DOWNTOWNS LOOKING UP
Executives discuss the condition of CBDs in the Southeast as well as efforts to revitalize.
Julie Fritz

Law Firm Tenants Save the Day

In addition to the federal government, law firms are significant generators of office demand in Washington, D.C., according to Peter Doherty of Advantis Real Estate Services’ D.C. office. In 2002, law firms anchored two notable projects that broke ground: at 901 New York Avenue, a development of Boston Properties, Finnegan Henderson leased 250,000 square feet; and at Charles E. Smith Commercial Realty’s 1700 K Street, Winston & Strawn pre-leased 40 percent.

Doherty also notes that Washington, D.C., is the only major southeastern downtown market in which developers and lenders have shown confidence to begin speculative projects during the current economic conditions. A number of new projects are underway in Washington, D.C. (For more information, please see the sidebar on page 60 and the D.C. office snapshot on page 45.)

Like they have in D.C., law firms have contributed significantly to the strength of Jackson, Mississippi’s CBD office market, according to Jim Ingram, senior vice president of Parkway Properties and president of Parkway Realty Services. Parkway Realty Services manages and leases approximately 9.8 million square feet of office space for parent company Parkway Properties, a full-service real estate investment trust based in Jackson, and another 1 million square feet for third-party owners.

Expansions by law firms such as Forman Perry Watkins Krutz Tardy, Watkins and Eager, and Butler Snow O’Mara Cannada Stevens kept absorption levels up and the vacancy rate down in Jackson’s CBD, according to Ingram. In fact, the CBD registered 54,000 rentable square feet of positive net absorption in 2002 and the lowest vacancy rate (6.8 percent) of the four submarkets.

The availability of office sublease space in Jackson’s CBD has also decreased dramatically, notes Ingram. Nearly all of the 50,000 square feet of SunCom’s sublease space has been leased to the Phelps Dunbar law firm, effective July 2003. Formerly the SunCom Building, this building is being renamed 111 Capital Building by its owner, Parkway Properties. The AmSouth sublease space at The AmSouth Building, located at 200 Capital Street, was reduced from approximately 90,000 square feet in 2001 to 19,000 square feet in 2002. This space was leased to the Forman Perry law firm and Mississippi PERS. The CBD has the lowest effective rental rate of the submarkets; however, leases were executed in the $20 to $21 per square foot range at One Jackson Place and $21 to $22 per square foot at the Emporium Building.

Currently, there is no office space under construction in Jackson’s CBD. “Although the CBD has a low vacancy rate, there is not enough demand for a new office building to be developed,” Ingram explains. “It would take a 150,000- to 200,000-square-foot user to initiate new development downtown.”

Breathing New Life into CBDs

Miami and Coral Gables, Florida, are undergoing major revitalizations in an effort to bring people and businesses back to the CBDs.

Miami

Outside of work hours on the weekdays, downtown Miami is desolate. Residents and visitors must go to Brickell to enjoy any kind of nightlife. Understandably, the residents of Miami would like their downtown to be a vibrant, 24-hour place that they can enjoy.

It appears that Miami residents will soon get their wish. According to John Sumberg, managing partner of Miami law firm Bilzin Sumberg Baena Price & Axelrod, approximately $3 billion in mixed-use developments is planned for the downtown area.

A recent change in Miami’s leadership, which has recognized the need for a revitalized downtown, is key to the city’s transformation. “This revitalization would never happen if the government had not made tremendous efforts to be receptive and helpful, instead of bureaucratic, which it had been for the last 30 years,” Sumberg explains. “That’s really the thing that has caused this to mushroom in the last 2 years.”

There is certainly demand for this new product in downtown. One of the major reasons downtown Miami is currently abandoned outside of business hours is a lack of market-rate housing, which is vital to creating a healthy urban area. Like in many cities, residential development in Miami continues to spread beyond the perimeter of the CBD. Many families that moved to the suburbs 20 years ago to raise their children would like to move back to downtown Miami now that their children are grown. Foreign owners and investors who own property downtown are also contributing to the demand for revitalization.

“There has been a fabulous synergy in time between these two things happening — the government identifying and opening up, and the demand being there,” says Vicky Garcia-Toledo, partner in the land use, zoning and administrative law department of Bilzin Sumberg Baena Price & Axelrod.

Other contributing factors are the incentives that the government is offering to developers.

“The city of Miami’s elected leadership recognizes that a livable and sustainable residential community downtown can be accomplished through targeted incentives,” says Sumberg. “With the recent passage of a citywide economic development referendum and focused attention on downtown area revitalization, the city has ensured that a number of incentives are available to developers constructing new housing and redeveloping old properties downtown.”

