“I was born and raised in Miami in a Cuban-American family,” declares chef and restaurateur Miguel Massens. After learning the trade in Miami and elsewhere under big names like Norman Van Aken and Thomas Keller, Massens came back to his hometown in 2019 to test out his own restaurant idea as a popup. Antilla operated at the Time Out Market for three months, and that success propelled Massens to start looking for permanent brick-and-mortar space.

But even before the pandemic flipped the script, Massens was fighting through the high-priced hurricane of South Florida restaurant real estate. He went looking at “approximately 50 or 60 locations throughout Miami.” The search made abundantly clear the serious risks of prioritizing a flashy location. And the pandemic stress on the local market only made the situation worse. “OK, what kind of chef do I want to be?” wonders Massen. “Do I want to compete with the Daniel Bouluds in Brickell? Sure, but the reality is that if the market corrects, Daniel Boulud will weather the storm, and I’ll be wiped out.”

So Massens is looking elsewhere. “I need to be somewhere where it’s safe … In my opinion, the best value is Coral Gables. Unless you’re on the prime corner next to Hillstone, anything else in the Gables, you’re paying 40 to 50 percent less than you would in the Design District or Brickell. You can’t get into Brickell and expect to survive unless you have big-shot money behind you.”

Despite those seemingly bulletproof rent rates, Miami’s restaurant and hospitality industry suffered through 2020 as badly as anywhere in the country. One estimate puts the loss to Miami-Dade County restaurant revenue from the six months of March through August 2020 at $742 million, compared to the same period in 2019. Statewide, the Florida Restaurant and Lodging Association pegs the number of restaurants shuttered by the pandemic at 10,000 closures.

A combination of factors improved Miami’s restaurant prospects earlier than elsewhere. The warmer climate meant it was easier to accommodate outside dining. Florida resisted extended lockdowns and other restrictions, becoming one of the first states to allow indoor dining at restaurants again. And an influx of out-of-state investment created a “gold rush” mentality that drew in restaurant operators looking to expand to South Florida.

And those rents have not gone down—for the most part, commercial rents have held firm or even increased over the course of the pandemic, and restaurants are no exception. In fact, outliers on the high side for marquee restaurant space are more expensive than ever. Consider that the insanely popular Miami outpost of New York restaurant Carbone is reportedly paying $80,000 per month in rent for their prime South Beach spot.

The Gold Rush Hits Miami

Massens is amazed at the skyrocketing restaurant rents at the top of the market. “I was expecting … a bottoming-out of prices,” he says ruefully. “Brickell at $100 a square foot? Maybe this will come down to $70 or $80. Wynwood, instead of $65 or $70, maybe that will come down to $50 or $55, something a little bit more reasonable. But because all these New Yorkers just piled in, the prices never dropped.”

Even some of those New Yorkers are having a hard time swallowing high rents. Omar Ali-Shamaa, an attorney at the law firm Wolfe Pincavage who specializes in hospitality negotiations, says that while the hot neighborhoods in Miami remain hot, lack of space was driving restaurants to look further afield even before the pandemic. “You started to see areas like Little River and Little Haiti and places like that where well-known restaurants were expanding in those areas. … Chef Marcus Samuelsson’s restaurant opened in Overtown, the Red Rooster. That’s traditionally not an area you’d see a lot of these types of restaurants open, but the periphery is starting to expand, partly because the market was slightly saturated and there was not enough inventory.”

The arrival of Major Food Group—New York’s 800-pound gorilla of restaurant operators—in the form of the splashy Carbone is often marked as the start of the out-of-state rush. But it’s worth remembering that Miami has attracted out-of-state restaurateurs for a long time. Many of them, like Simon Kim, arrive on the heels of success elsewhere that gets them in the door while not necessarily floating on a tidal wave of cash.

In 2019, Kim was coming off the success of Cote in New York, and decided on Miami for his second location of the restaurant. “We signed the lease in Miami,” he recalls, “and then all of a sudden everything comes to a dead stop. I was like, ‘Oh my God, this is the end of the world.’ This is how you fail, right? … And back then, I was not 100 percent funded, either. So imagine trying to court an investor to give you money while every single restaurant, including my own, is closed. Cote New York City was on the verge of bankruptcy as well. It was sink or swim.”

Kim decided to blaze ahead with the new restaurant anyway. And as one of the few buildouts still underway, he suddenly had no trouble getting it done. “Everybody—all the contractors, all the designers—they lost all of their projects. I decided to go against the grain and move forward. So I was their only client, their only lifeline. I was the only one that was paying them. So I was able to get a lot of attention in a timely manner. It was a lot of work, right? And I have two kids, a 3 year old and a 2 year old in New York City, in a pandemic. So I feel like I went through hell and back.”

