The State of Real Estate in Coral Gables

Finding a Balance in the New Boom

Consider this: a national economy only tenuously keeping a recession at bay, a worldwide pandemic forcing everyone to stay in their homes, skyrocketing inflation and interest rates, and a new “work-from-home” environment making commercial office space virtually moot. How this formula equates to an unprecedented real estate boom in one leafy Miami suburb is anyone’s guess — but, in the aftermath, it’s what happens.

“For every rule, there is an exception. And Coral Gables is that exception, for office space, commercial space, and residential space. While South Florida and New York are having all-time record vacancies, in 2023 Coral Gables real estate benefitted from major corporate relocations to Miami,” says William Holly, president and founder of Gables-based Patton Real Estate, which specializes in corporate leasing.

“Over the past couple of years, everything took off, with COVID and with the huge influx of people that have come to Miami,” agrees Coral Gables realtor Ashley Cusack, who has seen the average price per square foot of homes in the City Beautiful rise to a whopping $1,000. Today, the Berkshire Hathaway HomeServices EWM realtor says, things have “tapered off a little bit,” but the market is still holding strong. “I don’t see it coming down. But I don’t see the same increase.”

Commercial office and retail space in Coral Gables has also benefitted from the post-pandemic surge, which experts attribute to a mix of “flight to quality” — including quality lifestyle — and better pricing than other nearby markets. As rates rise in Miami’s Brickell financial district, tenants are migrating to Coral Gables, where they can get a $30-plus discount per square foot compared to Brickell or Downtown Miami.

“Incoming companies had a strong appetite for Class A product, leading to skyrocketing commercial prices in downtown and Brickell, which pushed many local companies and value-oriented investors toward Miami’s premier suburb… Coral Gables,” says Holly.

As real estate in Coral Gables finds a steady pace amid the epic highs and lows of the past few years, we look to the trends that presage the future.

The Residential Rocket

Initially, Drew Kern thought the influx of West Coasters and Northeasterners to Coral Gables would weaken the market, leading to what he calls “the rebound” effect. “I thought we’d have a ton of inventory this year from people who said, ‘Oh, we’re going back,’” the Gables-based realtor says. But that didn’t happen. “They’re staying. And their friends are coming.”

During the pandemic, South Florida became extremely attractive to wealthy northerners who were living under strict COVID-19 regulations and, at times, in extremely cold weather. “I would be on Zoom calls with people from New York … sitting in my backyard with palm trees and my pool, and they’d be like, ‘Oh, is that your Zoom background?’ And I said, ‘No, that’s my backyard,’” Cusack recounts.

“Meanwhile, they’d be locked in their room in the cold. COVID did so much for people’s realization of how they’re living.” The massive tax benefits of moving to Florida made the decision to move easy, and Coral Gables, with its beautiful aesthetics, open restaurants, A-rated schools, and overall walkability, was a perfect choice.

The domestic influx has not turned off the spigot of international buyers — previously the bread and butter of high-end real estate in the Gables — but they have supplanted that sector as the dominant market mover. And because these domestic buyers are looking to escape their current living conditions as quickly as possible, they want move in-ready, turnkey houses. “If you’ve got new construction or completely 100 percent remodeled inventory, it’s unbelievable what we can get for it,” says Kern.

While some locals say Coral Gables has become too expensive, that’s not reflected by the market. “People are still moving here,” says Tere Shelton-Bernace of Bernace, Shelton and Stewart Realtors. “They’re paying what it takes to live here.” Last year, she says, a non-waterfront property in Coral Gables sold for $22 million. “What used to be two or four million is now eight to 10. And 30 to 50 million is the new 10 to 15.” Some of those prices have been driven up by lack of inventory, but Bernace says a recent increase in properties on the market are helping to balance things. Still, prospective buyers are often competing with 14 or 15 offers from day one, and homes are frequently taken off the market within days of being put on.

Some negative factors are at play in the market as well, but apparently haven’t dampened demand. Rates for home insurance are so high that some people have been priced out of their homes based on the insurance alone, says Cusack, who has seen post-pandemic rates go up more than 100 percent — though they seem to be evening out now.

