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Shopping Center Owners, Retailers In Florida Seize Opportunities In Effort To Outlast COVID-19 Pandemic

It’s been an atypical summer for retailers and shopping center owners in the Sunshine State. There are no Hollywood blockbusters debuting in Florida’s movie theaters, bars remain closed for the time being and shops and restaurants aren’t packed with domestic and international tourists visiting Disney World, Port of Miami’s cruise terminals or any of the states numerous beaches at the level they would in a normal season.

The outbreak of COVID-19 has redefined the consumer experience for retail the past several months, but even though it looks and feels different, owners and property managers have reasons for optimism. Giants in the retail industry such as Walmart, Target, The Home Depot, Publix and Lowe’s Home Improvement, among others, are enjoying surging in-store and e-commerce sales.

Other retail categories have boosted their sales during the pandemic as well. Deborah Butler, president of Butler Enterprises, says that the Total Wine & More location at Butler Town Center in Gainesville is a perfect example of a retailer benefitting from the current atmosphere.

“Total Wine did 60 percent over what they planned,” says Butler. “People want their wine and cocktails and couldn’t get them at bars or restaurants.”

Guidelines remain in place for the state’s retail base, including a 50 percent maximum capacity for restaurants, many of which have opted to close their dining rooms and focus on their to-go, delivery and drive-thru options.

Despite the restrictions, Andie Blade, principal of National Retail Advisory Group, says that retail traffic remains lively, especially in her hometown of Miami.

“When I’m out and about in the Design District or Bal Harbour, everyone is out shopping and everyone has their masks on,” says Blade. “The parking lots are full. It’s not pre-COVID-19 traffic, but people are out. We’ve been surging in Miami, so we have a lot of precautions still in place.”

Retailers are also opening along the market’s heralded high street, Lincoln Road in Miami Beach. Lyle Stern, president of Koniver Stern Group and board member of the Lincoln Road Business Improvement District (BID), says that the corridor’s recent openings are a sign of confidence.

“Amazon is moving forward with its four-star store (the first one in Miami-Dade or Broward counties); YoYoSo is opening its first Florida location on Lincoln Road; Nespresso opened its new flagship store just a few weeks ago in the height of the pandemic; and Dr. Martens also recently opened.”

Shopping center developers are busy around the state signing and opening retailers in some of the denser submarkets. Beth Azor, owner of Azor Advisory Services Inc. in Broward County, owns six shopping centers in Florida. Azor says she currently has 11 letters of intent in the pipeline, which is the most she’s handled at a given time in the past three years.

Bromley Cos. recently signed a lease with Royal Pets Market & Resort to join the tenancy at its $500 million Midtown Tampa project. The veterinary and dog daycare provider will occupy 8,000 square feet on the ground floor of the Novel Midtown Tampa apartment building.

Butler Enterprises recently welcomed a new REI store at Butler Town Center.

“REI didn’t have a grand opening, but they’re thrilled,” says Butler. “There’s so much pent-up demand for it. Our property is surrounded by rivers, lakes and streams. People come here from all over the world to hike and tube.”

Similarly, there’s demand for casual wear as a large contingent of office workers and students are working and learning remotely for the time being. Hill Partners Inc. recently executed a lease with lululemon athletica at Promenade at Coconut Creek in Broward County. Bob Spratt, president of Hill Partners, says the retailer will open in November.

Additionally, several Publix stores are opening around the state, as well as its small organic grocer concept GreenWise Market. Publix Super Markets recently opened GreenWise locations in Odessa, Tampa and Ponte Vedra Beach. Hobby Lobby is also expanding in Florida, with three new locations in Panama City, Pembroke Pines and Miami within Urban-X Group’s River Landing Shops and Residences project.

Terra has recently signed Ross Dress for Less and Panda Express at its Doral Square mixed-use development in Miami-Dade County and is also opening the second phase of its Pines City Center project in Broward County. In addition to Hobby Lobby, in the past 45 days Terra has opened locations for McAlister’s Deli, AT&T Wireless, Legacy Fit and Paradise Grills at the 47-acre Pines City Center project.

“We anticipate a continued need for lifestyle-centered developments that will serve at the pulse of South Florida’s neighborhoods,” says David Martin, president and CEO of Terra.

Bankruptcy Opportunities

Another major change for Florida’s retail sector is the wave of retailers and parent companies that have filed for bankruptcy and/or restructuring since the outbreak. These include Pier 1 Imports; Ascena Retail Group (Ann Taylor, LOFT, Lane Bryant, Justice); Tailored Brands (Men’s Wearhouse and Jos. A. Bank); Lord & Taylor; 24 Hour Fitness; GNC; CEC Entertainment (Chuck E. Cheese); Brooks Brothers (recently purchased by Simon and Authentic Brands); Sur La Table (bought by Marquee Brands and CSC Generation); and California Pizza Kitchen.

“COVID-19 has accelerated the bankruptcy process for some of these retailers to thin the herd,” says Spratt. “They’re reworking their debt load and trying to re-emerge stronger and leaner.”

Azor says that the retailers that are opting to restructure and close stores were underperforming before the pandemic struck in mid-March.

“If you look at the 30 or 40 retailers that have filed bankruptcy, there aren’t a lot of surprises,” says Azor. “This put the dot on the exclamation point.”