Lyle Stern, president of commercial real estate firm Koniver Stern Group, says it was really in the fall of 2020 that things began to change in Miami. He describes “this wave of migration—wealth migration, population, et cetera—started to come to Miami. … I wouldn’t say that we’ve been deluged, but there’s been a consistent pattern of restaurants coming from Toronto, coming from Chicago, coming from LA, and certainly several from New York as well.”

Felix Bendersky, owner of F&B Hospitality Brokerage, saw landlords looking out of state to pick up the slack from struggling local tenants. “It was like, ‘What do you have to lose?’” he says. “Landlords were lucky if they were getting paid. So you might as well bring in a sexy concept from out of state—New York, Vegas, LA. You have a better shot than going with a local upstart.”

“One thing that we saw from the pandemic,” observes Drew Schaul, SVP of retail advisory and transaction services at CBRE, “is that a lot of the new Yorkers and people from the Northeast who moved here mostly to take advantage of the tax benefits—they dipped their toe in the water during the pandemic to see what it was like living here, and they liked it. They were encouraging some of their favorite restaurateurs in New York to open up venues down here because they’re friendly with the chefs and the owners of those restaurants.”

Building New vs. Second Generation

The extremely tight inventory of Miami restaurant space versus overall commercial vacancies can be chalked up to two reasons. The first is that building a totally new restaurant space in Miami is extremely difficult, expensive, and time consuming. Extensive approvals and permits are required for everything from liquor licenses to ventilation to grease traps, with even more regulations expected due to COVID and the Surfside condominium collapse.

That makes renting out a previously operating restaurant—known as second-generation space—much more attractive to everyone except really big spenders. But Miami’s pandemic resilience ended up creating a crunch on this type of space as well. “I had a realtor friend do a search for all the second-generation commercial restaurant properties in Miami,” says Miguel Massens. “She came back to me and she’s like, ‘Wow, I’m really surprised that the list was like 20 names. … I’m used to seeing like 100 or 200. There’s nothing available.’”

“Construction costs right now are through the roof,” says Chris Cuomo, VP and director of operations for Groot Hospitality. “To get manpower and labor is so difficult, so to find a good second-generation space is extremely appealing. It definitely has made us look at spaces that we weren’t considering before just because the bones of the space were so good.”

With Miami’s rigorous regulations and tight market even before the pandemic, broker Felix Bendersky makes second-generation space a special focus. “Miami is probably the hardest place to open a restaurant because of zoning and codes,” he says. “Ask any operator about the biggest challenge of opening in Miami, and they will tell you, without a doubt: the grease trap.” Getting a properly updated grease trap alone is hazard enough to sink a business. “Permitting was a year out before … and now it’s going to be 18 months to two years. Guys who don’t know any better will start signing leases. They’ll set that money aside for six months of expenses, but then they’re going to find out that their free time is up, and their permits aren’t done yet, and they have to start paying rent. By the time they’re open, they’re done.”

“I’ve never seen Miami with no second-generation restaurant inventory,” Bendersky laments. “Every broker, if you go on Facebook chats, is asking for the same thing. ‘Does anybody have a second generation, 1,000 to 1,5000 square feet with a hood, with an updated grease trap?’ That’s like saying, ‘Hey, have you seen my unicorn lately?’”

Big developers and landlords still have new prime restaurant spaces to fill. They’re looking for a solid anchor amenity on a new condominium, for example—something that will appeal to all those prospective out-of-state condo buyers. Bendersky works with them too. “They’re looking at anywhere between $300,000 and $500,000 for a ready-to-go restaurant. So they’ll come to me and say, ‘Hey listen, we’re going to have to do something anyway. We’ll give the operator that money, but bring us somebody sexy. Bring us somebody from out of town.’”

In every other case, Bendersky insists that building out a new space is a bad idea. He thinks anyone looking to open a new restaurant should wait until the inventory opens up. For those who absolutely cannot wait, and who like a second-generation space but can’t make a deal with the landlord, he has a new piece of advice: Just buy the building.

“Whatever happens with the restaurant,” Bendersky explains, “whether the restaurant does well, whether it doesn’t do well because of all the competition—they still have that asset that’s really in demand right now. … Between the investment they would have to make with the lease, and with the prices getting as crazy as they are, and landlords taking advantage of the market, it just makes more sense to buy the building. Be your own landlord. That way it decreases your risk if the restaurant were to shut down because of COVID. With a landlord, the first thing they’ll do is evict you because they know what they’re sitting on. Then they’ll raise the price on the next guy.”

High Rents And Landlord Relations

Your view on restaurant rents in Miami depends on where you sit in the business. Felix Bendersky has a very dim view of the current rent levels, calling them “a bubble that’s about to burst.” He complains that due to pandemic turnover, “landlords got very, very greedy with the restaurant space. Maybe a year ago they were charging $28 a square foot, and all of a sudden you’re at $49 or $50 a square foot.”

