NAR’s annual conference was held in Boston earlier this week, and there were several takeaways for those of us who buy, sell and own commercial real estate. Like the light shining forth to the Prudential building pictured above, Florida’s economy is strong and the future for bright.
Florida was the top state in the country for job growth rates for the 12 months ending September 2018. The 4.83% in job growth will result in more real estate sales across the board. Florida is well over a full % point ahead of the second state.
Opportunity Zones (OZ) are still the talk among investors. With two distinct tax advantages, deferral of capital gain tax with a portion (10% or 15%) escaping the tax depending on how long (5 years or 7 years) investment is held, and no tax on the appreciation if the asset is held for 10 years or more, there will be a lot of money flowing into these areas. Clarification from the Treasury is needed on a variety of the nuances of investing in these zones. If you are considering investing in one of the funds, remember that the fact that a property is in an OZ won’t make a bad project good or even better, but it will make a good project very good.
Today, Canada becomes the first G7 Country to fully legalize marijuana. Canada had already legalized medical marijuana in 2001 and the law to legalize recreational marijuana, which was passed in June of this year, goes into effect today.
Although Florida and several other states have legalized medicinal use of marijuana, and nine states plus Washington D.C have legalized recreational use, marijuana is still illegal in the United States. This dichotomy between state and federal law creates a variety of legal hurdles, especially in banking and real estate, for marijuana growers and businesses.
CREW-Miami ‘s October luncheon featured an expert panel that discussed some of the legal challenges as they pertain to commercial real estate. Since Florida requires medical marijuana treatment centers be vertically integrated, they have to not only grow and process the marijuana, they also need to have retail locations, making the commercial real estate crucial to the business. However, purchasing the property with a mortgage can be a challenge, since most banks will not issue a mortgage for property that is involved in an illegal activity, landlords may be afraid of leasing property for the same reason, and many cities have moratoriums or ordinances that limit where these facilities and growers can be located.
Global spending on legal cannabis is expected to hit $57B by 2027. Now that the United States is sandwiched between two countries, Mexico legalized medicinal marijuana in June of 2017, that have legalized marijuana, the US is starting to revisit it’s policy on cannabis.
I just received my copy of RH’s catalogue and immediately loved the building pictured on the front. I liked RH as a brand even more when I opened the front cover and read CEO Gary Friedman’s piece, The Death of Retail Is Overrated. In it, he states that “…most retail stores are archaic, windowless boxes that lack any sense of humanity” fresh air or natural light. Just that description of a retail store would make me shop more online, from the comfort of my home or office, both of which have plenty of windows and light.
However, he goes on to state that since we are both social and physical creatures we still like experiences. This of course ties in to the whole “experiential retail” trend that the industry is pursuing to keep the customers it still has and bring new customers in. RH New York – The Gallery is the building featured on the cover. It is RH’s latest space that integrates food, wine, art and design in the Historic Meat Packing District.
“blur the lines between residential and retail, indoors and outdoors”
“are more home than store”
“are filled with fresh air and natural light”
have “garden courtyards, rooftop parks, restaurants, wine vaults and barista bars”
“activate all of the senses, and spaces that cannot be replicated online”
In Don’t Hold A Funeral For Retail Just Yet, I emphasized that retail wasn’t dead but rather shifting and that brands that provided their customers with options and experiences would fare well. Mr. Friedman worded it eloquently when he wrote: “… the physical manifestation of a brand will prove to be the most compelling and cost effective way to engage and inspire customers in a physical world.”
Make it easy for consumers to find what they are looking for. In a recent blog Is Veganism Going Mainstream, I discussed how Marshalls was making it easier for vegan shoppers to identify purses that coincide with the shopper’s values. In addition to Marshalls highlighting vegan purses, Whole Foods also makes it easy for consumers following specific dietary guidelines, such as Paleo, Whole 30, Gluten Free etc., to find products that meet their requirements without them having to read every label.
Make it experiential. Whether you own or operate an individual store, a chain of them or a shopping center, the consumer has to experience something beyond the shopping itself. Retailtainment was first used back in 1999 by sociologist and author George Ritzer
Make it interactive. Books and Books, the independently owned local bookstore is amazing at interacting with their customers. In addition to having knowledgeable staff, they have a cafe with great food, spaces for getting together and socializing and they offer book signings and readings by authors. Patrons come early have dinner or a cocktail, socialize, buy the book, and interact with the author. You can’t get that from online shopping and, in spite of technology (or maybe because of it) people want to have places where the can interact.
Make it Instagram and Pinterest worthy: Instagram, Facebook, Pinterest and the rest of social media has made it essential that whether it is food, clothing, real estate, spaces and places, whatever it is you are selling has to be Instagram and Pinterest worthy. Two places in Miami do that extremely well. Miami Design District and Wynwood. Don’t believe me? Go into Instagram and #miamidesigndistrict to view 158,000 posts or #wynwood to view over 2.4 million posts.
Make it about community. Several of the places already discussed such as Books and Books, the Miami Design District, and Wynwood are great examples. FootWorks in South Miami has running clubs and helps train you for half and full marathons, Dharma Studio in Coconut Grove offers free yoga classes three times a week in the Grove, and Aventura Mall has all sorts of events scheduled throughout the year. If you are in an area that has one, check with your local Business Improvement District and see how you can get involved to bring more traffic to your store.