Additionally, two homegrown concepts have also filed for bankruptcy protection: SteinMart and Cinemex Holdings USA Inc., owner of the CMX Cinemas chain of movie theaters. Blade says her landlord clients have already been working to backfill some of the big boxes that Jacksonville-based SteinMart is leaving behind.

Fitness concepts are actively taking down these vacant stores, despite being hampered by operating restrictions and deemed non-essential by the office of Florida Governor Ron DeSantis. Ivy Greaner, chief operating officer of InvenTrust Properties, says that the Chicago-based REIT is backfilling a SteinMart with an unnamed fitness concept.

“Fitness is chasing deals hard, which has been interesting,” says Greaner. “There’s also soft goods out there as well, as well as furniture. Those three are fairly active.”

Jeremy Larkin, CEO of NAI Miami, says that the retailers looking to expand now have a survivor’s mentality and are also fiscally responsible.

“The ones signing leases are well-capitalized, well-focused companies that are offer products and services that the market now demands,” says Larkin.

Landlords and operators are also working with these retailers to keep them in their locations. Samuel Sutton, president of Sutton Properties Inc., says that his firm’s Lake Buena Vista Factory Stores center in Orlando has a number of national retailers that are opting to remain in the property since those locations historically perform well.

“Ascena has both a Justice and Ann Taylor in the center, but fortunately we weren’t on the store closing list because we’re a center with high sales,” says Sutton. “Even the retailers that are having issues nationally almost all remained intact in our center just because we’re one mile from Disney World.”

Jill Strumpf, president of Clearwater-based shopping center management firm Bruce Strumpf Inc., says that her company has also restructured leases with retailers that have filed for bankruptcy.

“I have GNC in three of my centers, but in all three we were able to work out something so they’re all remaining,” says Strumpf.

Rent Collections, Performance

The second quarter was not kind to shopping center owners when it came to rent collection. Macerich, which owns a strong portfolio of malls in New York and California, collected 46 percent of its rent in the most recent quarter, according to Goldman Sachs research. Similarly, Simon was only able to haul in 57 percent of rent from its tenants, including deferrals.

Other shopping center REIT owners brought in rent collections in the 70 to 80 percent range, including Kimco Realty Corp., Brixmor Property Group Inc., Federal Realty Investment Trust and Jacksonville-based Regency Centers Corp. On the bright side, all REITs mentioned above fared substantially better in their collection of July rents.

Overall owners are reducing their rental rates in an effort to improve and maintain their occupancy. Beth Azor says her firm has come down 10 to 15 percent for new leases at its centers to get ahead of any further complications following the 2020 holiday shopping season.

“My goal is that if I drop my rents now, the majority of these deals will be close to opening by second-quarter 2021, and I’ll be less affected,” says Azor.

Greaner says that the current recession is much different than in years past for the retail sector because of the communication that exists between retail tenants. She says the current dialogue among retailers has centered mostly on the topic of rent relief.

“Not only are tenants are talking to each other about what they’re doing as far as rent workouts, they’re calling each other before to ask advice,” says Greaner. “They have a checklist of what they could or should do, and they have a list of landlords that will play ball. Some landlords and tenants are unafraid to be a pioneer while others don’t want to be a pioneer. These are big financial decisions.”

Strumpf says her ownership clients are still deferring rents across her portfolio but that it’s not nearly at the same level as April and May. Retailers that were able to remain open and operating during the pandemic such as grocers, automotive and drugstores have been able to meet their rent obligations, whereas impacted categories like bars, movie theaters and salons are still figuring it out.

For owners and operators, Greaner says that time is of the essence so having a rent relief plan in place is paramount.

“We don’t have months to work through everything for every tenant calling us,” says Greaner. “We have to have a process, philosophy and a strategy on how we want to deal with things for now.”

Unfortunately, as seen in the wave of bankruptcies and store shutterings, there have been some casualties along the way, with more almost certain to come. The sad truth is that some retailers won’t make outlast the pandemic, no matter what rent workout they strike with their landlords in the interim.

Flight to quality

There’s been a significant pullback in investment activity in recent months as buyers have been reticent to purchase assets. It’s not just in Florida as overall retail investors purchased $4.6 billion in assets in the second quarter in the United States, according to Real Capital Analytics (RCA). This is a 73 percent drop from retail investment activity in second-quarter 2019.

Some companies halted transacting at the early stages of the pandemic. Jon Adamo, senior vice president of acquisitions at National Retail Properties (NNN REIT), says the general uncertainty is still causing many to sit on the sidelines.

“There’s a side of the market that is waiting for an adjustment that may or may never come,” says Adamo.

“At the moment, clarity doesn’t exist,” adds David Perlman, managing director of Thorofare Capital and head of the firm’s New York City office. “Brokers are having a tough time creating a market for retail properties.”

Adamo says that investors that are actively purchasing shopping center assets are taking a long and hard look at the creditworthiness of the tenant base. Those that were deemed essential and able to operate throughout the pandemic are in high demand.

“’Essential’ is now the term of the past few months,” says Adamo. “Any retailer that was open and operating during COVID-19 and paying rent are the gems people want to pick up right now.”

