Development Real Estate

Espacio To Build $412M Mixed-Use Project In Miami’s Downtown

Spanish Developer To Break Ground Early Next Year

In its first major U.S. development, Spanish developer Espacio USA has received approval from the city of Miami for a $412 million project to build a 12-story office building, a condominium building and ground-level retail in downtown Miami’s Omni area.

It’s the first major development in the Omni area since the last real estate boom, receiving approval from Miami’s planning, zoning and appeals board last week. Architecture firm Pei Cobb Freed & Partners designed the mixed-use project, its first in Miami since the iconic, color-changing Miami Tower.

The development at 1400 Biscayne Blvd. by Espacio USA, the American division of Spain-based real estate firm Inmobiliaria Espacio, will break ground in early 2013 and take five years to complete.

In addition to the 12-story, 103,000-square-foot office building designed to achieve LEED (Leadership in Energy and Environmental Design) Gold certification, the project will include a 55-story condo tower with prime street-level retail.

Demand for residential and commercial property is rebounding in downtown Miami. The area’s inventory of new, unsold condo units has dropped below 2,900 units as of June 30, 2012, a decrease of 30% from a year ago, according to the Miami Downtown Development Authority (DDA).

More than 200 new businesses have opened since 2005 and the office market is experiencing net positive absorption as new-to-market tenants arrive and existing companies expand.

Source: Costar
By Randyl Drummer

Development Real Estate

Brickell CitiCentre by Swire Properties

Brickell CitiCentre

New York City has Rockefeller Center. San Francisco boasts the Embarcardero Center. Now, Miami could have its version of a vibrant urban gathering place called Brickell CitiCentre.

Hong Kong-based developer Swire Properties broke ground on June 2012 on its massive Brickell CitiCentre project in downtown Miami, in what could be the beginning of substantive westward expansion across South Miami Avenue. The nine-acre, $1.05 billion project is planned to include two office buildings, two residential towers, a hotel, a wellness center, service apartments and 520,000 square feet of retail and entertainment space.

In March, Swire announced $140 million in financing for the project from HSBC Bank. The first phase is expected to be completed before 2015.

“The most important thing out of the many important things with this project is that they have moved progress toward the west,” Miami Mayor Tomas Regalado told The Real Deal. “Miami Avenue was just an imaginary line that developers wouldn’t cross to the west, and what this is doing to West Brickell is making it explode as a potential center for real estate and construction.”

In recent years, some developers have begun crossing the “imaginary line.”

Canada-based Ivanhoe Cambridge’s Mary Brickell Village has become a bustling retail center, and Jorge Perez’ Related Group already has 92 percent of units under reservation for its planned Millecento Residences just a few blocks south on South Miami Avenue.
“[Swire] is going to start construction right now, and this will send a message,” Regalado said. “I promise you that all of this area, in the next two years, is going to be changed.”

The project’s first phase is slated for completion in the first quarter of 2014.

But while CitiCentre represents a shift westward, it’s also a significant sign from the East.
Wednesday’s groundbreaking included a traditional Chinese blessing, a ceremonial beginning to what the city hopes could be increased growth in investment from Asia (which began with Genting’s high-profile purchase of the Miami Herald’s headquarters on Biscayne Bay).

“We hope it’s transformational,” Swire Properties CEO Martin Cubbon said. “We’ve done lots of projects like this in Hong Kong and China, and we feel very confident about this city.”

The distance between East Asia and Miami continues to represent something of a roadblock for investment, he said, but Miami is starting to be perceived as a potential investment target in Asia.

“It’s a long way from Asia, but I think [the perception] is changing,” he said. “When people who know us in Asia see what we’ve done, they’ll take note. People from Beijing and Hong Kong will like Miami — so I think you will see the beginnings of more investment. How much there will be will depend on the opportunity.”

By Alexander Britell
The Real Deal

Architecture Development Real Estate

Spanish firm proposes major development next to Arsht Center

The company is looking to build a 12-story office and retail building, then add a 650-foot tall tower. The project goes next to Miami’s planning and zoning board.

By Bill Cobb
A Spanish firm has unveiled a five-year plan for an ambitious commercial and residential project on Biscayne Boulevard near the Adrienne Arsht Center for the Performing Arts that supporters say will restart the stalled transformation of the long-dormant, dog-eared corridor into the vibrant, pedestrian-oriented urban district envisioned when the performing arts complex opened in 2006.

The $412 million proposal by Espacio USA, the subsidiary of a big Spanish developer that purchased most of the 1400 block of Biscayne last year, calls for a 12-story office and retail building to start construction early next year on the corner of Northeast 14th Street, facing the Arsht Center’s opera house. It would be joined later by a separate 650-foot-tall residential, office and retail tower. A tree-shaded public plaza would split the block at a diagonal between the two new buildings.

