Big-box retailers to set shop in urban Miami

Posted on Sunday, February 05, 2006

DEVELOPMENT

Big-box retailers to set shop in urban Miami

Miami's urban core is about to get the types of retailers found on every suburban street corner. Target and other national retailers will anchor the Shops at Midtown Miami.

BY ELAINE WALKER
ewalker@MiamiHerald.com

After years of speculation, the Shops at Midtown Miami has finally inked deals with at least six big-box retailers to anchor the project viewed as a focal point in Miami's urban revitalization.

Developers Diversified Realty, the Cleveland-based real estate investment trust that is building the project, told The Miami Herald that its initial lineup of anchor tenants will include Target, Circuit City, Ross Dress For Less, Linens 'N Things, PetSmart and Office Max. The company also confirmed that Midtown will be the site for Florida's first West Elm store, an affordable home furnishings concept by Pottery Barn.

The project aims to fill a retail void for anyone living in Miami's Upper East Side, Miami Beach, Brickell and Key Biscayne. Those residents now trek to Aventura or Kendall to shop at the big-box retailers that can be found on every suburban South Florida street corner, but until now had been missing from Miami's urban core.

These announcements represent about 40 percent of the 645,000-square-foot shopping center on the former Buena Vista rail yard. Divided into three distinct blocks, the project's first phase is scheduled to open in late fall, including most of the initial group of anchor tenants. But the final block will not open until spring 2007.

While it's been almost two years since the groundbreaking at Midtown Miami, the developers say the reason for the delay in announcing tenants is a reflection of the strong interest they have received.

''We thought when we originally started this project, it would take far more selling than it actually has,'' said Dan Hurwitz, senior executive vice president and chief investment officer for Developers Diversified. "The reason we were not rushing was because our options were plentiful and we wanted to make sure we were pulling together the best merchandise mix. When you have options two or three deep, you have the luxury of time on your side.''

In addition to the shopping center, the 56-acre Midtown Miami project also includes a mixed-use residential and office development of about 3,000 condos, offices and other types of retail space. The project on the outskirts of Wynwood and the Design District is expected to serve as an anchor for the continued revitalization of Biscayne Boulevard and Miami's urban core.

''At the end of the day, I think it will be very successful,'' said Mark Gilbert, executive director for Cushman & Wakefield. "The market is totally reinventing itself between downtown Miami and 79th Street and that's right in the middle of it.''

Miami is simply catching up on a trend that has been happening in urban markets across the country, as retailers are slowly moving toward nontraditional locations to meet the needs of consumers hungry for shopping options.

But because of the length of time it has taken DDR to announce any tenants for Midtown Miami, there had been concern in the market about whether retailers were convinced of the viability of an urban Miami location.

Industry experts credit the developer with overcoming the doubters and being the first to line up tenants for an urban Miami site after several have tried at other locations including the old Omni International Mall.

The key many say was the $170 million in subsidies from the city of Miami and Miami-Dade County that helped make the deal more financially viable for everyone.

Chuck Fadek/Miami Herald Staff
Shopping City: The Shops at Midtown Miami, under construction above, aims to fill a retail void for anyone living in Miami's Upper  East Side, Miami Beach, Brickel and Key Biscayne. A rendering of the project below  includes a Circuit City.

LOCATION CHALLENGES

''They pulled off something a lot of people in town didn't think they could do,'' said Alan Esquenazi, senior vice president of Continental Real Estate Cos., who represents Target in its South Florida leasing. "Bravo to them.''

While Midtown Miami is expected to draw customers from as far away as Miami Beach and Brickell Avenue, there isn't the typical volume of rooftops surrounding the location that retailers like to see. And many of the closest homes are lower-income housing.

Another challenge for retailers has been the site plan, which will require nontraditional layouts including multistory retail and parking decks. Ross is one of a couple retailers that will build a two-story store, Hurwitz said. Target's store will allow for multiple entrances, parking above the store level and a completely different merchandise layout. ''To our surprise, retailers have been extremely flexible in willing to adapt their prototype to accommodate this project,'' he said.

Many of these retailers have been looking for years for additional locations in Miami but have been unable to expand because of a lack of available real estate.

''It's a greatly underserved trade area and they've got nowhere to go,'' Esquenazi said.

The shopping center will serve a trade area of more than two million people living within a 15-mile radius, with an average household income in excess of $57,000.

DDR says the demand for space has been so great, it's prompted them to make changes in the project to accommodate the interest of more retailers. The delay has also given the developer an opportunity to better reflect the changing market, which has seen real estate values skyrocketing and gentrification picking up speed in even the last year.

The middle section of the three-block project will now feature a mix of both national and local boutique retailers in a lifestyle center format, designed to encourage pedestrian strolling and gathering in public spaces. The tenants in this section are likely to be a bit more upscale than originally anticipated, including a mix of home furnishings and apparel retailers, plus as many as four restaurants.

WAL-MART KEPT OUT

The other major change involves a complete redesign of the south block, which was originally intended as space for one giant retailer. Wal-Mart had wanted the space for a supercenter, but city officials killed that deal.

The developer said they asked Wal-Mart to meet with city officials and get their opinion before moving forward.

''This is a project that would not be possible but for the cooperation of the city,'' Hurwitz said. ``We deferred to the interests of the city. It was done in the spirit of cooperation.''

Other options that had been seriously considered included a Home Depot or Lowe's and Costco. But all of those are off the table and the developer is looking at several possibilities for breaking up the space for use by as many as two or four additional anchor tenants, which will include PetSmart. This block is expected to be the last to open in spring 2007.

''We always had the sense that the market would go more upscale,'' Hurwitz said. ``Because of our leasing pattern we were not locked into a certain price point or tenant base so we had the flexibility to move with the market.''

Copyright 2006 Knight Ridder

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