Success In The Suburbs: Build For Underserved Customers Outside The Urban Core, Florida CRE Experts Say
In South Florida, the focus is usually on the flashy, the sexy, the chic. But developers working in the suburbs of Fort Lauderdale are finding that it is profitable to leave trendy developments to others and focus on quieter deals in underserved areas, like the small cities of Sunrise, where the Florida Panthers hockey team plays, and Plantation, where major companies like Magic Leap and Virgin Cruises have recently established headquarters.
The area is transforming rapidly. Sunrise is bracing for an influx from a $1.5B development, Metropica, on 65 acres. And the Miami-Dade County Commission will vote Thursday on approving the country's biggest mall and theme park, American Dream Miami, on 175 acres just south of the Broward County line. While rents are high across the board, people priced out of hot markets like Miami or Fort Lauderdale are better able to afford the western suburbs, and retailers are now coming to them.
During the Bisnow West Broward Neighborhood Report event Wednesday, moderator Arthur J. Gallagher & Co.'s Lisa Neumayer asked panelists what they felt were common misconceptions about the western part of Broward County.
"West Broward has stronger submarkets than East Broward," Franklin Street Senior Vice President Greg Matus said. He said a main suburban road, University Drive, is arguably the strongest retail corridor in all of Broward County.
"Retail is actually underserved in West Broward," he said. "I live in Cooper City with five kids and I have to drive through traffic 10 minutes to find a restaurant. Pines Boulevard is probably stronger than Federal Highway."
Seritage Growth Properties Senior Vice President of Development Paul D'Arelli echoed that, saying that he's been frequenting many of the same establishments for the 16 years he's been living in Plantation. But new restaurants and retailers are starting to give suburb-dwellers more options.
"It's so different than 10, 15 years ago, when you'd get your Bed Bath & Beyond, your Petco, the big-boxes and fill in with smaller tenants," said Encore Capital Management CEO Art Falcone, who is redeveloping the Plantation Fashion Mall as Plantation Walk (and the $2B Miami Worldcenter further south). "Now it's more mixed-use and what I call entertainment centers. Not big-box, that's over. Your anchor tenant might be a grocer, or a health club you'd never thought of as a big tenant."
Matus said private investors are interested in redeveloping old strip malls.
"Winn-Dixies are a great example. There are a bunch sitting vacant now. What do you do with them?" he asked. "There's one in West Broward on 14 acres. The tenants aren't doing well. Somebody's got to come in with capital."
He said service-based tenants are starting to fill those spaces and that creative tenants do well. He noted the success of Riverside Market, which began as a small hangout in Fort Lauderdale where people could grab their own beers from well-stocked coolers and were encouraged to linger and order food from a small menu.
Matus added that there are "a lot of shadow, quiet projects around ... a lot of stuff being done that people may not see."
Riviera Point Development Group Finance and Asset Manager Carlos Chuman said the development funding model had changed in recent years.
Riviera Point has developed numerous hotels and office parks. A few years ago, financing was coming 100% from the EB-5 program, but that percentage of his business now comprises only about 30% of the capital stack, Chuman said. Investors of all stripes have filled the gaps.
"We see South Florida as an asset protection plan," Metropica's vice president of development, Erick Collazzo, said. "As long as South American currencies fluctuate, capital will continue to come in. Eighty percent of our buyers are international from South America. "
Stiles Realty President Paul Marko said Florida is still a relative bargain for outsiders expanding into the state — even with retail rents creeping up toward $50 per SF.
"They've been been paying that all day long in California and New York," he said.
Despite the opportunities, the panelists agreed that the market has slowed somewhat from a year ago and that nightmare traffic, higher interest rates and hurricanes were ever-present threats.
"There are no freebies right now," Falcone said. "You've really got to work and work hard."