Adamo says that grocery-anchored centers remain the most coveted retail category. Recent acquisitions around the state include Zurich Alternative Asset Management buying a Whole Foods Market-anchored project in Coral Gables for $46.8 million; The PMAT Cos. buying a Publix-anchored center in Port Richey for $7.6 million; and Westcott LLC buying a Winn-Dixie-anchored center in St. Augustine for nearly $8 million.

Adam Tiktin, president of Tiktin Real Estate Investment Services, says that there is a flight to quality among investors.

“Investors are looking for credit and for stability to get through this pandemic,” says Tiktin. “They want to know their income is solid.”

Tiktin says on the other side of the negotiating table, sellers have differing levels of urgency now to sell that may or may not have existed before the pandemic.

Joe Gallaher, senior vice president of NAI Miami, says that there’s also a delta between buyers looking for discounts and sellers that are unwilling to come off their asking price.

“Sellers still have 2019 numbers in their minds and buyers have 2020 in their minds,” says Gallaher. “There’s a gap, but it all comes down to motivation. Sellers are more motivated than what they were previously to liquidate their assets. In some situations, we see a little more meeting of the minds.”

Additionally, Tiktin says that the market for redevelopments is strong, especially for sites that could be zoned for mixed-use and multifamily. His firm recently found a multifamily buyer for a site in downtown Fort Lauderdale that currently is leased to Sherwin Williams and a bus terminal for Greyhound.

Operational shifts

In addition to signing leases, shopping center managers are busy helping consumers navigate their centers in a responsible and efficient manner.  Rod Castan, president of leasing and management services at Courtelis Co., says that it requires flexibility on the part of the owner and strong communication among all parties to be successful.

“We’ve become more flexible in allowing take-out/short-term parking spaces, outdoor seating, cueing areas and increased signage for our tenants. And we’ve become closely aligned with them in social media marketing of both the shopping centers and the individual businesses,” says Castan. “We’ve really never had such close communication and one-on-one problem solving with our tenants. It’s been exhausting, and as property managers, we need to take things day by day, but we will end up with closer relationships with our tenants as a result of this.”

Although it’s been a challenge, owners and operators say the onsite approach remains the best way to conduct business despite the pandemic. Scott Crossman, CEO of Crossman & Company says his firm’s hands-on approach was a key reason it’s been able to achieve 90 percent rent collections at its properties.

“As a management company, we choose to keep our offices open and continue to function on a face-to-face basis with no reduction of staff,” says Crossman. “We believe this effort to stay in close communication with our clients, tenants, staff and vendors was key to the results we have seen.”

Similarly, Mary Reichardt, vice president of marketing at Butler Enterprises, says that Deborah Butler has been a fixture at the Butler collection of shopping centers in Gainesville, and it has been critical to help support the retailers and restaurants with items like curbside pickup and wayfinding.

“Having the owner on property every single day allows us to pivot really quickly and adjust to what each of the individual tenant’s needs are,” says Reichardt. “It operates very differently at some of the malls and shopping centers where you can’t make decisions quickly.”

Although less retail space is being used overall, operators say that expenses remain either the same or even more expensive than pre-pandemic. Crossman says that streamlining operations has been a key way to help keep expenses down. This includes reprioritizing maintenance items like landscaping and pressure washing to an as-needed basis and also helping tenants access personal protective equipment (PPE) that local governments are providing.

Reichardt says Butler Enterprises is enabling its two boutique apparel shops, Agapanthus and Narcissus, which is a Tony Burch boutique, to do curbside pickups and virtual shopping.

One thing that owners and operators are concerned about in today’s environment is being conservative with their expenditures. Greaner of InvenTrust Properties says that her firm’s portfolio saw fluctuations on the expense side of the ledger in recent months.

“There was a drop in some expenses like garbage collection but then an increase in things like signage,” says Greaner. “On balance it’s not going to be more or much less.”

Stern says the Lincoln Road BID partnered with Jayda Knight, a Miami-area artist and former set designer for Saturday Night Live, to design face masks for patrons of Lincoln Road’s shops and restaurants.

Additionally, owners and operators are turning to ancillary retail options to bring in extra revenue, including temporarily backfilling vacant boxes with seasonal retailers such as Spirit Halloween. On Lincoln Road, The Comras Co. recently converted a former BCBG boutique into a popup theater for the Miami City Ballet to safely practice their performances before the public.

“By utilizing inactive space and zeroing in on arts and culture, we’ve given people that compelling reason to visit while supporting area businesses,” says Michael Comras, president and CEO of The Comras Co.

Shopping center owners and operators are also looking for innovative solutions to help their local communities. Azor’s partner recently opened a digital learning study hub at Weston Town Center that is catering to students and parents in the community, as well as bringing added traffic to the center.

“It’s got 42 cubicles and 10 private offices. We’ve hired four college students who are education majors and a current teacher in the school system who will act as principal,” says Azor. “When parents register their kids, we give them a $100 gift card for any of the nine restaurants in the shopping center. We have 80 families who will have dinner at the restaurants in our shopping center, and we have 80 people who will be at our property twice a day for nine weeks.”

Outlook

Shopping center owners and managers expect short-term pain as the historic demand generator of tourism remains on the ice during the pandemic. International travel has slowed down significantly, which has been a tough blow for retailers in markets like Miami and Orlando.

