Today in Florida growth is being redirected into our urban cores and the type of development in our urban cores is diversifying. Areas that were once “daytime only” are going “24/7”. The Brickell Village area of Miami is a perfect example.
Luxury apartments, affordable housing, condominiums at all price points, entertainment venues and hotels are being added to what was once “office tower only” urban cores.
Factors such as traffic congestion, hectic work schedules, the rapidly dwindling pool of developable suburban sites and a desire by many workers to live, work and play in exciting urban environments have all contribute to a shifting paradigm in our urban communities. All major Florida cities are experiencing rapid development and redevelopment in and around their urban cores. In Miami, what was once simply ”downtown” has evolved into Downtown, Brickell, West Brickell, Brickell Village, Central Brickell and Claughton Island. This is being repeated in Orlando’s central business district and in Tampa’s expanding redevelopment of its downtown neighborhoods and Ybor City projects. Even sleepy towns such as Jupiter are seeing examples of this trend as the New Urbanism development Abacoa created a new “city center”. One theme is common to all of these trends: developers specializing in differing land uses that were once planned and developed separately are now working together to plan, capitalize and execute new urban developments. There are many reasons for these trends.
A decrease in the availability of “easy” urban sites and increasing public pressure to create livable urban environments has caused the cost and lead time for new urban developments to increase. In the past, prime development sites were plentiful. Today, prime sites for urban development is scarce, costly and subject to many regulations.
The downsizing of many development companies in the current real estate cycle and a capital market that focuses on a developer’s product specific expertise has had a significant impact on Florida’s emerging urban development paradigm. The current real estate cycle saw many large developers scale back their staffs and expand their focus to all product types just to survive.
The aforementioned issues are causing projects to become increasingly costly and their delivery time to be drawn out. This creates presser to capitalize the project before some of the pieces are ready to be delivered to market. These factors make new development and redevelopment more difficult to plan, coordinate and capitalize. As we all know, developments that are poorly planned, coordinated or capitalized will most likely fail.
So what does this mean for today and tomorrow? Developers are creating strategic alliances to deliver properties to market. For example, a retail developer may have the perfect site for a grocery store and have the tenant interested in the site. However, the land cost may be to high to justify a standard retail project or, the developer may have to close on the land before he has the lease needed to capitalize the project. One alternative would be to bring in an apartment developer to purchase the right to develop multifamily units over the grocer. This allows the retail developer to purchase the land with the dollars from the sale of the apartment “site” while not having the grocer’s lease executed. Both developers would share the high cost of the land.
Another example of the increase in the urban development in strategic alliances would be for a “master developer” to gain control of a site and create a commercial planned development. “Sub-developers” could be brought in to build a product they specialize in so that the final “urban community” can be created. The sub-developers could work with the master developer to plan, engineer and capitalize the project in the most efficient way.
In the past, we have seen both of these methods used successfully in our suburbs. However, these old tools are being rediscovered in today’s new urban development environment. Developer joint ventures and strategic alliances are becoming the norm rather than the exception as our urban areas see an increase in density and product variation. Capital sources are looking favorably at these new development alliances because the developers are now able to bring more capital, better designs and the best locations to the table.
As the urbanization of our communities continues the aforementioned trends will be increasingly evident in our development community. We will see how the condominium market will react.
