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Plans Would Expand Design District Retail Geography

September 22, 2014

The borders of Miami’s Design District are expanding, both legally and in the real estate community’s collective mind.

Proposed rezoning would expand the Design District Retail Street Special Area Plan by 1.9 acres to include a property north of 42nd Street, allowing denser development.

The City Commission approved the plan for Robins’ $312 million pedestrian-friendly retail project in mid-2012 for 19 acres. About 140,000 square feet of new department store space and about 400,000 square feet of renovated retail buildings would include luxury fashion retailer Hermes and French designer Louis Vuitton.

In fuzzier terms, interest in the neighborhood as a retail hub has expanded beyond the core of the Craig Robins-backed Dacra Development Corp. redevelopment to the periphery. Particularly on 36th Street and west of Miami Avenue, several real estate brokers told the Daily Business Review rents are quickly escalating as landlords push the envelope on adopting the Design District brand.

The rezoning is being sought by Helm Equities, a New York real estate investor that spent $12.5 million in late July for a church at 4201 NE Second Ave. Helm is now looking to rezone the parcel to build a mixed-use building with multilevel retail, 80 apartments and 300 indoor parking spaces.

The building is envisioned as potentially reaching 81 feet in height, though the design would be graded so the northern section of the building are no taller than 25 feet. Additionally, a green space 25 to 50 feet wide would serve as a buffer between the building and the residential neighborhood to the north.

The extension of the line that marks the official edges of the district, however, is being overtaken by retail tenants, a broker leasing buildings in the area said.

tony arellano“The center of the Design District is really the engine that’s driving the rental growth, and the rents are driving the building values in the perimeter,” said Tony Arellano, executive vice president of Miami-based Metro 1 commercial real estate.

 

Rents in the Dacra-driven core from 38th to 42nd Street between Northeast First and Second avenues are $175 to $200 per square foot, he said. A few blocks west and east of that, tenants can expect asking rents closer to $100 per square foot. Asking prices on the edge of what brokers can brand the Design District—the west side of Miami Avenue, for example—are seeing asking rents closer to $65 to $75 per foot.
 

“If you taper from $200, you still get very good fundamental rent levels,” Arellano said.

 

Tenants looking for value as well as an association with the Design District might find a place on Northeast 36th Street, which is separated from the district core by the I-195 overpass. A hotel and a luxury mixed-use development are planned on the north side of that roadway.

Peripheral Pickings

The highway overpass has long served as a solid divider setting 36th Street apart from development to the north, but Arellano said he expects that to change. In his estimation, the neighborhood will develop to a point where people walking through the gritty-chic urban mall being built in the Design District will walk under the bridge to reach shops or restaurants on the other side.
 

“By no means are they going to get $200 per foot, but they still will maintain premiums above Midtown and above Biscayne Boulevard, and just having the brand Design District is worth a premium in terms of rents,” he said.

 

Another broker offering commercial property in the periphery of the Design District also believes the cachet associated with the Dacra development will be a boon to nearby retail neighbors, though he draws the line all the way west to Northwest Second Avenue.

Andy Charry, a sales associate at Marcus & Millichap, said the zoning along that thoroughfare from 38th to 54th streets is conducive to dense retail development. While the area is too far from the central Design District to pretend a direct link, it can benefit from the displacement of tenants being priced out just a few blocks to the east.

The Northwest Second Avenue corridor “is sort of like the last child to get picked for dodgeball,” Charry said.

“No one wants to be the first in the pool, but in the next two years it’s likely activity will pick up,” he said. “Everybody right now is kicking tires, and I think as soon as the first players walk in you’ll see a rush.”

 

Source: DBR

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