From The Falls to Lincoln Road, local retail is at a crossroads

For longtime South Florida shoppers, the closing of Bloomingdale’s at The Falls in South Dade seems like a watershed moment in the history of retail in Miami-Dade.

While retail centers faltered and national brands shuttered brick-and-mortar stores nationwide, Miami has seemed largely immune — at least until Bloomie’s announced the Jan. 11 closing of its 35-year-old Falls store. (The Bloomingdale’s at Aventura Mall will not be affected.)

But there’s more to that news than the headlines might suggest, say experts.

Bloomingdale’s, which has long been been owned by Macy’s, has been closing and consolidating major stores throughout the past decade. Macy’s itself just announced it is closing three area stores, though none is in Miami-Dade. Both are part of the Ohio-based retail giant once known as Federated Department Stores.

Replacing Bloomingdale’s at The Falls will be Life Time, a fitness and athletics workout facility that dubs itself as a “resort.” Based in Minnesota and with another location soon to open in Coral Gables — in addition to Dallas and Houston — Life Time bills itself as a “modern country club” with all the amenities one could dream of: a restaurant, spas, work space, classrooms. The 140,000-square-foot facility is set to open in 2022 after the current Bloomingdale’s space is torn down.

“It’s a great place to build a social community,” said Natalie Bushaw, Life Time’s Senior Director of public relations and internal communications. The swap from Bloomie’s old-style retail to Life Time’s “community” captures the trends dominating U.S. retail, and Miami’s place in it. With a retail vacancy rate of 6.4%, Miami is second only to the Washington, D.C., suburbs of northern Virginia in terms of retail occupancy of any market on the Eastern Seaboard, according to Moody’s Analytics REIS research group.

By comparison, the national rate stands at more than 10%. When combined with an average retail rent of $25.49 per square foot, according to REIS, Miami has become the most in-demand retail market east of the Mississippi; only uber-wealthy markets like Los Angeles, San Francisco, suburban Washington, D.C., and parts of Long Island have higher rents.

But even within a geographic area, neighborhoods perform differently, say experts. Retail winners are now being consolidated in a few, select high-growth neighborhoods or properties. Other stand-alone malls, which once might have drawn crowds in the past, will slowly get left behind or be forced to adapt.

The key: unique experiences like yoga meet-ups, chef-driven dining, concerts, and festivals.

“The whole retail world needs to be thoughtful about the way that the experience that is being delivered to customers is truly meaningful,” said Matthew Whitman Lazenby, owner and manager general of Whitman Family Development, which owns Bal Harbour Shops, one of the nation’s highest-grossing retail centers. “It can’t be purely transactional.”

In the past, he said, retail developers “could simply build something in the middle of nowhere, buy a lot of stuff and people [would] come. That’s not true anymore.”

Bill Smead, chief investment officer of Smead Capital Management and a major mall investor, puts it more bluntly: “Retail has always been a war, and there are always casualties and companies being left behind.”

Simon Says

The broadest barometer of retail’s shifting winds locally may be Simon Property Group. Though based in Indianapolis, it is the largest mall operator in South Florida, with stakes in Aventura Mall, Brickell City Centre, Coral Square, Dadeland Mall, The Falls, Florida Keys Outlet Marketplace, Miami International Mall, and Sawgrass Mills.

Simon did not respond to multiple requests for comment. But Wall Street has made clear it does not like the firm’s immediate prospects: Company shares have fallen 20% over the past 12 months, as operating income has declined. Its shares closed Friday at $144.79.

Part of the reason: Traditional malls rely heavily on national chains, whose sales have plummeted. In recent years, once-ubiquitous brands — including Sears, Kmart, Pier 1, and Forever 21 — have shuttered stores or disappeared altogether.

“Simon, and peers, has endured an onslaught of retailer store closings and bankruptcies over the last three years as over-levered retailers and growing online sales drive a reconfiguration of the brick and mortar footprint,” Montreal-based BMO investment bank said in a recent note to investors. While the bank says Simon has “battled admirably,” Simon will continue to face headwinds as the broader retail climate adjusts.

With at least 22 properties in its Florida portfolio — the greatest concentration in a single state — at least some local Simon-owned malls will likely suffer.

Retail is shaking out into a winner-take-all business, said Tracy Hadden Loh, a senior data scientist at the Center for Real Estate and Urban Analysis at the George Washington University School of Business. The victors, she predicts, will be those in walkable, urban communities.

“We’re seeing extremely high rent premiums for very specific neighborhoods within Miami,” she said. “That’s true across multifamily housing, office, and retail.” And the least rates “are on par with smoking-hot urban areas like ones in New York, Las Vegas, Portland.”

Overall, Miami came in sixth place in her study among metros with the brightest retail futures.

Walkable

Loh counts about 15 walkable, urban centers in Broward and Miami-Dade that are primed to support shopping and retail, including Downtown Dadeland up through Coconut Grove, Coral Gables, Brickell and downtown, Wynwood, South Beach, North Beach, the Design District and Bal Harbour and downtown Fort Lauderdale.