To deal with this, homeowners are getting creative: they’re self-insuring, forgoing windstorm protections if they have a well- built home, or pushing their rates down by installing things like PVC plumbing, impact glass, and new roofs. “Educated consumers,” says Carole Smith of Compass Realty, “are asking those questions [about insurance mitigating factors] upfront.” These days, she thinks buyers are “more informed about potential pitfalls that make deals fall apart at the last minute.”

Meanwhile, lenders are becoming more willing to negotiate. “They’re trying to make it work because they know they’re going to refinance in a year if they don’t put them at a decent rate,” says Kern, who adds that he’s seen several big national banks come under market rate for his clients. Those clients vary somewhat, though usually not in general affluence.

Kern, who also works for Berkshire Hathaway HomeServices EWM Realty, says his average buyer is an empty nester with kids in college. They choose the Gables “for the proximity, not the big piece of property.” Younger families, he says, are more likely to go elsewhere to get more land. His colleague Cusack, meanwhile, says she sees both empty nesters and families from New York searching for the same walkability they had in the Big Apple. Smith, on the other hand, says many of her clients are renters from Brickell “desperate for a home” to start their family lives. Shelton-Bernace agrees, citing these Brickell migrants’ desire for good schools for their kids and the “more manicured” look of Coral Gables over areas like Coconut Grove.

For the empty nesters, however, townhomes are the new pink. They’re vastly easier to maintain, for one, and instead of worrying about a lawn or a pool, you can simply lock the door and go visit your family, for months at a time if you wish. They’re also generally more spacious than people assume, meaning you don’t have to “sacrifice entertainment space or sacred spaces where people gather,” says MG Developer CEO Alirio Torrealba. Responding to demand, there are several new townhome developments coming to the Gables, including projects by both MG and the Calta Group.

“There are a lot of families that have big homes and have been in Coral Gables a long time,” says Ignazio Caltagirone of the Calta Group, which is currently building townhomes near Venetian Pool in the Gables. “And then their kids go off to college and their house is too big. They want to travel and they have more time now. So, townhomes are great…. It’s just normal market selection. There’s always going to be people looking to move out of homes and into apartments or townhomes.” His brother and partner Gaetano Caltagirone echoes the sentiment, adding that the firm’s townhomes are “also a product that lets the kids come back and visit you. If you want everyone home for Christmas, you have the space.”

The Calta Group’s Via Veneto townhome project reflects the same qualities that many homes in Coral Gables offer — large spaces, myriad amenities, and walkability to downtown, albeit in a more convenient space. It’s the company’s first project of this kind. “We typically build luxury homes,” says Gaetano Caltagirone. But “townhomes are a trend [in Coral Gables].”The 10-home project is directly adjacent to the Venetian Pool and each 5,000-square-foot, $5 million unit will feature four bedrooms, four-and-a-half baths, and a four-car garage, in addition to high-end appliances and interior design. Via Veneto is expected to be completed by the end of 2025.

Meanwhile, MG Developer is in the process of building not one but two new townhome projects to complement its existing portfolio, which includes Beatrice Row, Althea Row, Biltmore Row, and 444 Valencia, among others. The Village at Coral Gables, the unofficial “eighth village” that city founder George Merrick dreamed up, is soon to begin construction. CEO Torrealba is also working on The George (as in George Merrick).

Each of its projects “has a story that ties into the very beginning of Coral Gables’ existence,” according to Torrealba. His son, Diego, says that his father has always been adamant about following this concept. “Ever since I started working alongside my dad, I immediately understood that I had to continue his vision to elevate and follow George Merrick’s plan for the City Beautiful.”

The George, expected to be completed at the end of next year, will feature 13 luxury townhomes priced at $1,100 per square foot. “With a product like this, the demand never really vanishes,” says Torrealba. “It’s amazing to see the appreciation people in the community have for this type of Row home development.”