Do you commute to the city but live in the suburbs? Light traffic day in Miami
Remember the movie Something’s Gotta Give starring Jack Nicholson, Diane Keaton and Keanu Reeves? Well this is nothing about that movie other than I thought of the title today while out on my morning run. It does have to do with Labor Day, however.
Although I normally run shorter routes during weekdays, I decided I would go on one of my longer routes along Old Cutler Road. What a mistake that was! In addition to being extremely dark at 5:45 a.m., the traffic was horrific! I couldn’t cross the street anywhere there wasn’t a traffic light, which I am sure made all of the commuters extremely unhappy. For the longer part of my run, I thought about where those commuters lived versus where they worked, what they were sacrificing, if anything, having to get up so early to get to work, do they have another choice other than sitting in traffic at the crack of dawn? So what do all of these questions have to do with real estate? A lot, I think.
Quality of Life was the first thing that came to mind during my musings. What quality of life do the commuters have? I know several people with long commutes, including my husband. We live in Pinecrest but he commutes to Port Everglades. We have considered moving, but love our neighborhood and he says he would rather commute and love where he lives than have a shorter commute and not like where he lives, but the truth is traffic is getting worse, his commute times are getting longer, and he has already been doing this commute a long time. Something’s Gotta Give.
Large lots, great schools, and plenty of parks are just a few of the perks of living in Pinecrest
Popularity of Live, Work, Play Communities – Places like Aventura, Downtown Miami/Brickell, Coral Gables, Coconut Grove, Miami Beach, Downtown Dadeland, have all been growing because people want to be able to minimize their time in traffic. Savvy developers, urban planners, and city officials, have been building condos and mixed use developments to meet the wants of a commuter weary public. The negative side of this development and the demand, is that prices in most of these areas have gone up so rapidly, that they are no longer affordable and residents of Miami-Dade County pay more than (**(% in housing. Teachers, firefighters, police and many service providers were probably sitting in that traffic. One of my friends is a teacher. She lives in Palmetto Bay, but commutes to her job at Beach High? Would she take a teaching job closer to home if she could get one? Does MDCPS consider an employees commute time/contribution to traffic, when they assign that employee to a school? A vibrant community needs to include affordable housing options or offer wages to compensate. Something’s Gotta Give.
Other topics that I thought about include the importance of having transportation and work options close to home as well as affordability, taxes, and mixed use neighborhoods, not just buildings. But those are all topics for other blogs.
Do you have a horrible commune? Do you have public transportation options? If you did, would you use them? Would you live closer to your job if it was affordable? Would you like to work closer to where you live if you could find a job? If you feel like sharing your answers, please do. If not, at least give the questions some thought and think about what your quality of life is versus what it could be if you didn’t have to spend so much time commuting.
As predicted by Baum+Whiteman, experts at creating destination-dining attractions, 2018 has been the year for plant-based dining and Miami is no exception. Ranked number nine on PETA’s 2018 Top Ten Vegan Cities, Miami has a diversity of vegan restaurants.
In addition to the more informal dining options such as Choices, Eden and Eden, and Glam Vegan, there are some pretty upscale options as well. Plant at Sacred Space is one of my favorites and you can’t beat the beautiful location.
Since Food and Beverage continue to be the retail darling in many centers, if you are a landlord looking to bring traffic to your space, or if you have a unique setting, consider a restaurant such as one of these top vegan restaurants in Miami as a tenant.
As reported in Vizzda’s Quarterly Report For South Florida Commercial Real Estate, the total dollar amount of multi-family sales in Miami-Dade County rose to $232,943,000 in the second quarter of 2018, up from $196,115,503 in the first quarter. This is approximately half of the $462,372,302 worth of sales in the second quarter of 2017.
The largest transaction was for Sundance Village Apartments, a 304 unit complex at 11325 NW 7 St., which closed for $65,600,000 or approximately $215,789 per unit.
What will third quarter activity look like? Stay tuned for our next report or subscribe to our blog, so you don’t miss it. Mill Creek Residential just closed on a 127 unit apartment complex in Dania Beach for $37.2 million. Will it make the top 5 list of largest transactions in 3Q2018?
Affordability has become a real estate hot topic over the last several years and is going to continue to be one for at least the next 5 years. As both millennials and baby boomers age, their demand on residential and commercial real estate are driving up prices at a time when incomes are close to stagnant and definitely not keeping pace with rising construction and real estate prices.
With boomers living longer and opting to age in place and millennials’ ability to work remotely due to advances in technology, cities and states that remain affordable to these two age groups should fare well and be considered for potential investment properties.
In Florida, some of the cities that have made “affordable best of” lists include:
Although not all of Miami is affordable, according to Zillow the median home price in Miami-Dade County is $296,400, so there are pockets where both residential and commercial real estate is more affordable than in the higher priced areas, better known areas of the county. These pockets still have room for appreciation over the next 5-10 years.
Just across Dade Boulevard and also designed by Kobi Karp, Saber Real Estate Advisors is building a retail development that will house Michael’s Craft store and a 160 seat restaurant.
In addition to the hotel and retail developments, 17 West, a mixed use project by Turnberry Associates is also coming to the immediate area and is bringing Trader Joe’s to the neighborhood.