If you don’t think of Miami as very walkable, you’re right — which is why the neighborhoods Loh highlights command an 84% rent premium on average, she says.

“These authentic, walkable, urban places that have historic, pre-auto routes are a finite commodity — they’re very scarce. That’s part of what’s driving this demand,” Loh said.

Notably, Aventura, Sawgrass Mills and Dolphin Mall, which is owned by Michigan-based Taubman Centers Inc., aren’t marked on Loh’s map. She says that doesn’t mean these malls won’t continue to see success; with 30 million visitors per year, Sawgrass ranks just behind the Orlando theme parks as a top visitor attraction. But Loh believes all those malls may eventually struggle to compete against destinations that fit the trending profile Loh has outlined.

Bal Harbour sits atop the list as one of the highest-grossing set of shops in the country. Bal Harbour recently announced a $500 million expansion due to open in 2025. As a Bloomberg headline recently put it, “It’s Doing Fine.” Aventura Mall is believed to be the second largest in South Florida on a sales-per-square-foot basis. A mall spokesperson says it is currently at 99% occupancy, including leases in negotiation.

Few areas were as meticulously planned to capture that profile as the Design District. The art-and-architecture-focused neighborhood just north of Northwest 36th Street now spans 850,000 square feet. Design District representatives say sales and traffic there grew 50% in 2018 over 2017, and then grew another 30% in 2019 over 2018.

“I think the Design District has succeeded because it has become a destination for both commerce and culture,” Craig Robins, CEO and founder of DACRA, said via email. “There is an extraordinary alchemy when you combine creative talents — architects, designers, fashion houses, artists — to contribute efforts to create an authentic community unlike any other.“

Also among those likely to benefit from the trend in Loh’s forecast is Coconut Grove’s Cocowalk, which is undergoing a full-blown transformation. When unveiled, the new center will feature more office space and more dynamic restaurants. No longer in the picture: The Cheesecake Factory. Stepping in: Sweetgreen, the to-go salad concept now valued at more than $1 billion.

“It’s about density,” said Michael Comras, president and CEO of The Comras Company, one of the developers behind the new Cocowalk. “You have to bring people to your shops and give them a social experience.”

From a developer’s perspective, retail must be part of a larger “mixed use,” “live-work-play” project. “The single-purpose destination” doesn’t work anymore, he says.

“Because of the ability to acquire goods online, no one needs to go to traditional retail,” he said. “But there is still a need to go out, to feel, be touched. People like to see and be seen.”

Downtown Double-down

Like Loh, Comras sees Miami as a series of distinct retail neighborhoods — some on the way up, others lagging. He singled out Sunset Place in South Miami as an example of a property that is “not working right now.” Sunset owner Federal Realty Investment Trust knows the score: After years of denying petitions to refashion the center, the city recently approved its plan to tear down half of the faltering mall.

In contrast, Comras points to Miami Worldcenter, a project for which he serves as leasing agent. Developers of the 1.7 million-square-foot residential, office and retail center scrapped an initial, 2013 plan that included Macy’s, Bloomingdale’s and big-box stores in favor of a more open-plan vision.

“We made the decision to pivot from developing an enclosed mall to building a high-street retail destination that would be seamlessly integrated with our surrounding streets and access points,” said Miami Worldcenter managing principal Nitin Motwani via email. “This model has been successful in urban centers across the U.S., including San Francisco’s Union Square, New York’s SoHo and Lincoln Road in Miami Beach, and we believe it will be a natural fit for Downtown Miami.

“Together with Forbes, Taubman and The Comras Company, we are in continuous discussions with many of the most recognizable brands in South Florida and around the world, and we will announce our first retailers later this year,” he said.

Zach Winkler, senior vice president for retail at Jones Lang Lasalle, points to nearby Virgin MiamiCentral Brightline station as another example of an urban node. Inside the station, a new marketplace called “Central Fare” is being billed as “downtown Miami’s food hub.” Downtown workers and train passengers are filling up on caffeine at Parliament Coffee & Espresso Bar, grabbing a nosh at Rosetta Bakery, and taking lunch at Chick-fil-A, House of Mac, 800º Woodfired Kitchen and the full-service bistro, La Estación American Brasserie, by Juvia Group.

Too Much?

Meanwhile, south of the river, three-year-old Brickell City Centre is already reshaping its urban mall. Luna Park is replacing La Centrale, the high-profile Italian eatery that was eclipsed by neighboring Italian eatery Casa Tua Cucina, while local chef Alberto Cabrera will open Maribu. The Centre is now 87% leased, according to Swire Properties, which oversees the development. That is likely less than the current capacity at several other major local malls, according to data seen by the Miami Herald.

