, they will not be full.”

While new condo buildings rose, no substantial office structures have come on line in years Rudzinski says.

Puente adds that from 2003 through 2007, “we were coming off years where vacancies were decreasing and absorption was at a high pace in the downtown market. Some areas, especially in the Class A products, achieved lows of 3% to 4%, which is almost like zero.”

Rates have increased about 10% per year, Puente says. Even though Miami is an international city, most of the foreign enterprise requires small amounts of office space. Puente expects law and accounting firms will lease a substantial amount of the new space.

For instance, Greenberg Traurig plans to move into Met 2. Another law firm, Bilzin Sumberg Baena Price & Axelrod, signed a 10-year, $58 million lease at Brickell Financial Centre.

Meanwhile, Arriola of the arts center remains bullish about what’s happening downtown.

“In five years, Miami will be one of the great downtowns, not just in this country but worldwide,” he says.

Useful sources:

1450 Brickell
http://www.1450brickell.com/

Brickell Financial Centre
http://www.brickellfinancialcentre.com/

Met 2
http://www.metropolitanmiami.com

Moss & Associates about Mint
http://www.mosscm.com/company/news/news.php?id=44

One Broadway Brickell
http://www.onebroadway.com/