The 1400 Biscayne project, which goes to Miami’s planning and zoning board for a vote Wednesday evening, would replace a far larger, twin-tower project that had been approved for the site during the downtown condo boom six years ago but, like several other major developments in the immediate vicinity, fell victim to the subsequent real-estate collapse. Some critics feared the previous development’s mass would have overshadowed the opera house.

Espacio is seeking a major modification of that existing development permit, which is still valid, for what is a completely different development, this one designed by Pei Cobb Freed & Partners. The firm, founded by famed retired architect I.M. Pei, was also responsible for the signature Miami Tower, built in 1987 as the CenTrust Tower. Supporters say the new design is far more simpatico than its predecessor to the Arsht Center and the neighborhood.

“The times have changed, and we didn’t want to take away views or impact the area heavily,’’ said Espacio USA CEO Alberto Muñoz. “We wanted something sustainable that did not overwhelm the city.”

Arsht Center administrators, who are warily awaiting plans from casino giant Genting, which bought the Miami Herald and Omni buildings nearby, have welcomed the Espacio proposal, a spokesman said.

The proposal would place the 12-story tower at an angle to the opera house’s black-box theater and Biscayne, allowing the arts building to remain visible from up the boulevard. The 55-story tower would also angle back from the street. By placing the 10-story garage at the rear, the architects avoided the usual Miami parking pedestal effect, so that the tower comes all the way down to the street, creating a more pedestrian-friendly ambience.

Ground floors of both buildings would have commercial space to provide pedestrian life on the street. The garage would also be lined with usable space on Northeast Second Avenue to avoid the blank-wall, back-of-the house syndrome that deadens some downtown streets.

The complex would begin to provide Arsht Center patrons with amenities like restaurants and structured parking that have been lacking in the vicinity, backers say.

“It continues the growth and urbanization of downtown,’’ said Alyce Robertson, executive director of the city’s Downtown Development Authority. “It will bring more life into that area around the Arsht Center and add to the vitality north of Interstate 395, which has been like an invisible line separating the Omni from everything that’s going on downtown.’’

The DDA does have some quibbles. Among them: The last version of the blueprint its planners saw had a retaining wall all along the Biscayne Boulevard frontage, which could discourage the very pedestrian traffic the city wants to encourage. Because the project is using a development permit approved under the old city code, it doesn’t have to adhere to the new, more pedestrian-friendly Miami 21 code.

“We’re hoping they address this,’’ Robertson said. “We want to make it an easy transition for pedestrians from sidewalk to commercial space. It’s better for them. We want them to be incredibly successful.’’

The developer said Tuesday its architects added stairs and lowered 40 percent of the retail space to street level to deal with the DDA’s concerns.

Espacio purchased an existing office building and parking garage that take up about two-thirds of the block for more than $32 million, and later added a small apartment building that houses the Manhattan and DRB cafes on the ground floor. Espacio does not own the southwest corner parking lot.

The project, which requires city commission approval, would be built in two phases, Muñoz said. Demolition of the apartment house and the corner structure would allow the company to start construction of the 12-story building while retaining most of its existing tenants. Once that building is done, Espacio hopes its tenants, which include the Spanish cultural center the firm lured to the office building, will move into the new commercial space as the remaining buildings on the property, including the old garage, are torn down to make way for the residential tower.

The idea, Muñoz said, is to create synergy between officer workers, residents, visitors and Arsht Center patrons and get them circulating through the area.

“We think the Biscayne corridor has real strength. But right now, if you go to the Arsht Center and want to have a beer or eat something, you have to get in your car,” he said. “We want people to enjoy the city on foot. It’s already happening. But we want to extend that by animating the area.”

Picture by Bill Cobb

Development Real Estate

The real reason the US economy is starting to improve

“The real reason the US economy is starting to improve”

AP Photo / Chris O’Meara

New construction soared 15% in September. Look for real estate to keep improving, which will create housing-related jobs.

Is the latest improvement in unemployment a statistical fluke, a political conspiracy or the start of something real? The answer, obvious to anyone paying attention to the US housing market, is that it’s real. Just look at this morning’s new construction numbers—a 15% increase in September, the best performance in more than four years.

Economic news will be saw-toothed through the winter, but the real estate industry is finally starting to create jobs, and will keep doing so in 2013, regardless of who becomes the next US president.

No one at this point is even arguing that real estate has rebounded. Last February, Redfin was one of the first to call the bottom, at a time when others were still revising their 2012 forecasts downward.

Now, Goldman Sachs predicts that home prices will increase 2% over the next 12 months, rising another 2.8% the year after that. JP Morgan CEO Jamie Dimon said on Friday that housing has turned the corner. Only 11% of consumers now expect home prices to decline.

