Evolution of Urban Retail in Florida
Just as traditional downtowns gave way to suburban malls, those suburban malls are now giving way to new 24-hour work, live and play projects in urban locations (activity centers, lifestyle centers, etc.) A number of articles have been written recently declaring that the new activity center/new urbanist trend of mixed-use development is passé. I believe that it is here to stay, but its form will continue to evolve.
My experience with this genre of property goes back to the mid-1980’s when I worked as a consultant on the feasibility study for Pleasure Island at Walt Disney World and was an office tenant in Florida’s first lifestyle center Old Hyde Park Village in Tampa. My mid-1990’s experience with this type of project included my involvement as the broker for the sale of one of Miami’s more well know urban mixed-use projects, Mayfair in the Grove. Most recently, I have helped to match residential developers with retail developers at a number of mixed-use projects in South Florida.
Over the years we have seen old guard urban retail centers such as Mayfair, Coco Walk, Beach Place and Las Olas Riverwalk take their lumps as the market changed and their concepts became dated. One thing these centers had in common was that they relied on a mix of restaurants and entertainment venues. All of the afore mentioned projects are in the process of being retenanted and repositioned to better reflect the changing view of the urban mixed-use activity center.
The centers of the past are materially different from the latest wave of urban activity centers that focus on the new urbanists view. Unlike the older centers and their entertainment focus, the newer projects have a mix of uses that are more diverse and interrelated than their forerunners. City Place in West Palm Beach and Mary Brickell Village in downtown Miami best illustrate this new wave of urban retail centers. They integrate vibrant retail concepts with residential components to create a 24-hour live, work and play environment.
These new centers of activity bring together retail and residential to create a community gathering place. The first of these new centers that I became aware of was Old Hyde Park Village in Tampa. Begun in the early 1980’s , this project helped to reinvigorate a gentrifying sub-market in Tampa. The head of development for the project was Bruce Koniver a partner in Miami’s FKS Realty Group.
Twenty years ago Old Hyde Park Village’s concept was ground breaking. It contained one of the nation’s first multiplexes and had a suburban location, office and residential located above retail and structured parking. Today, Koniver is continuing to fine-tune the lessons he learned at Old Hyde Park Village 20 years ago as he assists in the development and leasing of a number of lifestyle centers across the country including Mary Brickell Village-in the heart of downtown Miami’s Brickell Avenue district.
According to Koniver, “over the years Old Hyde Park Village’s concept has evolved, from a mix that was made up of high-end specialty tenants such as Brooks Brothers, Polo, Crabtree & Evelyn and Laura Ashley to include more moderate price tenants such as Linens and Things and Bed, Bath and Beyond and even grocery stores .” Publix has been signed to be a tenant in Mary Brickell Village. “The right mix of food, fashion and entertainment continues to be very important.” One of the main lessons Koniver has learned is that “most centers need a mix of local and regional tenants to create a differentiated feel. This helps to set these projects apart from some of the sameness that has taken over retail centers across the country.”
Koniver’s comments on the evolution of the concept fit nicely with those of industry observers Jack Winston a senior member of the PricewaterhouseCoopers consulting practice in Miami and Tom Koler a Senior Vice President at Real Estate Research Consultants in Orlando. Winston believes that “ the market is moving away from entertainment base retail, which has recently failed in centers such as Mayfair, Las Olas Riverwalk and Beach Place”. The design that is gaining favor according to Winston “ is more like the urbanist’s view, which can be seen in West Palm Beach’s City Place. This evolution in the design of urban retail focuses on the integration of uses to create an attractive neighborhood. The biggest difference between early entertainment based centers and today’s mix of uses is the introduction and integration of residential units both for sale and for rent.”
Kohler concurs and adds that “Orlando’s Church Street Station was the first entertainment center in the State and has been tweaked by Disney and Universal into Downtown Disney and City Walk. These are state of the art entertainment centers and they work in the unique resort environment of the Orlando tourist district”. He sees successful futures for new concepts catering to Orlando’s residential market. “These new projects focus less on entertainment and more on integrating residential and main street type retail in projects like Winter Park Village.”
The most high profile example of the continuing evolution of the new urbanist’s vision is West Palm Beach’s City Place. Kevin Lawler, a principle in West Palm Beach based NK Ventures, LC worked closely with then Mayor Nancy Graham to plan and develop City Place on a desolate piece of land in the City’s downtown. As Lawler works on new projects he has found that “the key issue that is driving the genre’s evolution is that developers have yet to see some of the rent premiums from retailers that they had expected. Without those premiums developers cannot afford to pay the higher prices for the choice urban locations their projects require.”
“The rent premiums are not there because the retailers are finding that in the early phases of a project a store that has the same format as one that might be found in a mall is not as profitable per square foot as expected because the traffic level those sales levels require are not generated until the residential and office components are filled.” At some centers this is addressed by making percentage rent a large component of lease payments. However, it is difficult for a developer to sell or finance off of percentage rent.
Lawler continues to say that “increasingly, retailers would prefer to be a later component in the project. The problem with that is the developer wants to open the entire project at one time so his land carry on vacant pads doesn’t eat up his profit. Additionally, there is a shrinking pool of credit worthy tenants for developers to place into these projects.”
According to Lawler, “it is important to note that while retail tenants are not willing to pay the rent premiums because they are not seeing the sales figures they expected, apartment tenants and condominium buyers are paying premiums.”
So what do our experts believe the future holds for this portion of the new urbanist’s vision? The consensus is that we can expect to see a trend towards smaller retail components with store formats that evolve to meet the smaller footprints that the projects can support in their early phases and that residential will be an increasingly large component in these projects.