Higher overall vacancy only tends to cause lower rents if the properties are listed as vacant. If landlords choose to keep their spaces off the market, then the two statistics don’t necessarily match up. Miguel Massens says that in his experience, “All the good stock is taken. It’s strange, though. I was living in North Miami Beach this past winter. On my street, a major street, Collins Avenue, within a two block radius there were five closures. … The little pizza joint, the taco joint, the donut joint shut down. The real estate landlords here are just very greedy. There are locations that I’ve looked at that will sit empty for three or four or five years. And you’re like, why doesn’t anybody pick this up? Every time you look at the rent, they don’t budge on the price. They know that eventually a Carbone or somebody else will move in and pay the money.”

Much of the haggling over rent and terms understandably turns on the landlord’s own position and priorities. Roger Duarte, CEO of Hospitality Capital Partners, has experienced the full spectrum of landlord reactions to pandemic pressure. “Each landlord is totally different. Sometimes the landlords that are more sophisticated, more in a corporate environment, they’re easier to understand. They’re more compassionate. Then there are landlords who say, ‘Look, you have your problems. I have my problems. The contract says this. … And I’ll see you in court if you don’t pay me.’ In one day I had a call: ‘Yeah, Roger, we understand. Just keep in constant communication. Do what you can do.’ And the other landlord was like, ‘If you don’t send me the wire by tomorrow at 1 o’clock, my attorney is calling your attorney. … Figure it out.’”

While existing restaurants might have dealt with inflexibility, those looking to sign new leases on vacant spaces often had much friendlier interactions with prospective landlords. For his new restaurant location in Fort Lauderdale, Angelo Abennante, owner of Lynoras restaurants, was offered enough free rent to expand when he hadn’t been planning to. “Typically, landlords give four to six months at best. They offered us the whole year of free rent. That gave me the time to really understand the market and to take it slow, get through the pandemic, and not have to worry about opening immediately. Plus they did come down about 10 percent, 15 percent from their normal rate as well.”

Many landlords were proactive about supporting their tenants through the pandemic, given that it’s bad for both parties if the restaurant shuts down. “We worked very closely with every one of our tenants,” says Scott Sherman of Tricera Capital, “giving them relief early on … helping them get whatever grants were out there. Across our whole portfolio, we lost less than a handful of tenants throughout the pandemic. … In my mind, I’d rather come out of this pandemic with tenants than having empty buildings because all my tenants went out because they couldn’t pay the rent.”

The Future: Long Boom Or Bursting Bubble?

Lyle Stern at Koniver Stern is very happy with Miami’s restaurant outlook. “I know from the number of restaurant deals we’re working on now, that will open in the last quarter of 2021 or the first quarter of 2022, that several new, large, important restaurants will open in Miami and Miami Beach,” he says. “We wish we had more spaces.”

By contrast, hospitality broker Felix Benderksy tells his restaurateur clients, “Don’t do it right now. Wait. There are all these people who are coming down, who don’t have experience, who are maybe being backed, who just wanted to come down here because this is where they want to be. A lot of those places are going to be back on the market in the next six months. … Let’s say there’s 1 to 2 percent of second-generation [space] available in Miami right now. I think that number will go to 25 percent by winter. That’s what I’m seeing in terms of random people signing leases who have no right signing them and overpaying.”

Miguel Massens is equally skeptical “This thing is scraping on thin ice,” he warns. “It’s not normal that a successful chef in New York City is doing a 3 to 5 percent profit margin.” He’s not rushing to rent out a space before he’s ready. “I’m in it for the long haul. … Nobody has a gun to my head saying, ‘You have to open up a restaurant.’ At the end of the day, I need to open up something that’s going to be profitable, that’s going to be there for the long term. I have no problem waiting.”

And while some don’t mind the competition, locals like Nicholas Garcia, CEO of restaurant-bar-wine-shop concept Vinya, are watching the newcomers carefully. “Miami has a very unique culture and unique identity. There’s a little bit of wariness from a lot of people, from us included, about what this influx does to water down that culture and that identity. In the short term, it’s really a great thing. It’s going to push Miami to do some really great things in hospitality and food and beverage. But in the long term, we need to be very careful that we hold true to that identity and that we’ve got enough local investors that are willing to take a chance on Miami so that we don’t lose that.”

Simon Kim of Cote is one of those newcomers, and he’s making a point of respecting that local identity. He says, “Every restaurateur friend from New York at some point has reached out and asked: ‘How’s it going? What are some of the do’s and don’ts?’ … One of the most important things is: Do not underestimate the Miami clientele’s palate. … if you are interested in coming to Miami, you need to do your homework, and you need to understand what Miamians really want. Just like New Yorkers, they are sophisticated. They have their own taste, and they know what they want, and if they don’t get that, they’re going to cold shoulder you. I think that’s the biggest pitfall that people from New York sometimes fall into: ‘I made it in New York.’ Don’t take Frank Sinatra’s words verbatim.”