US banks have already benefited, both from increased mortgage applications and fewer real-estate-related write-downs, with the biggest two reporting record profits. The only questions now are whether it will last and what it means for the overall economy. On the ground and in national statistics across the board, we see ample evidence that prices recovered in 2012, and now expect that sales–and jobs—will follow suit.

Why real estate jobs matter

The reason real estate leads America in and out of recessions—of the 14 times American home prices have declined, 11 have resulted in a recession—is because it employs so many people in so many places, contributing as much as 18% of the gross domestic product. The US has more than 1 million licensed real estate agents but less than half that have recently served a customer. The construction industry has lost roughly 2 million jobs in the past five years, mostly due to the real estate crash. Many of these folks struggle to find jobs in other industries.

Because of trade deficits, electoral politics and nostalgia, we talk almost exclusively about the ebb and flow of manufacturing in Michigan and Ohio, but the auto industry’s impressive recovery has only added 250,000 jobs. Even a modest increase in real estate jobs can swing the economy even further, reaching every corner of the country. Any town big enough to have a gas station and a pizza parlor usually has a real estate office, with plenty of empty desks. This is why an uptick in real estate sales has far-reaching effects.

Breaking ground on big projects

One of the first sectors to add jobs will be construction. The reason builders have had a great year in 2012 is because they’ve been able to build more without hiring more. Skeleton crews finishing off half-built projects—often bought for pennies on the dollar from bankrupt competitors—haven’t added many jobs. It takes fewer cooks to prepare leftovers for dinner.

But now the builders are hiring big teams to break ground on new projects; housing starts are up 29% over last year. The Federal Reserve just reported not only strengthening home sales, but more construction across most of the country. In almost every American city, there are more cranes in the sky and holes in the ground, and more jobs.

Rising prices don’t create jobs, sales do

So why has it taken so long for real estate to contribute to a recovery? Prices rose this spring due to demand, but sales lagged. And sales are what matter most, putting money in the pockets of brokers and builders.

It’s hard for sales to increase more than a few points when inventory is down 29% from last year. The Federal Reserve spurred demand with record-low interest rates, throwing a party for the real-estate industry that many sellers decided to skip.

So when will sellers and buyers hook up? The truth is that there’s always a lag. When real estate prices first start to move up, builders hesitate to build and sellers hesitate to sell. As in other cyclical industries, it takes most of a year just for everyone to believe it’s real.

The end of the foreclosure era

The first inflection point came in 2011, with stabilizing prices. Prior to that, banks were still the market-makers in most cities, controlling inventory levels and setting prices through sales of foreclosures. But then last fall, the number of foreclosures for sale began to drop steeply; few individual home-owners were willing to pick up the slack by listing their own home, especially at the prices set by the banks. Inventory fell so far so fast that we soon began to see bidding wars, and prices stabilized.

Eventually rising prices will bring sellers back to the market. Every day this year, Redfin agents have been meeting regular people to discuss whether to list now or hold off in the hope of a higher price next year. Many, at our encouragement, have been holding off.

If you think we’re anywhere near the bottom, and you don’t mind waiting, why sell now? The inventory crunch has been compounded by rising rents and falling interest rates. In most American cities you can easily find a renter willing to pay your monthly mortgage and then some.

Shadow demand: Hundreds of thousands of buyers waiting for inventory

We believe the sellers will start to come out in greater numbers next year. Waiting for them will be hundreds of thousands of would-be US home-buyers, who are now headed toward the holidays frustrated at having failed to find a listing in 2012. We think of these buyers as a source of shadow demand, perhaps not of the same magnitude as the shadow inventory one held back by the banks but very large.

Already in the shoulder season before Thanksgiving, we’re seeing plenty of “domino listings,” where one home-owner puts his house on the market and immediately gets a sale, emboldening his neighbor to follow suit.

More significantly, 2013 will be the first year in the last seven that will begin with a broad consensus that home prices are rising. Inventory has already started to increase in at least one market, Phoenix, as higher prices there induce owners to sell. As more listings appear nationwide next January, more sales will follow.

Return of the flips

Another more subtle change is driving employment: the amount of money people are putting into the homes they buy and sell. Economists often talk about home prices in abstract terms, as if people were simply paying less in 2010 for the exact same asset that sold in 2005.

But in fact, Americans stopped putting money into homes over the past six years. Hard-nosed buyers stopped falling in love with finishes, and just did the math on how much they were paying per square foot. And sellers took note. Banks selling off their foreclosures stopped mowing the lawn, much less renovating the kitchen. The value of American real estate plummeted in part because America itself just started to look shabbier.