The Office Absorption

COVID’s impact on commercial office real estate nationwide has been undeniable, with many larger companies downsizing their footprints to adjust for employees now used to the comforts of working at home. Which is why Coral Gables’ quick rebound to pre-pandemic occupancy is so unexpected. The difference is that now there are many more companies moving to the Gables, looking for smaller spaces.

“The last several years have seen downsizing of corporate users, but the strong local economy has offset that with private service firms growing in the City Beautiful,” says Holly. “The downsizing of the last three years has been stabilized and offset by professional service firms that have benefited from the influx of new businesses and residences.”

As a result of this rightsizing, subleasing is on the rise. “We’re finding several tenants looking to put half or a portion of their space on the market,” says says Avison Young Managing Director Donna Abood, and because of the demand from smaller companies moving in, these spaces are going fast. “In the past, it would typically take 16 to 18 months to move in, but now, these spaces are being subleased in two to six months,” and for good prices, she says. “In the past, tenants would be lucky to get 50 cents on the dollar. Now, they’re [getting] exactly what they paid for… or, in some cases, more than what they paid.”

Meanwhile, “hoteling,” where offices are shared between employees of different companies, has not quite taken off as expected, says Thad Adams, managing director of brokerage at the Gables-based Allen Morris Company. “People don’t like to share their office with someone else,” he says, though he adds that “open space” is on the rise, as long as it’s shared by one company and one company only.

While there’s still a lot of office space available in Coral Gables — one million-square-feet today compared to 700,000-square-feet in Q1 of 2022 — there are also no new office buildings being built. This puts the Gables at a disadvantage compared to Greater Miami, where there will be 259,000-square-feet of new office space available in the next year, according to Adams — including the advent of what Abood calls the “trophy building.”

Simply put, because businesses are being hard-pressed to entice workers back to the office, they need to create better office environments. This means not only choosing a good location, but building a signature structure with in-house services like dry cleaning, free Wi-Fi, coffee bars, and on-premise food and fitness options. This new trophy class can capture significantly higher rates, such as the 830 Brickell building in Downtown Miami, which has signed leases for as high as a whopping $150 per square foot.

In Coral Gables, the best (and perhaps only) example is The Plaza Coral Gables, a 2.25 million-square-foot mixed-use project that includes highly sought-after offices, residences, a Loews hotel, bowling alley, facial bar, barbershop, and numerous restaurants. “We intended it to be the most high-end project in the Gables,” says Carlos Beckmann, who runs operations for Agave Holdings, the company behind the project. “We bet on the luxury end, and it has proven successful.”

Rates for trophy buildings have increased 78 percent over the last five years, according to Abood, compared to the 31 percent increase that Class A and B buildings saw. At The Plaza, office rental rates are in the $60s per foot, compared to the high $40s and low $50s elsewhere; its two towers are now 99 percent leased.

Class A buildings in Coral Gables aren’t doing poorly either, however. Last year, the Allen Morris Company’s iconic Alhambra Towers building leased 62,861-square-feet with new and expanding leases. Between those contracts and the ones already in place in the 174,000-square-foot building, Alhambra Towers is also now 99 percent leased. It, too, boasts some “trophy” aspects of its own, including its signature bell tower, a common boardroom, outdoor work area, LEED certification, and, soon to come in May, an upscale steakhouse on the ground floor with three private dining rooms for business meetings.

B and C class buildings, meanwhile, are not doing as well. The competition from higher-end offices is driving their occupancy down, which “has contributed to vacancy in Coral Gables, in addition to the trend of downsizing,” says Holly. Thankfully, there’s always the option of renovation, which he points to as another on-the-rise trend. The 4000 Ponce building that his company manages, for example, just did a multimillion-dollar renovation of its space, including outdoor and common areas, conference facilities, and restrooms.

Boding well for future office occupancy is the prediction that hybrid work, though here to stay, is on the wane. Both Adams and Abood believe that the current trend of three days at home and two in the office will decrease to two or even one day at home. Holly says that working from home is likely to be completely phased out in Coral Gables. “National companies in low-rent suburban markets like Miramar will continue to see work from home,” he says, but Coral Gables, with its “more locally-owned businesses,” will re-adapt.