“Any retail location in the world that relies heavily on tourism, especially international tourism, is feeling a pressure on retail sales that we haven’t seen in a generation,” says Justin Greider, senior vice president of JLL and lead of the firm’s Florida retail team. “However, these tourist-focused areas make up a very small percentage of the overall retail sales in Florida, and the traditional suburban consumers seem to be demonstrating stronger shopping habits now than in the past, especially in the grocery and service retail categories.”

Sutton of Sutton Properties says that his firm is marketing Lake Buena Vista Factory Stores in Orlando now to locals and regional tourists who are visiting the center from markets like Alabama and Georgia.

The rejoinder among property owners and brokers is that a second shutdown would be devastating for Florida’s retail sector and could damage even the most durable retailers as there could potentially be less disposable income.

“Our biggest concern is another shutdown, either full or partial,” says Crossman. “So many of our tenants did get through the last one, but they’ve burned through their reserves. Our hope is that we see a significant reduction in the infection rate and a continually reviving economy. Our tenants are hopeful about the future and a return to vibrancy.”

Looking further on the horizon, property owners are searching for opportunities at the property level to boost sales and traffic. Retailers are likely going to downsize their footprints and store layouts, as well as rethink their merchandising. Castan of Courtelis says this potential design shakeup will require nimbleness on the part of shopping center owners.

“We are going to have to be open and creative as developers, because this is a whole new ballgame,” says Castan.

For now, Greaner says that all any company can do is plan for the short-term and be ready to adapt at a moment’s notice.

“We’re taking this in small bites, we can’t plan for what’s going to happen for the next two years because we don’t know,” says Greaner. “We do our best for what we’re doing today, but we’re ready to pivot if the market changes. Florida will be OK, and then it will thrive when it needs to.”

 

Source:  Shopping Center Business

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Florida Precision Oncology To Open 15,000-SF Cancer Care Services Facility From New Location At Recently Completed Aventura Medical Tower

Aventura Medical Tower will now be the new home for Florida Precision Oncology (FPO), a division of GenesisCare (21st Century Oncology).

The cancer care services provider has signed a 10-year lease to occupy approximately 15,000 square feet of space at the recently completed medical tower, located at 2801 NE 213 Street in Aventura.

GenesisCare has more than 440 centers including 14 centers in the UK, 21 in Spain, 36 in Australia and 300 in the U.S. The company also offers cardiology and sleep services at more than 80 locations across Australia. Every year, the team sees more than 400,000 people globally.

FIP Commercial President/Broker Roy Faith and VP of Leasing Julian Huzenman represented the landlord in the lease deal. Jay Whelchel of Whelchel Partners represented 21st Century Oncology.

Roy Faith
Roy Faith

“We are extremely proud to bring in a tenant of this magnitude and to have them join a host of other signature tenants and condo owners that already call Aventura Medical Tower home,” commented Faith. “Our vision was to bring the best of the medical community together under one roof and our vision is coming to fruition.”

The Faith Group’s in-house construction team and architect will be handling the interior build out to the highest of standards and will be delivering a turnkey space for the tenant.

Aventura Medical Tower is a Class A medical condo building and some purchase and lease opportunities remain. Please contact FIP Commercial for more information at 305.438.7740 or contact Roy Faith at Royfaith@fipcommercial.com or Julian Huzenman at Julian@fipcommercial.com.

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EIG Aims To Convert Shuttered Ramada Inn In Hialeah To Apartments

The Estate Investments Group filed plans to convert a shuttered Ramada Inn in Hialeah, located at 1950 W. 49th St., into apartments, and construct a pair of commercial buildings.

The 4.9-acre site currently has a four-story, 258-room hotel that was built in 1970.

1950 Hialeah Holdings LLC, an affiliate of Miami-based EIG, acquired the property for $15.25 million in August. The hotel was closed at the time of the deal.

The developer is seeking a special use permit to convert the hotel building into apartments through adaptive reuse. It would have 251 apartments, with 90% studios ranging from 340 to 599 square feet, and the other 10% one-bedroom units starting at 600 square feet.

 

Source:  SFBJ

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Shopping Centers Stay Strong In South Florida. Miami-Dade County Has A 92.9 Occupancy

Density is helping sustain occupancy rates in Miami-Dade County’s shopping centers, making it the healthiest market in South Florida.

Miami-Dade has a 92.9% occupancy rate among its shopping centers, according to a third-quarter report by Boca Raton-based 11th St. Capital. Palm Beach has an 88.8% occupancy rate, and Broward has an 88.6% occupancy rate. Joshua Ladle, the CEO and founder of the real estate investment and management firm, visited all 1,720 shopping centers.

“The significant dense population in Miami-Dade is one of the main drivers to its success in terms of occupancy. Where there are concentrated amounts of people, retailers like to be there. More people coming to their stores means more dollars in their cash registers. Driving the nearly 700 centers in Miami-Dade County, it’s clear that there are still a lot of people shopping in all those stores, which is keeping the company lights on,” Ladle said by email.

Still, restaurant and store closures are inevitable and will impact commercial real estate, he said by email.

“More vacant space will come onto the market and will need to be backfilled. As always, premium, well-located space will be the quickest to be picked up by those tenants that are still expanding while the more challenging areas will struggle to fill the increased vacancy.”

