Peter Mekras, President, Aztec Group
Peter Mekras, president of Aztec Group, spoke with Invest: about why the region is ideal for investment. He also discussed the international influence on the region, the shift back to in-office work, and Aztec’s client-centric approach. “As much as we are small and nimble, we like to stick to our knitting. Our knitting continues to be serving clients we align well with, including many entrepreneurs,” he said.
What makes Miami and South Florida an ideal location for real estate investment and expansions?
Specifically in commercial real estate, the reason the housing space continues to be a massive growth engine for Miami is because of the continued migration of people. Miami is a market that is statistically misunderstood. There’s a number of people who own, rent, or stay here but don’t live here 365 days a year. Our housing demand isn’t correlated directly to how many kids are enrolled in school or registered with the census.
Another trend we’ve benefited from is the amount of wealth that has come here relative to population. While the population growth in Miami-Dade County may be slowing, the difference is that we were previously bringing in a lot of population that was seeding our service base. Consumption is a critical part of the economy, and spending is the root of that. People with greater wealth have more discretionary income. As greater wealth comes to Miami, that will lead to greater consumption to buttress the service economy. As more people with wealth come here and more businesses open, it will lead to a greater need for professional services and will make the hospitality sector more successful. That doesn’t happen overnight. You build a project, come up with an idea, hire professionals, go through the regulatory process, and maybe four years later, you’re open for business. That’s a long time when you consider how business cycles run. There’s a lot of time in between the beginning and end of the business cycle.
How does Miami’s reputation as the capital of the Latin world contribute to attracting and retaining clients?
People say Miami is the capital of Latin America. We have a major correlation to Latin America, and if you look at Miami as a market historically, there were two or three economies in Latin America that contributed. Brazil, as large as it is, was not a huge driver of what happens in Miami until recently. As a native who grew up here, I never heard Portuguese spoken, but now it’s very commonplace. If somebody is from Columbia, Argentina, Brazil, or Mexico, that would be unsurprising. The migration of businesses, real estate people, investors, or people having secondary residences is much more prominent. It leads to a level of familiarity and continuation through generations. There are people who are of Colombian descent who have been here a long time. Those roots go back 40 years, when there were changes happening in that country and people brought their families here. Their children have become embedded here, and then their friends come here, and the next generation comes. Miami becomes a natural place to aspire to move to if you live in Columbia. There’s also a massive influence from Canada. We’ve had people who come from every province in Canada. Just like there’s a New York effect, there’s a Toronto effect. There also continues to be a European influence. There is a greater presence of Eastern European investment in South Florida. There would not typically be a group from Austria here building or a family office from Germany capitalizing a project, but that’s commonplace today.
Miami’s office sector has seen shifts due to remote and hybrid work trends. How has this affected commercial real estate investment in the region?
Within office, industrial, and housing, there are many different products and segments. In the office space, there are certain urban markets that are performing well and others that are not. Brickell is an example of a market that was not killed by COVID, but supercharged. In the midst of COVID, if you looked around the country, there weren’t many people going long in office. The perception was the urban high-rise office building was a dinosaur on its way to extinction. But there are certain products and buildings that have been huge winners, and they are typically triple-A products. As those products did well, there were certain B+ or A- properties that also did well, and it all fed off each other. If you were a restaurant operator in an urban center in 2020 or 2021, you may have struggled because people were working remotely. Now, many of those restaurants are indispensable because they are in markets where the barrier of entry and cost of production are very high. Restaurateurs want to buy restaurants to occupy the buildout because of how expensive it is to open a restaurant. There’s a current trend to get people back in the office. Many businesses recognized it’s not about how productive the employee is when they’re working from home, it’s how valuable they are as a resource to the company. It’s not about what they do in their email or phone calls, it’s the interaction, mentorship, and collaboration they provide and creating a cohesive office culture. Businesses are based on relationships, and in-person meetings provide a different level of social engagement. I’m a believer that the in-office trend will continue to progress. There are some large suburban office buildings that previously had processing and call centers, and they may continue to feel pressure and be challenged to find a business plan that works. The office markets with decision-makers and where young professionals want to work are going to be very strong, and Miami has several examples of those, such as Miami Beach, Brickell, and Coconut Grove.
What new transit-oriented developments could significantly impact Miami’s real estate market, and how is Aztec Group involved in their planning, if at all?
We sold a parcel of land several years ago adjacent to a Metrorail station. We are often working on projects with transit-oriented correlations. We work on a number of projects adjacent or close to Metrorail, Brightline, or other fixed-rails within Miami. It’s a new trend. Dadeland Station, for example, is one of the few Metrorail stops that had development around it. In the last 10 years, that has completely changed. The county has taken proactive efforts to bring transit-related development to the Metrorail stops, including residential, office, and retail. The station and adjacent properties become activated. Where some of these sites never had anything significant built, now we’re seeing new business and office projects building off each other in these areas. Bus transit going further south has seen a significant amount of infrastructure dollars being invested in that artery. There is a tremendous level of growth in southern Dade County along that bus corridor.
What impacts have you witnessed from the Live Local Act, and what is your overall assessment of how it has been implemented for projects in South Florida?
Live Local is something we’re very excited about. I would point to New York City and its tax abatement program, which would allow developers to build a project and receive a real estate In terms of entitlement, there have been positive and negative examples. We’ve seen municipalities that resisted certain developers to build projects they conceptualized in those markets. The one positive is, absent all of the evolutions of Live Local, all the nearby countries cannot opt out of the program.tax abatement. Miami is now taking that playbook in a different form. It’s not creating an avalanche of supply, but the incremental difference is a big difference. Rent control does not reduce the cost of housing. It’s not developers that charge too much, it’s supply and demand. The most expensive markets in the country all have rent control. A free market that allows capital to flow will allow for more supply and lower housing costs.
The markets that can opt out will be more constrained on housing, and those governments will regret not being more open to the program. Developers will be more willing to invest in markets that have the program.
What will be Aztec Group’s top goals and priorities for the next two to three years?
As much as we are small and nimble, we like to stick to our knitting. Our knitting continues to be serving clients we align well with, including many entrepreneurs. We have many institutional relationships and collaborate with institutional capital, but the vast majority of our clients are entrepreneurs. We’re more likely to focus on challenging structured transactions, including construction financing and sourcing equity for developers and operators.