Miami vs. Coral Gables

Over the past few years, companies have flocked to Brickell from places like New York, Austin, Chicago, and the Bay Area, happy to pay Brickell’s $55 per square foot rate. But today, Brickell’s rate is now the same as what they were escaping: around $80 per square foot, with more for Class A and trophy buildings. “When they came to Brickell at the time, it was a major discount,” says Abood. “But the rates kept escalating.”

And these out-of-state companies are part of their own problem, Holly says. “The new firms that came to Downtown Miami and Brickell have driven up the prices on Class A office space to rates that far exceed inflation. What that’s done,” he says, “is taken local tenants and priced them out of the market.” Meanwhile, Coral Gables’ rates have stayed relatively linear. Pre-COVID, Class A rates were about $45 per square foot, whereas now they’ve risen marginally to the low $50s.

Businesses have taken notice of Coral Gables’ comparatively low rates. Last year, there was a 12 percent increase in office leasing activity in the Gables, accounting for 226 new leases signed. Several big names moving to Coral Gables were at the forefront of this trend, including FIFA and Ryder System. Besides pricing, companies find the Gables attractive for the same reasons as residents: walkability, safety, amenities, traffic, proximity to the airport, etc.

While neighboring Coconut Grove boasts many of the same qualities, Coral Gables is cheaper and has vastly more space. The Grove has 1.6 million-square-feet of office space. Coral Gables has 7.3 million. And because there’s so much less space in Coconut Grove, the rates are $10 more per square foot than in the Gables.

The benefit from the corporate influx is undeniable, Adams says, with the revenue these company relocations add to the local economy. Last year, he says, 15,000 new jobs were created and over $54 million was added to Miami-Dade County’s economy. “In Coral Gables, approximately 40 percent of the entire city’s revenues come from the commercial sector,” he adds. “Having buildings that are substantially occupied means higher property tax valuations [and that] means more city revenue. And that mitigates the need for residents to pay higher millage rates and taxes on their properties.”

Retail Rises

The other side of the commercial real estate coin is retail — and no one owns more retail space on Miracle Mile than Terranova Corporation. Founder and chairman Stephen Bittel started buying up property on the main street almost 20 years ago with a vision that “as more residences and more hotels and more offices were built in the area, traffic would grow.” He adds with a grin, “And, in fact, that’s happened.”

Today, Terranova owns 15 buildings on the Mile, including John Martin’s and Capital Burger, as well as an office building at 255 Alhambra. Bittel recently relocated the firm’s offices from Miami Beach, where he made a fortune buying early on Lincoln Road, to a temporary location on Miracle Mile.

Bittel credits the 2015 city streetscape project with a lot of the commercial retail scene’s success in Coral Gables. “Lincoln Road taught us the power of people sitting in cafes on the street and how that could be the engine to transform the street,” he says. “That pushed us to communicate vigorously with the [Coral Gables City] Commission about the need for the streetscape project.”

The streetscape project transformed Miracle Mile into a more pedestrian-friendly roadway, with widened sidewalks, enhanced lighting and landscaping, and public art. Though some businesses complained about lower traffic during the construction phase, Bittel says Terranova “lost no tenants… contrary to popular belief.”

However, the firm also did not sign any new leases. “The minute it was done, we started signing leases like crazy and our tenants started doing better sales than they had historically,” he says. Giralda Avenue also got a makeover in the two-block stretch that now makes up Giralda Plaza, transforming from a roadway into a pedestrians-only walking space. Lined with restaurants and retail, its completion was a huge get for commercial real estate in the Gables.

Retail also experienced the same flight from Brickell that has characterized much of the office and residential real estate booms in Coral Gables. Average retail rents in the Gables are around $53 per square foot, while in Brickell that number runs anywhere from $85 to $130. “In the past three years, rents have increased a cumulative 13.5 percent,” says Carlos Guzman, president and CEO of Pacific National Bank, which primarily finances commercial real estate transactions. “There have been 40 sales, which have traded for approximately $293 million…. Buyers have exhibited a steady interest in the area.”