Some new restaurants and retailers moving into recently vacant storefronts may help counteract the anticipated closings. Miami-Dade has 500,000 square feet of “Coming Soon” space while Broward has had a million during the third quarter, Ladle said by email.

“I believe that occupancy rates will still trend downward in Q1 2021, but only slightly because of all the ‘Coming Soon’ space,” he said. “Good case in point, Broward County, from Q1 2020 to Q3 2020 only fell from 89.1% to 88.6%, despite those 6 months being right in the thick of the pandemic.”

 

Source:  Miami Herald

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Luxury Miami Condo Association Sues Airbnb

The condominium association of a luxury tower in Miami’s Edgewater neighborhood has filed a civil lawsuit against Airbnb, and several additional lawsuits against Airbnb hosts, over short-term rentals at the property.

Transient renters have led to problems including a shootout in an elevator and increased costs for security, maintenance and insurance, the condo association alleges.

“Airbnb has misappropriated the condominium property and turned it into its own de facto, unlicensed hotel,” according to the complaint, filed by Opera Tower Condominium Association Inc. in Miami-Dade Circuit Court Aug. 24.

Separately, Airbnb last week began cracking down on Florida properties used to host parties. More than 40 listings across 12 counties that received complaints or otherwise violated company policies were suspended from the platform.

The Opera Tower is a 665-unit condo that opened in 2008. While rentals are not expressly prohibited by condo rules, residents are supposed to be screened and registered by the association and present leases during that process. Additionally, short-term rentals in that part of Downtown Miami are prohibited by zoning laws.

The complaint alleges that about 450 units at Opera Tower are used by full-time residents while the others are used for short-term rentals. As those proliferated, common areas have gotten crowded and waits for the elevators in the 56-story building can stretch for 15 minutes. The property’s condo association hired a person to deal with related headaches and has had to spend an additional $200K on janitorial services, plus an annual $560K on security, it said in the complaint.

Over the past three years, there have been 397 9-1-1 calls, and alleged crimes by transient users have included robberies, assaults and at least one rape allegation. In June, two dueling gunmen shot up an elevator and third-floor lobby.

In 2018, the condo association’s insurance company dropped the policy because of the short-term rentals — a new policy with a different company cost $93K more, the complaint says. On Aug. 6, the city issued a cease-and-desist letter to the condo over short-term rentals and said it is subject to an ongoing investigation by code enforcement because it is not zoned for lodging.

“Quite brazenly, Aibnb makes no effort to either verify the legality of accommodations or even to remove listings once it has been informed that its listings may be illegal,” attorneys for the association wrote in the complaint. “Airbnb’s business model calls for it to continue riding the gravy train of booking fees from illegal listings and dare affected property owners to sue it.”

The lawsuit accuses Airbnb of aiding and abetting breaches of the condo declaration, aiding and abetting trespass and violating Florida’s Unfair and Deceptive Trade Practices Act. The condo association filed separate lawsuits against Airbnb hosts in Opera Tower including Happy Travels Miami LLC and Suarez Group Hotels Corp.

Separately, on Aug. 20, as COVID-19 continued to spread throughout the world, Airbnb announced a global ban on all parties and events at Airbnb listings and a cap on occupancy at 16. The party ban remains in effect until further notice. Airbnb has also restricted rentals for people younger than 25 — they can’t rent near where they live unless they have at least three positive reviews.

The city’s investigation of Opera Tower and the subsequent lawsuits come after a Miami TV station, WSVN, this summer explored how “pandemic parties” were proliferating in South Florida as bars and restaurants closed and nightlife moved to private parties. It quoted Opera Tower residents saying that they felt unsafe there, and found that pornography was filmed on one of the condo’s balconies.

Airbnb Manager of Public Policy in Florida Viviana Jordan said in a statement that the company supports local officials stopping irresponsible behavior at host properties and that the company has set up a hotline to field complaints.

Airbnb said in a statement that only a “small minority” of hosts would be affected by its Florida crackdown and that these hosts had previously received warnings.

“The vast majority of hosts in Florida contribute positively to their neighborhoods and economy, and they also take important steps to prevent unauthorized parties — like establishing clear house rules, quiet hours, and communicating in advance with their guests,” Jordan said.

Airbnb’s Florida crackdown affected properties Alachua, Broward, Duval, Lake, Lee, Manatee, Miami-Dade, Okaloosa, Orange, Palm Beach, St. Johns and Walton counties. The company has previously led crackdowns in specific geographic areas. In August, it removed 50 listings in Los Angeles County and another 50 in Arizona.

Aibnb has reportedly lost $1B since the COVID-19 pandemic began. Nevertheless, amid these challenges, last month Airbnb filed paperwork to become a publicly traded company.

Source:  Bisnow

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How The Pandemic Has Changed Apartment Building Amenities

While slow to embrace major changes — some developers say they’re hopeful that pandemics will not be a concern when their projects finally open in 2023 — developers are making tweaks in the face of the COVID era.

They’re adding cabana-lined roof decks, repurposing lounges as outdoor schools and switching out built-in couches for more movable versions to facilitate social distancing, as well as adding ventilation systems that are deluxe even by the standards of luxury apartments.

“We haven’t had drastic changes,” said Whitney Kraus, the director of architecture and planning for Brown Harris Stevens Development Marketing, but added, “I don’t think amenities will ever go back to the way they were before.”

