A number of New York fund managers are hoping to re-create two of New York’s funkiest retail submarkets in an emerging area of Miami. Managers that include East End Capital, RedSky and London-based JZ Capital, KAR, and Junius Partners see parallels between Manhattan’s Meatpacking District and Miami’s Design District and between SOHO/Brooklyn’s Williamsburg submarket and Wynwood.
Miami’s rise has been clearly documented over the past 18 months, with drivers that are a bit apart from New York. “There’s been a lot of absorption of space as small business growth drives the economy,” said Charles Foschini, vice chairman of CBRE’s capital market, debt and structured finance team. “Executive space, meet-me type spaces are popular, with emerging markets like the Design District and Wynwood growing into new business hubs.”
With this emergence comes retailers that are expanding their bases from downtown Miami and Miami Beach to occupy ground floor space in warehouses and space that has just come online in newly constructed properties. The Design District will soon house brands like Dior, Givenchy, Miu Miu and East Coast Jewelry (ECJ Luxe), whereas the more boutique-like Wynwood sees the likes of Aesop and Warby Parker, market players told REFM. The Design District and Wynwood aren’t interchangeable. The Design District, a more mature market that is preferred by high-end retailers, is seeing sales prices of $3,000 per square foot while pricing in Wynwood is closer to around $1,000 per square foot. This is a substantial jump in values – two years ago, pricing was closer to $1,000 and $300 per square foot, respectively.
It’s Wynwood, however, that is seeing the most interest right now. The submarket, situated between then I-95 and Florida East Coast corridor, is benefiting from zoning changes that will allow for higher density development and greater height build outs, one broker told REFM. This has translated into a big boost in attracting investors eyeing potential rent increase with future tenants. “The re-zoning is probably responsible for 75% of the recent surge in investor capital,” said Joe Furst, Chair of Wynwood Business Improvement District and managing director of Wynwood at Goldman Properties. The company owns more than 400,000 square feet, or about 30 buildings in the submarket.
Wynwood’s main Second Avenue corridor has seen rents rise steeply over the past 10 years, increasing from around $12 per square foot to $50-60 Furst said. Rents in the remainder of Wynwood have risen from around $8-9 per square foot to $30-45 per square foot during the same period, he added. The neighborhood is also benefitting from the street art that is part of its Wynwood Walls program. “The street art creates a unique sense of place which makes Wynwood a cultural destination for visitors and locals, which led the way for creative businesses,” Furst added. “The Design District is great, but Wynwood provides an exciting and fresh localized food and retail scene which Miami lacked.”
When East End Capital paid $23.5m, or $270 per square foot for two acres on Northwest 24th Street in 2014, it was the largest transaction to date in Wynwood. The fund manager, which owns six properties in the submarket, sees the neighborhood as attractive to the younger demographic and TAMI tenants. “We love Wynwood, it has great location – easy access from I-95, proximity to the airport and you can get to downtown or Brickell without taking the highway. It’s also the experience – you have old warehouses being converted into offices, retail spaces, restaurants,” said Marc Gitto, director. “You can make the comparison to Chelsea, Williamsburg, but it’s its own thing. It’s unique.”
Click here for the full article REFM Issue 2 _ June 2015