“When you look at the asking rates that you find in the City of Coral Gables, I would suggest we’re actually a value proposition compared to other markets that we tend to complete with, like Wynwood or Coconut Grove,” says Coral Pine Real Estate founding principal and broker Barbara Tria. “It’s not unusual to see triple digit figures for base rents quoted in those markets, and we have yet to see that number in our retail market.”

There are also reasons like cheaper parking, less traffic, and ease of movement throughout the region which make Coral Gables more attractive. Tria points out that the Gables’ “proximity to amenities” like cultural landmarks, live music, and sporting events, “makes [the city] shine.” And if a company’s leadership is based in Coral Gables, where many are, “why would they move to Brickell?” she asks.

Today, vacancy rates for retail are in the single digits — around 1.2 percent, according to Guzman. “Sometimes it’s hard to perceive that because of the transition from one retailer to the next,” says Tria. “There’s downtime, and so it may feel like there’s more vacancy than there actually is.” Low vacancy also means base rent will be driven up, and retail also has to contend with rising triple net charges like real estate taxes, maintenance, and insurance, which has gone up significantly over the last year.

Another reason for retail’s rise to prominence? Night life. Just a few years ago, Coral Gables had virtually none. Today, young professionals who may not even live in the Gables but commute in for work are staying out on Friday nights, hitting bars like Copper 29 and the newly-opened Bodega Taqueria & Tequila on Miracle Mile. Getting a reservation during or after happy hour at places like Hillstone or Eaing House is almost an extreme sport.

Competition between restaurants is especially fierce, with chef-driven concepts increasingly popular and existing retailers often looking to open second locations in the Gables. CVI.CHE 105, for example, has locations in Miami and Miami Beach already, but just opened their “flagship location” in The Plaza. Graziano’s is another one of these — with a restaurant and a market already in downtown Gables, the Argentine retailer recently opened another market location in the LifeTime building on US-1. “They understand who the customer is in this marketplace,” says Tria. “And they know they can offer the customer something a little different.”

Agave Holdings’ Beckmann says food and beverage has become so big that it simply “has to slow down a bit. Everyone wants to open restaurants,” he says. “At The Plaza, we’re saying, ‘No more.’”

Health and wellness is another market that’s become extremely attractive to the Gables, whether it’s Pilates studios or facial bars. It’s specialized gyms that are the belle of the ball though, largely because Coral Gables doesn’t have the giant spaces that general fitness centers need, Tria says. Lifetime and Equinox are the exceptions that fill the gap, but there are many more hyper-focused gyms like Sweat 440, OrangeTheory, Pilates Strong, and SoulCycle that offer select services.

At The Plaza, Beckmann says, “we are creating a kind of health and wellness corner” with yoga studios, high-end facial bars, and a barbershop. Boutique retailers that deal exclusively in high-end pieces are also trying to break into the market with curated fashions that appeal to affluent Gableites and visitors from Europe and South America.

Because of all this, says Bittel, Terranova Corporation is looking to buy even more properties in downtown Gables to add to the four more buildings it bought in the last two years. “We’re by no means done,” he says. But not everything is going his — or retail’s — way. With two newly elected commissioners that ran on anti-development platforms (Ariel Fernandez and Melissa Castro), there is some cause for alarm amongst developers. Bittel, for one, believes the mood of the city “swings back and forth” on development, but he takes a positive viewpoint even so.

“As buildings age and become obsolete, there will be the opportunity to build new ones that are respectful of the past but reflective of the future,” he says.

Tria also points out that the business of real estate is cyclical. “There have been headlines lately about the challenges in financial markets as it relates to commercial property debt,” she explains. “So, I think that has yet to be figured out and fully experienced. How the market adapts to that is going to be critical.” But Coral Gables, she adds, is uniquely positioned to respond.