Some upgrades will likely appeal whether a disease is rampaging or not.

Click here to read more about this story.

 

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Is The Pandemic Priming Neighborhoods For A New Wave Of Gentrification?

Last year, we might have viewed gentrification as one of the worst aggravators of the housing market. We did not expect a pandemic. We’ve spent months indoors, lost work or transitioned to telecommuting, and watched once-bustling streets go silent; and as the coronavirus persists, more and more people have fled cities to hunker down in rural locations.

The question of gentrification still looms, and in deciphering what this exodus means for the future of housing, some have looked to the phenomenon of disaster gentrification in particular.

“When [people] talk about disaster gentrification, they’re referring to instances where a community was hit by a disaster that caused, at a minimum, temporary displacement,” says Lance Freeman, a professor at the Graduate School of Architecture, Planning, and Preservation at Columbia University, and a leading researcher on gentrification. “In the rebuilding process, the area was rebuilt for people from higher social economic status households,” preventing original tenants from moving back to their neighborhoods and uprooting communities.

New Orleans in the wake of Hurricane Katrina is perhaps the best-known example of disaster gentrification—reported by CityLab: “Those neighborhoods with a higher percentage of physical building damage were more likely to have gentrified one decade after the storm”—but it has occurred in New York, Miami, and other cities that have experience major climatic disasters. With the pandemic now worldwide, it’s worth considering if the pattern will reappear, though for different reasons—namely, people forced out of their homes by financial hardship, and a migration from urban to rural areas.

For gentrification to occur, two things must happen. For one, “you have to have an area that has very low values on residential real estate, which involves disinvestment and [maybe] abandonment of certain areas,” says Bruce Mitchell, a senior analyst for the National Community Reinvestment Coalition (NCRC).

The second thing? Investment—or, as Freeman notes, a rebuilding of an area so that it effectively prices out the current residents in favor of higher-income renters and buyers.

Right now, the U.S. is currently in a recession, with  about 31 million people unemployed. With so much uncertainty around when the pandemic will end, people will continue to suffer economically, especially those who live in lower-income communities, which are disproportionately people of color, notes Freeman.

“If you look at the number of predominantly white communities and then at the number of communities of color, the disinvestment in the community of color will be more disproportionate than in the white neighborhood,” he adds. “In that sense, you can say they experience more gentrification because they’re disproportionately in the working-class, disinvested neighborhoods.”

 

According to the Center for American Progress, “Housing instability triggered by the coronavirus pandemic is a growing threat across the United States, especially in communities of color.”

It notes that where 9% of white homeowners missed or deferred a mortgage payment in May, 20% of Black homeowners did the same.

If people of color and low-income communities continue to suffer economically, will they be forced to abandon their homes for areas that are more affordable, causing an abandonment or disinvestment of a neighborhood? And will that prime a neighborhood for gentrification to occur? Perhaps so—especially when you consider how many people in these neighborhoods are renters.

“In the short term, it looks like there are going to be a lot of repercussions having to do with the current rental crisis and the inability of people to pay their rent because they simply don’t have the income,” says Mitchell. “[If] people can’t pay rent, then landlords—particularly small landlords—are not going to be able to meet their mortgages, perhaps.”

While Mitchell views the eviction and rental crisis as something that may cause an increase in temporary homelessness, others are concerned that city residents will voluntarily turn to small towns and rural places due to the rise in telecommuting, or be forced into these areas in search of more affordable living.

“The workplace has increasingly moved into people’s homes,” says Mitchell. “It could result in movement out of central cities to areas that are less expensive.”

Rural gentrification has occurred in the past. Freeman notes, “In the New York area, you had these smaller towns in Upstate New York along the Hudson River that many artists and other creative types moved to starting at the latter part of the last century. They were drawn to those areas because housing is cheaper, [and] it’s scenic.”

Though some may have sought rural areas at the beginning of the pandemic, Freeman doesn’t foresee Americans moving to rural areas en masse.

“As we’re seeing in many of these smaller communities, you’re still not immune or protected from the virus, necessarily,” he says. “I think in the short term, perhaps that’s happening. I’ve seen anecdotes about it, but I don’t think it’ll be a permanent trend.”

We’ve also heard these anecdotes and reports of New York City residents moving to Upstate New York, Connecticut, and Vermont, or Californians in cities like San Francisco heading to Montana. In April, Redfin’s CEO said demand for rural homes was higher than for urban homes, and in May, the company noted that Redfin page views of homes in towns with fewer than 50,000 residents were up 87% year over year. And yet, the company also found that 27% of users who were looking to move during the pandemic were focused on metros like Las Vegas and Sacramento.

Comparing these statistics to actual homebuyer behavior will take time. In the meantime, we should keep in mind that many reports of city dwellers migrating to rural areas have centered on residents of metropolises in California and New York; those anecdotes are not necessarily representative of the entire nation.

Shad Bogany, a realtor who serves on the board of directors for the Houston Association of Realtors (HAR), feels similarly to Freeman. While he notes that the real estate market dipped in April and May, Bogany says that people are currently buying and selling houses in droves. “We don’t have enough houses to sell,” he says.

For Bogany, there’s one reason that the market has remained strong, and it’s not that buyers are moving to areas they deem safer or cheaper—rather, “people are making decisions based on the low interest rates.”