Wynwood, too, shows how even success can be fatal: The Wynwood Yard was open less than three full years before the foot traffic it earned brought it into the sights of home-building giant Lennar, which purchased the parcel on which Yard was renting, along with adjacent lots, for a planned mixed-use project. Other recent Wynwood casualties include craft brewer Boxelder and nearby Chinese throwback Palmar.

“There clearly can be too much retail, just as there can be too much office, residential or whatever,” Bal Harbour’s Whitman Lazenby said, “and one can argue that maybe the Miami area went from not enough to too much too quickly. But my ultimate view is that as long as these places are creating a perspective and point of view and unique and compelling then they should work.”

The proposed American Dream Miami mall threatens to add even more inventory. But its representatives insist it’s not even a mall, noting that 65% of its space will be devoted to entertainment including a ski slope, ice-skating rink, aquarium, submarine lake and roller-skating facility.

“We are an entertainment center with retail as a component,’’ without the same vulnerability to online shopping. “You cannot ride a roller coaster online,” said Miguel Diaz de la Portilla, an attorney with Saul Ewing Arnstein & Lehr LLP who is representing American Dream developers.

Lincoln Roadblock

And then there’s Lincoln Road, the dean of retail in South Beach. The mile-long strip embodies the paradoxes of South Florida retail — a walkers’ paradise that is increasingly struggling to catch the interest of shoppers. Illustrative of the dilemma is the parking garage at 1111 Lincoln Road, which opened to global fanfare about a decade ago. Then last year, its anchor tenant, Rosa Mexicano, closed — as did Argentinian stalwart Baires, just across the way. Sushi Samba, just up the street, also went under in 2019.

Over the past two years, according to its business promotion board, Lincoln Road has “seen steady foot traffic with approximately 10 million visitors yearly in 2018 and 2019. The monthly foot traffic has been in a range of 830,000 up to 1.5 million visitors per month, according to the Business Improvement District’s pedestrian counters.” It declined to break down numbers further.

Several new additions are now in the pipeline, including the fancy dog accessory shop Yoyoso and the Brooklyn-based sneaker shop Greats. That has helped keep 82 percent of the 250 total storefronts occupied, according to the Lincoln Road Business Improvement District.

Still, Lincoln Road should be performing better, Miami Beach Commissioner Michael Góngora says.

“I’ve been confused as to why Lincoln Road has not been as successful, and why there are so many empty commercial spots,” he said.

High asking rents — as much as $300 per square foot, according to Cushman and Wakefield — are a factor. So is the rise of Wynwood, which Góngora notes is attracting the types of younger, more vibrant crowds that used to flock to South Beach.

But Miami Beach is taking action, implementing a $67 million renovation plan and shifting zoning to allow more hotels along the pedestrian street. Many restaurants are also adding rooftop bars to capitalize on the broader retail trend for panoramic views.

Gatherers

Ultimately, experts say, there’s one simple factor that will keep Miami-area retail afloat as other metros struggle: tourists.

Moody’s says tourists will continue to be the key driver of the market, and keep it at a status quo even as “retail apocalypse” consumes others. REIS senior economist Barbara Denham says that without tourism, the Miami market would look a lot more like the rest of the country.

“Any place that has tourism in it is doing pretty good,” she said. But, she cautions, “No market is doing great.”

For Smead, tourists are the ultimate example of a group of people who have a reason to be somewhere, simply because they can’t do what they’re used to doing at home.

“People want to gather, and gather, and gather,” Smead said. “And it’s terrific when you meet an economic need in the process of gathering people. So a metropolitan area, retail-oriented entertainment mall has a place in the future.”

Whitman Lazenby observes that Miami in particular enjoys a special kind of “tourist,” since many in fact are part-time locals with second homes.

Increasingly, local shopping is catering to this higher-end group. Bal Harbour represents the tip of that spear.

“If it’s a market of influence, if it’s a global gateway city, if you’re a luxury store, if you have some reason to believe that the eyeballs [are] interacting with your store and products and the experience that you are creating and that those are qualified eyeballs — then there is a renewed focus making sure that experience is complete.”

Though it does not mention them by name, Simon and Taubman often highlight “tourist centers” like those in Miami in quarterly earnings reports. These shopping centers, like Simon’s Sawgrass Mills and Taubman’s Dolphin Mall, count on tourists for at least half of their foot traffic or sales — and have the amenities, like airline check-in desks for shipping goods directly back home, to support them. One is unlikely to find similar set-ups in New York or suburban Washington.

These tourist-oriented malls will be among the last to have to adapt to the new experiential model. But eventually, it seems, they will, Whitman Lazenby says.

“The model no longer is and can no longer be just purely transactional,” he said. “’If you want to buy that product, you can only come to us because we are the only place in town to get it’ — clearly that is not true.

“...The broad availability of e-commerce means there is always another way to get the product. It can’t just be about getting the product. It has to be about connecting with your customers at an emotional level.”

— Rebecca San Juan contributed to this story.

This post has been updated with new leasing data on Brickell City Centre, Bal Harbour Shops and Aventura Mall.