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Real Estate: Beach Party
"I don't touch my car for weeks at a time," enthuses Fritz, 41, district manager of the Washington Avenue Association, one of South Beach's new business organizations. "These buildings have great architecture on the outside, but they have small interiors and tend to expel you onto the street. I don't have any food in my refrigerator and dine out constantly. On South Beach, the hotel lobbies and restaurants serve as living rooms. It's a wonderful place to live."
In the past decade, South Beach has been transformed from a low-income slum that rolled up the sidewalks at 6 p.m. when the local supermarket closed to an international jet-set destination. It serves as a stunning backdrop for TV commercials, music videos and feature-length films such as comedian Robin Williams' current hit, "The Bird Cage."
South Beach offers a unique residential, resort and retail atmosphere where drag queens, ultra-chic fashion models, Hollywood celebrities and foreign visitors from Sweden to Brazil mingle. While the Miami Beach neighborhood still faces significant problems, such as crime, traffic congestion, insufficient retail space and the threat of being overshadowed by high-rise development, there's no sign of a downturn.
In fact, the South Beach success story -- and in particular the designation of two historic preservation districts there -- may provide an object lesson for other Florida urban communities seeking to rejuvenate themselves.
"South Beach teaches us that there is great wisdom in looking at the resources available to us in our built-up urban environment and evaluating the positive role they can play in improving our quality of life," says William Cary, historic preservation coordinator, City of Miami Beach. "In Miami Beach, preservationists are working hand-in-hand with developers, stimulating the entire area. It's one of the most extraordinary cases in the U.S. in terms of its success -- especially when you consider the enormous pressure put on the city government in this atmosphere of super-charged development."
South Beach can trace its roots to 1912, when the Lummus brothers created the Ocean Beach subdivision on the southern end of a piece of land incorporated in 1915 as the city of Miami Beach. In the late 1970s, it became known as South Pointe, and in 1979 the one-mile-square Art Deco district just north of South Pointe received federal historic designation. Then this year, on February 20, the city commission created the Ocean Beach Historic District in South Pointe.
Within those two historic districts, the city has reviewed real estate projects for quality of design and appropriateness of character, making life more difficult for developers bent on demolishing historic structures in order to clear land for new construction.
Restoration and renovation
More recently, the Washington Avenue corridor on South Beach, where some buildings date back to the 1920s, was named a participant in the state government's Florida Main Street program, which provides grants for promotion and building improvements.
"We have to be careful that South Beach, with its unique Art Deco architecture, doesn't become the victim of its own success," Cary says. "I personally believe that architecture is the most important factor in South Beach's revival. After all, the area still had the climate and beach in the 1960s and '70s, when Miami Beach had serious problems. The renaissance didn't occur until the architectural restoration and renovation work began. It put back the main ingredient."
Thanks largely to South Beach, the city's property values have been rising consistently since 1988. More dramatically, Miami Beach's median age fell from 65.3 in 1980 to 44.5 in 1990. The city also has become far more Hispanic in the past decade. Still, the per capita income of $16,504 in 1990 was below the Dade County average of $17,823, and the unemployment rate of 7.9% in 1995 was above the county average.
One positive economic force is the impact of the film and photography industry. "The Bird Cage" was just one of many feature films, TV series and magazine fashion ads that used South Beach as a pastel-colored, subtropical backdrop. In 1995, the city issued 1,939 film permits and film production budgets totaled $58 million.
South Beach has almost single-handedly revived Dade County's tourism industry. In 1995, about 44% of the county's 9.4 million visitors went to the South Beach area, according to Bill Anderson, director of planning and research, Greater Miami Convention & Visitors Bureau.
"South Beach has a strong appeal among Europeans, Latins and domestic travelers," Anderson says. "It's drawing people from all segments, and there's been a definite increase, both in percentage and numbers, over the past few years."
South Beach provided 56% of all resort tax collections in Miami Beach last year, and the winter-season curve keeps going up, according to Fritz of the Washington Avenue Association. "Obviously, all that visitor spending is having a great impact on the community."
However, most hotels on South Beach are small and offer "boutique" lodging. With all the restrictions on the Art Deco buildings, it's hard to see a full-service hotel being put in there," says M. Chase Burritt, national director of hospitality services group for E & Y Kenneth Leventhal in Coral Gables.