 

Source:  Dwell

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How Covid-19 Is Changing Leasing Agreements For Businesses

Experts say changes are on the horizon to the decades-old language in retail and restaurant leases as a result of the Covid-19 pandemic.

New leases are being written with substantial changes, particularly in regard to provisions that provide relief for tenants that are unable to fulfill their contract obligations because of circumstances out of their control, such as a natural disaster or pandemic.

Steven Silverman, a shareholder at Miami-based Kluger, Kaplan, Silverman, Katzen & Levine PL, who deals in lease negotiations, said the language in these provisions is often broad, and landlords did not interpret them to apply to shutdowns caused by a pandemic.

As a result, many new leases signed over the last few months include more specific language, Jaime Sturgis of Fort Lauderdale-based Native Realty said.

“Moving forward, there’s going to be a little more clarity,” he said. “[The provision] is broad by design, so I think moving forward more clarity and more specific language addressing these types of situations.”

Click here to read more about this story.

 

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14 Big Factors Driving CRE Trends This Year And Beyond

The Covid-19 pandemic has created an unprecedented challenge for the real estate industry.

Commercial real estate professionals have had to navigate new obstacles like virtual showings, finding buyers during an economic downturn and perhaps most significantly, the shift away from centralized offices toward full-time remote work.

The current climate and circumstances will continue to impact real estate trends in the months and years to come, and if you’re in the industry, it’s important to be prepared for what’s ahead. To help, Forbes asked 14 members of Forbes Real Estate Council for their insights.

Below the members identified the biggest factors driving commercial real estate trends this year and beyond.

1. Utility Management For Remote Work

One factor is the ability of some companies to effectively and responsibly manage critical business initiatives while telecommuting. Companies are evaluating the health, safety and necessity of their employees working remotely versus maintaining the continuity of a central office location which may have redundant electrical power, data connectivity and other security measures necessary to maintain sales and operations. – Josh Gopan, Simone Development Companies

2. The Need For Office Space In The Home

While everyone has always needed a place to live, people’s homes now have added value. With many people shifting their workplaces from offices to their homes, their dwelling also has increased in importance. Conversely, this has had a detrimental effect on office space across the country. – Matt Picheny, MJP Property Group

3. Smart Amenities

The adoption of technology will drive smart amenities from the “nice-to-have” column to the “need-to-have” column as restrictions are put in place by local, regional and state governments. Adoption was already trending up pre-Covid-19, but should continue to see a strong increase over the next 12 to 24 months. – Marshall Friday, ADT Security Services

4. Newly Available Subleases

Large, established institutions, like Twitter, Facebook, etc. have put work from home requirements in place that are minimizing their physical space requirements. Combined with businesses negatively affected by Covid-19, there is a large volume of subleases hitting the market. Younger companies that are doing well are looking for flexible space and terms, so subleasing might be the top CRE trend. – Matt Weirich, Realync

5. Less Demand For Commercial Office Space

The outlook of office space is uncertain, but possibly very dark. Businesses had to adjust quickly to a virtual workforce. Many of those businesses will find that they can operate just as well without the overhead costs associated with owning or leasing a physical office. – Chris Bounds, reHacking / Bounds Realty Group by eXp Realty

6. Uncertainty Around Retail Business Operations

One of the key factors driving commercial real estate trends since Covid-19 is the uncertainty surrounding which type of businesses will be able to operate during the pandemic and how that drives the values of those assets. Businesses in strip malls, like nail salons and hair salons, have previously been immune from fluctuations in the economy, but are now at the peril of intermittent shutdowns. – Todd Sulzinger, Blue Elm Investments

7. Property Maintenance As A Priority

Covid-19 has pushed property maintenance to the forefront. Consumers are more concerned about disinfecting than ever, and well-maintained locations—including everything from sanitization to spotless floors and regular, visible cleaning to fresh landscaping—instill confidence. Facilities maintenance is an area companies will need to increase investment in as it becomes integral to brand experience. – Marc Shiffman, SMS Assist

8. High Demand For Essential Businesses

In the net lease world, investors are focusing on quality and stability, both for guarantor and real estate fundamentals. We’re seeing very high demand and capital being reallocated to essential businesses like grocery stores, dollar stores, auto parts and service centers, pharmacies, medical companies and quality guarantors in fast food. Stable cash flow with quality tenants paying rent wins in a high-risk market. – Kyle McCollum, Trinity Real Estate Investment Services

9. Short-Term Market Performance

Covid-19 prompted many investors to spend more time tracking short-term market performance. From an investment perspective, our strategy and analysis begins by evaluating which sectors experienced stability in the last 20 weeks. Multifamily, self-storage, healthcare, NNN retail and office performers are well-documented, however, we must consider how each asset will also perform in the long run. – Keith Lampi, Inland Private Capital Corporation

10. Increased Importance Of Rental Property Amenities

With many people sheltering in place, office properties are relatively empty and time spent at home has never been higher. This makes multifamily amenities increasingly important. The trend of renters seeking well-appointed properties is not new, but in the wake of Covid-19, the value of on-site dining options, co-working lounges, fitness centers and other amenities has never been greater. – Salvador Garcia, MAS Development Group

