With far fewer tourists and far more remote work, it’s no surprise that South Florida hotels, offices, retailers and restaurants were among the hardest-hit sectors in 2020.
But there were bright spots in the South Florida real estate market this year — because of and not despite the pandemic. Demand remained strong for industrial properties due to the surge in e-commerce, and wealthy out-of-state buyers scooped up multimillion-dollar waterfront homes for some very pricey privacy.
Hotel shutdowns, foreclosures, sales
As tourism plunged in South Florida, hotels felt the pain.
After dozens of hotels laid off the majority of their staff starting in March, a number of properties remained closed until recently. Some are still shuttered. As loan defaults loomed, an increasing number of borrowers worked out forbearance deals with lenders, though foreclosure filings also rose. Hotel owners brought on new equity investors to bolster finances, filed out-of-court UCC foreclosures — which allow mezzanine lenders to take control without a court filing — and some merged ownership, like the three families that own Ritz-Carlton hotels in South Beach and Bal Harbour, as well as the Sagamore Hotel in Miami Beach.
More properties hit the market, including HFZ Capital Group’s historic Shore Club hotel in South Beach. Few properties traded this year, and the two largest sales — each for $120 million — closed in January, well before the pandemic upended the economy.
Retail store and restaurant closures, bankruptcies
Though the local government-mandated shutdowns of stores and malls ended in May, many brick-and-mortar retailers continued to struggle for business. A flurry of lawsuits resulted, as landlords tried to evict non-paying retail tenants, including Diesel and Original Penguin on Miami Beach’s Lincoln Road and Petsmart at Dadeland Station and Aventura Commons.
Restaurants also suffered amid capacity constraints and indoor dining bans this summer, and some protests over the restrictions followed. Several restaurants served their final meals, including Le Sirenuse Restaurant & Champagne Bar at The Surf Club in Surfside.
Office closures and the move to remote working
Offices cleared out in mid-March as city and county stay-at-home orders spread throughout South Florida.
In many cases, workers never returned to their cubicles, which left remote working as the new normal, at least temporarily. That left the co-working model in limbo, which led some operators to get creative. In August, Quest Workspaces turned some of its enclosed office space into small pods, with groups of students gathering for virtual learning.
The year’s largest office deal was Swire Properties’ July sale of two office buildings at Brickell City Centre in Miami for $163 million.
Industrial in demand
The industrial market has been a bright light during the pandemic, propelled by the boom in online shopping. With demand high and land scarce, South Florida real estate pros have also gotten creative. Some examples: a former Miami golf course-turned industrial park and a Hollywood warehouse chopped into six smaller offerings. A bidding war also broke out over industrial space in East Hialeah. In the largest industrial sale of the year, the Blackstone Group bought 13 industrial properties in Miami-Dade and Broward counties for $93.5 million this summer. The seller was Elion Partners.
Waterfront single-family homes sold quickly, accelerating the trend of buyers from the Northeast and other high tax states moving to South Florida — either temporarily or permanently.
In the second quarter, Palm Beach saw nearly as many single-family home sales as in all of 2019. And in November, home sales surged in all of South Florida, led by luxury properties. Tech investors were among the buyers, including Keith Rabois, who paid a record $28.9 million for a Venetian Islands home this month. Celebrities also got in on the home-buying action. Pharrell Williams dropped $30 million for a Coral Gables estate. Sylvester Stallone and his wife Jennifer Flavin spent $35.4 million for a Palm Beach estate, while Karlie Kloss and Joshua Kushner bought a mansion on Miami Beach’s North Bay Road for $23.5 million.
Not to be outdone, Ivanka Trump and Jared Kushner are reportedly buying a waterfront lot on Indian Creek Island for $30 million. NFL superstar Tom Brady and supermodel Gisele Bündchen will be their neighbors. They are also buying a lot on Indian Creek for $17 million.
Zoom calls, yes. Launch parties, no
Real estate players usually love to network and hobnob at shindigs as the champagne flows. All of that was put on ice after early March. Zoom chats took over, with virtual city and county meetings sometimes lasting into the wee hours of the night.
Developer Gil Dezer’s extravagant bash for the opening of Residences by Armani/Casa, in Sunny Isles Beach on March 6 likely left partygoers relishing the memories. Those included a Giorgio Armani fashion show, a performance by Pitbull and a fireworks display over the beachfront pool deck. It may have been the last major soiree, if not for President Trump’s Hanukkah bash at the White House, attended by a sprinkling of South Florida real estate players, who feasted on kosher offerings and were serenaded by klezmer music.