The city, however, is working with a Cleveland-based development group, Forest City Ratner, along with the Tisch family of New York and Miami's Codina Group development company to build a new 800-room Loews hotel just north of the Art Deco district. The city also is working with black-owned companies to put up a hotel in the same vicinity, adjacent to the Loews hotel site. Final financing arrangements on the $135 million Loews hotel are expected this summer with ground-breaking by this fall, says Kent Bonde, redevelopment coordinator for the city of Miami Beach.
"The convention center hotel, to its great credit, will not be as large as it could have been," says Randall Robinson Jr., historic preservation director of the Miami Design Preservation League, the civic group that spearheaded creation of the Art Deco district. "It helps to have a city administration that's more sensitive to preservation."
But that sensitivity doesn't preclude opportunities for real estate developers. For them, South Beach offers a variety of properties to purchase and rehabilitate or convert to new use, says Ezra Katz, president of the Aztec Group, a Miami real estate financial firm. "The essence of South Beach will continue to be rehabilitating its existing, charming buildings. I don't envision South Beach as a concrete canyon."
Although companies as diverse as MTV Latino and Benetton's clothing chain have established offices in the area, lack of suitable space, cramped quarters and parking difficulties make it unlikely that South Beach will develop into a significant office market.
Retail space is getting pricey. National chains have opened small restaurants and stores on Collins Avenue, Washington Avenue, Lincoln Road and Alton Road, the primary commercial streets. Many local art galleries, vintage clothing stores and music shops already have been pushed out by rising rents. But South Beach still needs broader retail shopping opportunities, in Katz's opinion: "You don't need any more restaurants but you need more supermarkets, drug stores and other retail shops."
Residentially, South Beach attracts a young, largely single population -- including many gays and lesbians -- who work on the beach or in downtown Miami. Renovated apartment buildings and condo conversions are the primary types of housing available. "The local community is an essential component of South Beach's progression from a resort phenomena to a year-round stable neighborhood," Fritz says.
A partner in the Miami office of accounting firm Arthur Andersen, Kevin Lawler has worked with several clients on South Beach condo conversion projects. These projects appeal both to local buyers seeking a primary residence and to seasonal visitors -- as long as the price is right, about $100 to $130 per square foot, Lawler says. "The entry-level buyer is an important part of the South Beach real estate market," he says. "People are looking for a certain lifestyle and they're also interested in the investment opportunity."
Much of the opportunity for large-scale residential development is south of the Art Deco district between the Intracoastal Waterway and the ocean: a mixed neighborhood with older apartment buildings, scattered renovations and vacant lots, now anchored by Joe's Stone Crab, Miami Beach's landmark restaurant. Major developers ranging from New York's Donald Trump to Germany's Thomas Kramer own property in the area and envision high-rise luxury condominiums designed to appeal to affluent second-home buyers from Europe, Latin America and the U.S. -- not the current South Beach crowd.
Already, Portofino Tower, a new 44-story, 228-residence development, is rising next to South Pointe Tower, the only other high-rise in the neighborhood. Portofino, which will be completed this fall, is 84% sold out with remaining units priced from $415,000 to $2.75 million, according to sales director Matt Weeg. Pre-construction prices were significantly lower.
In addition, the Related Companies, one of three partners in the Portofino project, is planning a luxury rental high-rise building on the Intracoastal Waterway three blocks to the north.
Kramer, another Portofino partner, has amassed enough land in the neighborhood to build several more towers. However, the South Pointe Citizens Coalition has appealed the city's approval of a second Portofino high-rise until a clearer master plan is prepared, according to Robinson. "There is great concern as to Kramer's properties, since five or six high-rises could be developed," he says. "High-rises can be successfully inserted into the urban fabric as long as they will be sensitive to the surrounding neighborhood."
South Beach can expect a long period of prosperity if it successfully accommodates some new high-rises, encourages construction of the Loews hotel (the first new hotel in Miami Beach in almost 20 years) and adds more public parking spaces. "We have something special here on Miami Beach," Robinson says. "I don't think the bubble will burst."
Contributing Editor Lewis M. Goodkin is president of Miami based Goodkin Research Corp.
