A RESOLUTION OF THE MAYOR AND CITY COMMISSION OF THE CITY OF MIAMI BEACH, FLORIDA, ACCEPTING THE RECOMMENDATION OF THE FINANCE AND ECONOMIC RESILIENCY COMMITTEE AT ITS FEBRUARY 25, 2022 MEETING AND AUTHORIZING THE CITY MANAGER TO ISSUE A REQUEST FOR LETTERS OF INTEREST (RFLI) FOR MIXED-USE DEVELOPMENTS ON CITY-OWNED PARKING LOTS NEAR 41ST STREET.

Miami Beach’s Middle Beach neighborhood is accessed via 41st Street, a major east-west thoroughfare and commercial corridor. The 41st Street corridor is largely flanked by low-scale, commercial properties featuring street level retail. The corridor also features nearby schools, and houses of worship. The business environment is primarily characterized by medical and professional services offices, restaurants, and other retail uses. To the north and south are six (6) city-owned surface parking lots to the rear of properties abutting 41st Street. Nearby residential areas are also serviced by the commercial corridor. The locations of the lots are as follows:

• P58 – 4049 Royal Palm Ave
• P59 – 525 West 40 Street
• P60 – 4000 Chase Avenue
• P61 – 4141 Alton Road
• P62 – 836 West 42nd Street
• P63 – 4166 Royal Palm Avenue

In December 2020, the City’s real estate consultant analyzed each lot to identify the characteristics, opportunities, and challenges, in terms of the development potential of each lot. See Exhibit A (Parking Lot Analysis).

General Obligation (G.O.) Bond Streetscape Project

 
To incorporate stakeholder feedback and build upon the Alta-Gehl 41st Street Vision Plan (2018), the City engaged AECOM to produce conceptual design options for G.O. Bond Project #40, the 41st Street Corridor Streetscape Project (the “Project”). On January 13, 2021, the Mayor and City Commission approved the conceptual design and authorized issuance of an RFQ for design development and construction administration services for the Project. On September 17, 2021, the Mayor and City Commission adopted Resolution 2021-31838, authorizing negotiations with Brooks + Scarpa Architects, Inc. for architectural and engineering design services. Negotiations have concluded and the agreement is being finalized. The $15 million Project is expected to revitalize the corridor with streetscape and infrastructure improvements such as new high-tech street lighting, landscaping, an expanded tree canopy, sidewalks, crosswalks, street furnishings, and reprogrammed on-street parking to enhance public safety, aesthetics, comfortability, and walkability for pedestrians. The planned improvements and investments are also intended to encourage business growth, and promote private investment and development.

Mayor’s 41st Street Blue Ribbon Committee

At its March 25, 2021 meeting, the Mayor’s 41st Street Blue Ribbon Committee adopted a motion to support ways to incentivize future development of the 41st Street corridor including a potential upzoning of the adjacent city-owned parking lots and with a specific focus on residential and commercial uses. During its April 29, 2021 meeting, the Committee unanimously voted in favor of recommending that a Request for Proposals (RFP) be issued to repurpose lots adjacent to 41st Street for Class A office space. The recommendation was prompted by recent observations of businesses relocating and people migrating to Miami-Dade County and Miami Beach. The Committee also noted the City’s efforts to promote Class A office development on Lincoln Lane through a RFP.

Parking Revenue Data

Parking revenue information for Fiscal Year 2018 through Fiscal Year 2021 shows a downward trend ranging from 20% to 45%, depending on the parking lot location. Although revenue data for Fiscal Year 2020 and Fiscal Year 2021 is influenced by the COVID-19 pandemic, the general downward trend was already evident in Fiscal Year 2019.

Even if revenue remained flat over the past few years, a reasonable assumption is that one or more of the parking lots may not be fulfilling its highest and best use. With G.O. Bond streetscape improvements on the horizon, it is anticipated that reconfigured parking access may promote parking utilization on the side streets connecting to 41st Street and support business activity.

Class A Office Market Trends

Since 2020, real estate analysts and national media have documented the influx of businesses, capital, and investment from various parts of the country including California, Northeast and Midwest regions, and South Florida, including Miami. The relocation of financial, technology, and other business industries have had a particularly positive effect on the office real estate market, with professionals drawn to the sunny lifestyle and companies leasing spaces in amenity-rich buildings at record rates.

With economic conditions improving and unemployment down in Miami-Dade, the close of the 2021 calendar year was marked by falling vacancy, record-high rents (six consecutive quarters of rises , according to real estate services and analysts firm JLL), and positive absorption, including the 15,000 sq. ft. expansion in Miami Beach of Wix.com, a participant in the City’s targeted business incentive initiative. Leasing activity for 2021 exceeded activity for 2020 and CBRE, Inc. notes that “much of the volume is represented by new-to-market activity and internal market moves as the pandemic became a catalyst for many organizations to restructure.”

