Commercial real estate roundtable: SouthFloridaCEO magazine assembled leading real estate industry executives for a frank discussion about the state of the commercial real estate market in South Florida

South Florida CEO, Sept, 2004

SFCEO: Other mixed-use projects are going up--Midtown Miami, for example, and there are others. Could they fall into the same trap West Palm Beach did?

JONES: The office market wasn't the real problem; it was more of the retail. And part of that problem could be duplicated here in the Midtown project. The residential built around City Place was being occupied, or purchased, by part-time tenants. You can't fill retail up when a lot of our condo buyers today are people who are not going to be here all 12 months out of the year.

STEPHEN BITTEL: Every county thinks they want a town center. If you look around the country, most of these have failed. What works in retail are great retailers with good credit and good business plans, and what works locally are good service businesses and restaurants, and there's a wide gulf between them. At Midtown Miami, there's going to be big-box, national credit retail that's going to serve an underserved community, and it's going to work very well. I don't take any strength in my feelings about the downtown West Palm market just because some people have overpaid for a few office buildings. That doesn't make a market. What makes a market is when, if you look at supermarket anchor retail in the three counties, and people have stepped up to the plate at sub-seven cap rates, 10 and 15 times. That makes a market, because that group is going to have to exit some day. There's a great herd mentality with these investors. They come in and they can trade out to their compatriots in the same industry.

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JONATHAN KINGSLEY: The retail side is definitely a sticky issue there because of the transient nature of West Palm. But on the office side, I'll tell you from the standpoint of investors, West Palm Beach is on everyone's buy list. The offers we get on properties are typically double what we see in Broward or Dade County on the office side. The other thing is you're seeing migration from Broward and Dade. To the west, the Scripps project, people feel is going to sort of bracket in the West Palm market because to the north those counties are anti-growth from a commercial perspective.

BRIAN GALE: You're seeing these little suburban areas develop. Miramar is building a town center and there's on and off talk about a town center in Sunrise, Pembroke Pines, and downtown Dadeland. That trend is going to continue.

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HANK KLEIN: Part of the problem we have is that we don't have any infrastructure planned to move people around. In Dade County, it's going to be a lot more difficult in the next 10 years. This is forcing a whole series of downtowns in Dade. There'll be one in Homestead, one in West Kendall, one in east Kendall, one in Coral Gables.

BITTEL: The biggest pension fund investors on earth are playing ball in South Florida today at prices that continue to stagger the mind. Two years ago if we sold a deal at a yield of less than eight we thought we did a great job; today we're selling deals at less than seven. The retail market could hardly be stronger, with one exception: that Florida has become a one-supermarket town. Winn-Dixie either needs to get fixed or sold, because, having only one player, Publix, who is an exceptional player, makes it a challenge to continue to keep all the centers full. Eckerd's, a long time Florida player, disappeared. The lack of competition in certain sectors probably will, in the long run, hurt the investment marketplace.