11. The Internet’s Impact On Land Value

Technology and digital connectivity have disrupted many industries and real estate is not immune. We have been forced to realize that such advances may alter our approach to land use and the built environment. There will be increasing discussion about the effect of the internet on the value of land generally, although we are in the very early stages. – Eliot Bencuya, Streitwise

12. Changes In How Office Space Will Be Used

When demand returns for office, the largest part of the workforce will be hybrid workers that come to the workplace two to three days a week. This is down from four to five days per week meaning a 20 to 30% decrease in demand for office, retail, hospitality, etc. This will dramatically shift how these assets are used and valued. We will see the productization of the office from a couple of products to several. – Jacob Bates, CommonGrounds Workplace

13. Industry Adaptability And Resilience

This trend is truly remarkable as it has shown how resilient the industry is. The market has made huge progress in creating work-from-home environments with management companies investment firms and doing the best they can through the use of many tech support programs. It’s been remarkable to see this trend take life while showing the industry stays strong (thanks to interest rates being low). – Heidi Burkhart, Dane Real Estate

14. Capital Reallocation

As we’ve seen in past downturns, there is a massive reallocation of capital for investment to commercial sectors deemed safer with cash flows that are perceived to be more durable. Look for pricing to tighten and competition to increase in multifamily, industrial, self-storage and medical sectors while loosening in retail, office and hospitality. – Max Comess, Hodges Ward Elliott, LLC.

 

Source: Forbes

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To Fill Vacant Stores, Lincoln Road Seeks Pop-Up Businesses

Cultural institutions and new retail shops may find temporary homes on Lincoln Road this winter, as the Lincoln Road Business Improvement District is hoping to bring in a series of pop-ups to boost business and fill vacancies. 

The improvement district’s executive committee has unanimously voted to support and promote pop-ups during the upcoming season.

“We’re looking to work with local cultural organizations that may want a space on Lincoln Road during the holidays,” Timothy Schmand, the committee’s executive director, told Miami Today last week. Additionally, he said, the committee would like to work with retailers, including clicks-to-bricks stores that operate primarily online and want to try out a physical space.

According to Mr. Schmand, site occupancy on Lincoln Road is currently around 74%.

“We have empty storefronts,” improvement district Vice President Lyle Stern told the committee Aug. 20, “(and) I think we have to use the opportunity right now to fill every single vacancy we can on Lincoln Road this year.”

“We as a group,” he continued, “should encourage all of our owners to make (vacancies) available for appropriate – and we’ll have to define appropriate – vendors to come to Lincoln Road and occupy this space subject to some conditions.”

The committee would have to discuss these conditions, Mr. Stern said, which could include requiring a security deposit or insurance policy.

“I think it’s a great idea,” said Mindy McIlroy, committee treasurer and president of real estate firm Terranova. “Terranova has done a lot of work on this already – we have been actively soliciting for fashion boutiques for our vacancies to fill our spaces from October through January. Just to your point, we want to have a very active holiday shopping season.”

Retailers in the fashion industry, she added, may have a lot of inventory as few people shopped for spring and summer styles this year. 

Indeed, Terranova’s founder and Chairman Stephen Bittel told Miami Today that the corporation plans to target local and regional retailers and is already communicating with two possible short-term tenants: a plant store and a vintage boutique.

To boost business and bring people back to the street, he continued, Terranova is willing to be “uniquely flexible” when it comes to rent. At the height of business, Mr. Bittel said, rental rates were in the $300s per square foot per month. Now, he said, these rents are in the $200s, and for short-term rentals his company is talking to some tenants about making rent “the cost of occupancy plus a percentage of sales.”

“All the owners are very focused on pushing occupancy and filling up our storefronts to provide the best opportunities for our guests,” he said, “and that strategy means we need to get those windows full. We are (willing) to sacrifice some near-term revenue to enhance the overall experience so that we can return to the strength that the street previously had.”

Mel Schlesser, a member of the committee, said the improvement district would need to be mindful of the City of Miami Beach’s policies. “If we don’t have significant support from the city to allow these pop-ups to move forward expeditiously,” he said, “we’re going to be wasting our time.”

However, Ms. McIlroy noted that policies already address this concern. “There is a pop-up program in place already that the city has initiated,” she said, “75% of what you just spoke about is already completed.”

The pop-up process, Mr. Schmand said at the committee meeting, “is a far more expedited process than the traditional process.” “I used it successfully a couple of times,” he said.

Steve Gombinski, the committee’s president, said that while Lincoln Road’s vacancies during Covid are not a unique problem, the improvement district could hopefully offer a unique solution. 

“We want to help the community,” he said. “We want to welcome everybody. We want art galleries, we want retail (and) other pop-ups. (We could) find out if there are restaurant spaces available where innovative chefs could come in for a short period of time.” 

The committee, Mr. Gombinski continued, should ask landlords what type of tenants they’re looking for and put together an inventory that would allow them to easily match interested tenants with open spaces.

The district wants to know the “wants, needs and desires,” of possible tenants, Mr. Schmand told Miami Today, so that it can come to an agreement that is beneficial for everybody.

Lincoln Road is not alone in seeking opportunities to increase business and promote cultural institutions as the year continues. Last week, Miami Today reported that Coral Gables city commissioners unanimously approved the installation of four new murals on Miracle Mile with the goal of stimulating the economy.

 

Source:  Miami Today

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