Quarterly reporting by JLL, CBRE, and Cushman and Wakefield all indicate that asking rental rates in Miami Beach’s Class A office market are at an all-time high and the city’s vacancy rate has trended downward the past three quarters. According to JLL, “the forces driving the rapid rise of Miami’s office market continue to strengthen and the repeated resurfacing of the global pandemic will only compound them.”

Recent Real Estate Activity and Interest

 
In recent months, some notable business and real estate transactions have been reported on 41st Street, potentially paving the way for private redevelopment and adaptive reuse opportunities that may invigorate the corridor. In April 2021, it was reported that David Grutman, acclaimed restauranteur and part owner of Groot Hospitality, would be taking over the operations of The Forge, arguably one of 41st Street’s most well-known dining venues located at 432 West 41st Street.

In December 2021, Terranova sold its 52,000 sq. ft. Miami Beach headquarters for $22 million. Reportedly, the buyers, Fifteen Group, plan to renovate and lease the 41st Street building to family offices, wealth management and financial firms. These financial services businesses align with the City’s targeted industries, as determined by the City Commission in March 2021.

In addition to actual sales transactions, for years there has been private sector development interest in the P60 parking lot located at 4000 Chase, adjacent to the Roosevelt Theater, one of the oldest, underutilized properties within the corridor. The owner of the Roosevelt Theater has expressed interest in redeveloping the site in conjunction with P60, for a mixed-use project with residential and restaurant components.

Likewise, there has been similar interest in P63 parking lot located at 4166 Royal Palm Avenue. As discussed by the 41st Street Committee, a major national grocer is evaluating the potential for a grocery store to provide a new amenity that would service the residents and business in the area.

During the February 25, 2022 meeting of the Finance and Economic Resiliency Committee (FERC), the FERC discussed development and issuance of a Request for Letters of Interest (RFLI) for Class A office development on city-owned parking lots. The FERC contemplated potential development scenarios and the benefits of incorporating additional uses such as residential (including workforce housing) and commercial in order to enhance and support business activity and provide employment opportunities for residents. Ultimately, the FERC unanimously recommended that a RFLI be developed and issued to gauge interest from the development community to develop mixed-use projects to include Class A office, residential, and/or commercial uses on city-owned surface parking lots adjacent to 41st Street.

[1]  Jones Lang LaSalle Miami Office Insight Q4 2021. https://www.us.jll.com/en/trends-and-insights/research/office-market-statistics-trends/miami

[2]    CBRE, Inc. Miami Office Figures Q4 2021 January 25, 2022 https://www.cbre.us/people-and-offices/corporate-offices/miami

[3] Cushman and Wakefield Miami-Dade Office Marketbeat Q4 2021 January 15, 2021. https://www.cushmanwakefield.com/en/united-states/insights/us-marketbeats/miami-marketbeats

The investment of $15 million through the G.O. Bond Program for the 41st Street Streetscape Project will trigger private investments and potential redevelopment of existing properties desperately needing revitalization and activation. Development of Class A office and other uses on 41st Street could have a complementary effect and was recommended by the Mayor’s 41st Street Committee and the FERC.

As demand for Class A office space grows regionally, Miami Beach is well positioned to incorporate additional inventory to attract local, regional and national businesses. Business executives who have recently moved their residence to Miami Beach, and their businesses to other areas, may also be interested in new office inventory in Miami Beach in the long term. The Administration is conscious of the potential Class A office inventory being proposed and/or developed on Lincoln Lane and other areas of the City. Likewise, the Administration is mindful of the growth and absorption needed to create a sustainable and resilient business climate and supportive of opportunities to increase affordable and workforce housing options to promote economic resiliency and equity.

The Administration recommends developing and issuing a RFLI in Fiscal Year 2023, incorporating the city-owned parking lot(s) with the most appropriate development potential in consideration of community needs. Issuance of the RFLI in Fiscal Year 2023 offers the following benefits:

• The level of interest in and responses to the RFLI may be influenced by the potential Lincoln Lane voter referendum outcome;

• Potential RFLI respondents may be more or less interested in Class A office development depending on the Class A office inventory to be added to the market through the proposed Lincoln Lane projects; and

• RFLIs provide an indication of current market interest for a Request for Proposal (RFP) process. Concerns regarding the Administration’s ability to simultaneously develop a complex RFP while negotiating multiple transactions and achieving public support for Lincoln Lane needs to be considered if a RFLI and subsequent RFP are aggressively pursued.