Did you finish the sidequests? I hope you did; the Gaia Gear is helpful in this next dungeon. We first need to head to the Imperial Observation Post on the southern continent, east of the other towns, to continue with the plot.

Before going into town, make a team. I used Terra, Cyan, Locke, and Edgar. I guess you can swap some around - for example, Sabin for Locke or Cyan. I just chose Locke due to his higher level. In short, though, you’ll need Terra in your party, and she needs some allies. Enter the outpost.