Perhaps I haven’t been paying attention but sometime over the last, oh I don’t know how many years, local, and some national stores, have become highly specialized. Maybe not so much here in South Florida, but certainly in New York, Washington and other big cities.  Yes, the trend eventually hits Miami and elsewhere.  I am talking about stores that sell things like just cupcakes instead of a general bakery or coffee shop.  I hadn’t paid much attention to this until recently when my wife had 3 or more choices of cupcake stores in Washington from which to send cupcakes to our son for his recent birthday.  Here, in our Ft. Lauderdale suburb, we would have just gone to Publix.

Maybe it is a food trend. We were in New York last year with our daughter lining up at Momofuku Milk Bar for cereal milk ice cream, the ONLY flavor on the menu.  Momofuku only sells this interesting ice cream as well as cookies and other baked goods that center around the cake, cereal and truffle theme.  Not a place to go if you are watching your weight.

Starbucks originally was just a coffee shop. But it has expanded to way beyond coffee.  Today, there are many niche coffee shops which are going back to the coffee roots.  Just coffee.  The list of specialty shops is by no means just food – bags/purses, containers, phones, soap, bath items – to name just a few.  But food is certainly a leader and there are numerous different single item food stores.

But the kicker, to me, in this trend, occurred on May 31 in Chicago when the 1st all-Nutella café opened. This is a stand alone restaurant dedicated to serving Nutella filled crepes, pastries, gelato, pancakes, waffles and other items.  Seriously?  1 or 2 spoonfuls of Nutella is great, but an entire restaurant’s worth is really…. I don’t have the words to finish this thought.


        During the past three meetings, the Alliance of Corporate Real Estate Executives and Specialists (ACRES) presented some of the top real estate economists and prognosticators. Brad Hunter, Jack McCabe and Eric Fixler expressed fairly similar views on the state of the South Florida real estate market for the next few years. What follows is an amalgam of their opinions and is not intended to be a restatement of the position of each expert. Each may disagree with some of the positions taken by the other two. The over-arching message of all three of our group’s speakers is that the presidential elections, world events, and exchange rates may create disruption to any of their predictions or the trends currently being seen. These predictions are their opinions of market trends and are not guaranties of future performance.

Market categories:

  • Luxury condo towers – The high-end luxury condo market on Brickell, South Beach and Sunny Isles is pretty much dead. If a project is not out of the ground, there will likely be a wait of 3 to 5 years before the next cycle. Their comments were mirrored by a recent Wall Street Journal article entitled “Another Condo Bust Looms in Miami”. The Journal, quoting a Miller Samuel, Inc. report, stated that  “In the fourth quarter of 2015, the number of Miami Beach condo transactions declined nearly 20% from a year earlier, while inventory jumped by nearly a third…” The Journal went on to note that the median sales price for luxury condo units dropped 6.6%. With exchange rates flipping in favor of the US dollar, some South American buyers may choose to abandon even 50% deposits, as that may be a “less worse” choice than closing. The silver lining for investors is that, as in past condo cycles, units will likely sell for far less than today’s sales prices.
  • Other residential – For entry-level, mid-market, and senior housing, demand has outstripped supply and will likely continue even in the face of a new recession.
  • Retail – Despite the loss of big box stores, like Office Depot and Sports Authority, core retail sales development will likely continue at an average pace. The projected average increase is 4.2% in project starts annually over the next few years.  The cautionary trend is that the cap rate spread between primary and tertiary markets is now dropping from 2012 levels. This means that there is more cash chasing investments and willing to pay more for third tier market properties.
  • Industrial – cap rates are down and rents are up. The cap rate spread between primary and tertiary markets has closed but not to the same degree as retail.
  • Office – cap rate spread has been fairly steady since 2012.
  • Multi-family – cap rates generally between 5% and 6%, although primary markets (South Florida included) have seen as low as 4 caps. New product being delivered is not substantially affecting existing inventory.



  • CMBS – still most readily available source for long-term fixed, non-recourse lending. Currently between 270 to 290 basis points above 10-year T-bills.  From a real estate litigation/real estate acquisition play, between 2016 and 2012 $1.7 trillion in CMBS loans will mature. Most are in office, hotel and some retail product. As most were made in boom times, the LTVs are high and will be difficult to refinance at same percentages. Of the $1.7 trillion, $390 billion will come due in 2017. In addition, Dodd-Frank will place pressure on the B tranche of new CMBS loans. The B holder must retain ownership in that tranche for at least 5 years. Under the new Reg AB, the CEO of the fund will be personally liable for false information in the issue.
  • Life Companies – almost 2/3rd of 2016 allocations already funded. Additional funding will be limited to Class A properties in primary markets.
  • Private Funds –  demand is increasing. Pricing still high (loans $3mm to $10mm, rates are at Libor + between 450 basis points and 600basis points; loans $10mm to $20mm, rates at Libor + between 400 basis points to 600 basis points; and loan $20mm+, rates at Libor + 300 basis points to 425 basis points) and LTVs between 75% and 60%.  Most such funds are currently looking at value add properties in areas with market growth and to borrowers with real track record.
  • Banks – still out of the mainstream. Mostly relationship loans with difficult rate lock-ins.
  • GSEs (Government sponsored enterprises) – Fannie, Freddie and HUD very active in multi-family market and are the majority funders. In 2015, GSEs funded about $90b with $17b in uncapped loans. Rates are currently around Libor + 250 basis points, although pricing is volatile. Freddie funding loans under $5mm.


         One key concern raised by one of our speakers is that Europe is already in  recession. Because tests are retrospective the existence of a recession will not likely be confirmed until this fall. Spain, Portugal and huge number of jobless refugees are straining the EU. This time, the recession will spread from Europe to the USA unlike the great recession.

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