For two decades – from about 2000 to 2020 – the hotel market was Miami Beach’s golden goose. After being overlooked as a tourism destination during the 70s, 80s and 90s, hospitality investors began to arrive around the late 90s and early 2000s – building new properties and renovating existing ones. The tourists followed and the capital kept pouring in, fueled by investors-turned-residents like Barry Sternlicht and Vlad Doronin.
Over this 20 year span, the City of Miami Beach grew its hotel inventory to the point where it was home to more than one-third of all rooms in Miami-Dade County, according to CBRE. Seeing this growth as central to its economic future, the City invested $650 million+ in renovations to its convention center, which reopened in 2019 with the goal of bringing in conferences and major events. The market was on fire up until the pandemic, with two older properties – the Seagull and the Shelborne – fetching $120 million each ($698k/key and $543k/key, respectively) in early 2020.
The music stopped, at least temporarily, when Covid-19 struck. Among the nation’s 25-largest tourism markets, Miami posted the steepest decline in ADR within a month of the pandemic taking hold – dropping almost 60 percent by mid-April 2020, according to STR. The convention industry and business travel dried up.
While the Miami Beach leisure hotel market has bounced back, with occupancy nearing pre-pandemic levels and major brands like Aman and Bulgari planting flags, this precipitous fall at the onset of the pandemic opened the City’s eyes to the importance of diversifying its economy with Class A office space capable of luring top-tier companies (many of which are led by Miami Beach residents).
Over the next year, Starwood’s new HQ was going vertical , Related’s Terminal Island project and Deco Capital’s Eighteen Sunset both won approval after years of political wrangling, and the City launched a national RFP aimed at bringing upwards of 400,000 sf of new office space to Lincoln Road.
All this development amounts to nearly 800,000 sf of new office construction in a market that hasn’t seen new Class A space deliver in more than 20 years.