That’s changing. Builders are trying to justify higher appraisals with expensive add-ons. In markets like Washington D.C. and Orange County, California, we see homeowners investing in a new kitchen or an extra bedroom and convincing themselves they’ll recoup part of the cost next year in a sale. Investors are pouring $50,000 into a home so they can sell it for an extra $200,000. This means that carpenters, electricians, plumbers and builders are getting more work and staying off the dole.

Employment will improve next year because more of these folks—and more real estate agents, lenders, inspectors and appraisers too—will have jobs. This doesn’t mean real estate will grow to the proportions it had at the height of the Bush-era bubble, when it was two and a half times larger than it is today. But it does mean that things will get much better. In fact, it’s why they already have.

We welcome your comments at

The real reason the US economy is starting to improve
By Glenn Kelman
Glenn Kelman is the CEO of Redfin, a technology-powered real estate broker. Previously, he co-founded Plumtree Software, with a 2002 IPO.

Development Economy Real Estate

Passenger rail on fast track downtown

Passenger rail on fast track downtown

Miami officials are excited about what a 240-mile passenger rail to Orlando with a train station at the end of the line in the heart of Miami can do for that neighborhood, as well as the entire downtown. Coral Gables-based Florida East Coast Industries Inc. is proposing to build a station on a 9-acre site it owns along Northwest First Avenue, north of the Miami-Dade County Courthouse on the west side of downtown.

“It’s a huge economic stimulus any time you get a mass movement of people into an area,” says Miami City Commissioner Marc Sarnoff, whose district includes the proposed station site.

The station would be modeled after London’s Paddington railway station, as part of the company’s All Aboard Florida project to create a passenger rail system connecting Miami to Fort Lauderdale, West Palm Beach and Orlando.The line would start operating by the end of 2014, but the company so far has disclosed few details of the proposed station.

The station should be carefully planned so that it becomes a landmark, says Alan Ojeda, president and CEO of the Rilea Group, a real estate development firm based on Brickell Avenue and a Downtown Development Authority board member.”This is the starting point of things,” Mr. Ojeda says. “It has to be an important building.”

He says the station and passenger line could lay the foundation for farther-reaching and faster trains in the future linking Miami to cities such as Atlanta.”It’s the first big step,” he says.

Florida East Coast Industries is the holding company for Florida East Coast Railway, which operates a freight rail line along the state’s East Coast from Jacksonville to Miami.

The passenger rail would run alongside the freight line from Miami to Cocoa in Brevard County, and new passenger tracks would be laid from Cocoa to Orlando.

Company officials say the estimated $1 billion project would be the first private, unsubsidized passenger rail service built in generations between major US cities.

Although not considered a high-speed rail, trains could reach speeds near 125 mph along the less-populated areas of the route. In more densely settled South Florida, the trains could go no faster than 79 mph. The goal is to provide trips between Miami and Orlando in about three hours.

Amtrak, the federally-owned national rail corporation, currently offers twice-daily service between Orlando and the outskirts of Miami, but those trips take five hours or longer.

With All Aboard Florida, Miami officials have high hopes for what the influx of thousands, perhaps even millions of rail passengers each year into the center of the city can do for downtown, especially for what they describe as under-developed areas in the vicinity of the station site.

“It will be the catalyst for development of western downtown Miami,” says Miami attorney Neisen Kasdin, a Downtown Development Authority board member and former mayor of Miami Beach. “I think you’ll see larger-scale and smaller businesses open up.”
Mr. Kasdin says the passenger rail and station would be “a very exciting addition” to downtown, helping to transform the neighborhood to a more vibrant transportation hub.

For years, he says, the east side of downtown along the Biscayne Boulevard and Brickell Avenue corridor has seen the most expensive development, but the west side of downtown could gain more of that when the station opens.

“This could create a new focus for development,” he adds. “This is an important initiative for everyone to get behind.” It will not only create investment in that [immediate] area, but it will strengthen all of downtown as business and activity center.”Mr. Sarnoff, a lawyer, has broached the idea of moving the Third District Court of Appeal to the site to help create a “legal campus” there. The Court of Appeal is now located west of Miami near the Florida Turnpike in the Tamiami area.Mr. Sarnoff says he has discussed the idea with the court’s chief judge, who seemed intrigued. So far, nothing has been formally planned.

In addition to the county courthouse, state and federal courts sit near the downtown site. The only other thing needed there, Mr. Sarnoff says, is a law school to round out his idea for a legal campus, which would attract more law firms and restaurants and other businesses.”It would make for a legal community with live-work opportunities” in the neighborhood, he adds.

An intercity passenger rail downtown, Mr. Ojeda says, is long overdue.”This should have been done 50 years ago,” he says. “Every serious city in the world has it.”Mr. Ojeda foresees the passenger rail leading to greater development, such as retail and offices.”I think any method of transportation opens up places” for economic development.

By Scott Blake
Miami Today