These incentives include a fee exemption for three, market-rate residential projects; a one-time, $4 million grant to improve the riverfront along the Miami River; and enterprise zone incentives. “Most of downtown lies within the city’s enterprise zone,” explains Sumberg. “In September 2002, the city leadership received approval from the electorate to grant property tax abatements to new and expanding businesses and other developments within the enterprise zone.”

Lissette Calderon’s NeoLofts in East Little Havana is one of a number of new developments underway in Miami.

As a result of the city government’s efforts and the incentives it has made available, there are many new projects underway. Lissette Calderon is developing NeoLofts in East Little Havana. This is the first projected loft-style condominium development downtown. NeoLofts, which will include 199 residential units in 21 stories, is under construction. On the Miami River, between SW Seventh Street and First Avenue, Calderon is in zoning on another loft project called Neo Vertika. This 33-story property will contain 443 units.

Another development of note is One Miami-Two, a 1,500-unit residential and mixed-use development with five freestanding structures. This project will include a 12-story parking garage; a four-story entertainment complex with a 16-screen movie theater; a 39-story, 400-unit condominium tower; a 42-story, 450-unit apartment tower; and a 72-story, 650-unit apartment tower. Ricardo Glas and Luis Pulenta are the principals of the company developing One Miami-Two. P&G Development Ltd., MDM Residences Ltd. and MDM Retail Ltd. are the owners of the property.

Tibor Hollo is developing South Bayshore Tower, a 39-story, 347-unit, mixed-use apartment project on Brickell Bay Drive. It will include a plaza-level restaurant as well as other commercial and retail space.

The city is also creating a true cultural center for the community that will involve The Performing Arts Center and Museum Park. Just north of The Performing Arts Center, The Finger Company is developing Biscayne Village, a mixed-use development on Biscayne Boulevard between NE 19th Street and 20th Terrace. The project will consist of 437 residential units and ground-level retail space.

“There are a number of other projects, as many as the ones listed, that are in the process of acquisition and/or zoning,” Sumberg notes. “And while we can’t discuss them specifically, I can tell you that there is as much activity planned as what is already underway. There is just a wellspring of activity.”

Those involved with the downtown revitalization, such as the law firm of Bilzin Sumberg Baena Price & Axelrod, say that this will transform the city forever.

“This is the most significant thing that has happened to downtown Miami in my lifetime,” says Sumberg, who has practiced law in Miami for 30 years. “In 5 years, the downtown area will look 100 percent different than it does today.”

Coral Gables

Urban Investment Advisors is developing 55 Miracle Mile and Ten Aragon in downtown Coral Gables, Florida.

Just west of downtown Miami, Coral Gables is also embarking on a major revitalization of its CBD. The city of Coral Gables has high expectations for Urban Investments Advisors’ $58 million mixed-use project — the city’s business and residential communities are betting on the new development to lead the way for the city’s revitalization efforts. Urban Investments Advisors is developing on behalf of Starwood Urban Retail XI.

With a mix of new tenants and an innovative vision, Starwood has already transformed Miracle Mile. The company began buying retail properties on Miracle Mile in 1998, at a time when there was little action on the streets of downtown. The principals of Starwood had spent many years at Federal Realty and understood the power of good, urban retail, especially the need for a mix of retailers and restaurants. Today, the company is the largest landlord on the Mile, owning about 20 percent of the street.

One of Starwood’s most significant downtown efforts is the development of 55 Miracle Mile and Ten Aragon in downtown Coral Gables. This Mediterranean-style, mixed-use development will consist of a four-story retail, restaurant and office complex known as 55 Miracle Mile and a 15-story retail, parking and luxury residential rental building, which will be known as Ten Aragon.

Ten Aragon, located on Aragon Avenue, will consist of 184 luxury rental apartments on 10 floors in addition to ground-floor retail and restaurants and four levels of parking. Located on Miracle Mile, 55 Miracle Mile will include 27,000 square feet of office space. The ground floors of both structures will have a combined total of 39,400 square feet of retail and restaurant space. The office and retail component of the project is slated for completion in late fall 2003; the residential units will be completed in summer 2004.

Peter Page, celebrated for his sophisticated renovation of South Beach’s Hotel Astor and Hotel Nash, has been selected to design the building’s public spaces and luxury apartment finishes. Bruce Leonard is the project’s design architect. Architect of record is Dorsky Hodgson & Partners. The Felenstein Koniver Stern Realty Group handles Starwood’s retail leasing, while Cushman & Wakefield has been retained to lease office space at 55 Miracle Mile.

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