Miami Retail Sizzles With $1,111 Per Square Foot Sale of Former Bank

We all know drive-thrus are hot. Especially in Miami Beach, where all types of real estate are scorching — and not just literally. It’s also becoming more evident that retail, especially of the convenience variety, is making a big comeback going into 2023.

But even with those fundamentals, it’s surprising to see a relatively small storefront trade hands for more than $1,000 per square foot. This week, Comras Co.’s Senior Director, Irma Figueroa, explains how she positioned a former SunTrust Bank as a future Ace Hardware in a $10 million deal.

Upon restructuring when SunTrust merged with Truist earlier this year, it became time for the bank to let go of its 9,000-square foot ground floor branch at 1655 Alton Rd. The bank owned the property, complete with a drive-thru and parking, and used a 6,000-square-foot portion while leasing the rest to another tenant.

When listing agents Figueroa and her colleague Vicki Freeman, a senior retail leasing associate, began positioning the asset, they were ready to attract all sorts of demand, especially considering the possibilities of the drive-thru, to the extent that they were gearing up for a quiet, off-market leasing opportunity.

Although the marketing team had whipped up dazzling renderings of what the building’s next evolution might look like — complete with vertical green walls or staggered 3D, illuminated cladding — the brokers had something far simpler in mind. The marketing brochure even had floor plan configurations representing how one, two or even three tenants dividing the deep floor plate might play out — with stores, restaurants and an outdoor terrace.

But from the start, the agents immediately thought of Ace Hardware, which had been stationed for some time in a space right across the street from the subject property that the agents believed was simply too small to serve the growing neighborhood.

“I live in this neighborhood and I shop at the Ace Hardware a lot — because who wants to leave the Beach to drive out to Home Depot?” Figueroa joked. It seemed the Ace location across the street had outgrown that store’s layout, and it was becoming evident the branch would need to relocate. Selfishly, Figueroa added, she wanted to see it stay in the neighborhood.

This is where the first lesson that Figueroa shared with LoopNet comes in. “I’ve been in retail real estate for a long time, and it happens over and over — so often, whether selling or leasing, our clients come from the same neighborhood [of the subject property].”

It turns out the asset was already on the radar of the family-operated Ace franchise, owned by Robert Shor, who is a well-known investor in the area. Shor’s broker, Seth Gadinksy of Gadinsky Real Estate, had shown Shor the property several times, Figueroa later learned. From what she knew, Shor wasn’t interested.

But therein comes Figueroa’s second lesson: “Persistence pays off. Even when someone says no, it doesn’t hurt to continue trying,” she said. Figueroa and Freeman decided to pitch the property to corporate decision-makers at Ace Hardware. It was only after that move that talks with Shor began.

According to Figueroa, it was at that point that Shor began to consider leasing the space. “It’s not far away from their existing customer base, there’s parking behind and it had a little more square footage — it was exactly what they needed.”

Although this is not confirmed, and Shor couldn’t be reached by the time of publication, the assumption around the sale, Figueroa noted, is that Shor was selling the original Ace franchise location as part of a 1031 exchange. “It made a lot of sense that he might buy another nearby location instead of leasing,” Figueroa added, “And that’s how the whole thing evolved into a sale.”

Though Figueroa acknowledged that the drive-thru added to the property’s marketability, she believes it won’t ultimately be used by Ace. “It’s certainly convenient,” she said. In this case, though, the parking capacity behind the building was the main draw.

Still, the price for this week’s Deal of the Week exceeded both the Miami retail market and even Miami Beach submarket standards, which averaged $769 per square foot in the third quarter, according to data from LoopNet’s parent company, CoStar Group.

Retail is soaring throughout Miami and the Miami Beach submarket in particular. Compared to the average sale price of around $236 per square foot for retail in the country overall, Miami is in an elite league.

Despite Miami Beach being targeted fiercely by retail investors in the area — sales in the category average around $150 million per year over the past five years, with a 12-month record of $448 million during that same timeframe — the Miami Beach retail market is largely traded among private players. More than 70% of sellers of retail assets in the past five years were considered private, and nearly 80% of buyers were as well.

Shor, the buyer of this property, is one of the biggest of this set of names, coming in above all other known private sellers by sales volume in the past five years at $37.6 million, which makes him second only to Vornado Realty Trust.

Real estate taxes bring the type of heat only Miami can produce, too, though. Compared to the nationwide average of less than $3 per square foot, Miami Beach properties’ taxes have landed at more than $14 per square foot on average for the past five years.

For many investors, though, those costs may be offset by the strong pace of retail rental growth in Miami Beach. Rents have surged in the past 12 months, according to CoStar, growing 8% per year. Triple net leases, which are common for stores like Ace Hardware, averaged nearly double the already pricey Miami market rates, soaring to around $92 per square feet.

Despite what seems now, in the long term, like minor headwinds from the pandemic, it's clear that Miami Beach retail operates at a considerable premium to many other markets. CoStar’s Director of Market Analytics for the region, Brian Anderson, says it best: With an increase of around 50% from 10 years ago, “retail rents in Miami Beach have increased at levels that border on transformative.”