South Florida Retail | Q2 Update

Miami-Dade

The Miami-Dade retail market is comprised of 120 million square-foot ranging in size from the 7.8 million square-foot Coral Gables/Kendall/Richmond submarket. In the last ten years, the West Dade submarket has experienced the greatest introduction of new inventory, 556,000 square-foot, amounting to 35.7% of all new competitive stock added to the market.

Asking rents climbed by 0.9% during the second quarter of 2017 to an average of $27.78. This advance extends the market’s streak of gains to seventeen quarters and rents are expected to grow by 2.9% by the end of the year, which is above the 10-year average of 1.4% and 2016, when rents grew by 2.2%.

The rapid expansion of ecommerce has been accompanied by sharp cutbacks in the development of retail real estate, particularly of conventional shopping centers. Major retailers and others continue to cut back on expansion even as they shutter large numbers of existing stores. The retail development experiences a shit in favor of mixed-use projects, often in urban settings. Of the 1.8 million square feet under construction a large portion is represented in mixed-use projects.  Most prominent among these is the 350,000-square-foot retail component which broke ground in May at the first phase of Miami World Center. Completing late last year, meanwhile, was 500,000 square feet of retail at the Shops at Brickell City Centre at Swire Properties’ Brickell City Centre mixed-use development.

Net absorption for the Miami-Dade retail market was positive 284,324 square-foot in the second quarter 2017. That compares to positive 352,735 square-foot in the first quarter 2017 and 1,050,240 square-foot year-to-date.

Vacancies remained stable at 3.8% during the second quarter of as demand was strong for retail space. However, vacancies are expected to increase slightly by the end of the year and will remain around 4.0% throughout 2018.

Broward

The Fort Lauderdale retail market is comprised of 93 million square-foot ranging in size from the 9.0 million square-foot Cooper City/Pembroke Pines/Miramar submarket to the Dania/Hollywood/Hallandale submarket, which accounts for 3.9 million square-foot. In the last ten years, the Cooper City/Pembroke Pines/Miramar submarket has experienced the greatest introduction of new inventory, 776,000 square-foot, amounting to 32.7% of all new competitive stock added to the market.

Asking rents climbed by 0.1% during the second quarter of 2017 to an average of $21.13. This advance extends the market’s streak of gains to twenty-two quarters and rents are expected to grow by 2.1% by the end of the year, which is above the 10-year average of 0.9% but slightly below 2016, when rents grew by 2.6%.

Conditions for retail development have been unfavorable in recent years in-spite of favorable economic and demographic fundamentals. Only 385,000 square-foot of retail space across all product types completed construction in Broward County in 2016 in just four projects. The year 2015 saw just 208,500 square-foot come online. The first quarter of 2017 followed with two projects with a combined total of 100,500 square-foot. “Bricks-and-mortar” retailing, however, is not dead. Although the emphasis has shifted in favor of mixed-use development, outlet centers and other niche products, the development of conventional community and neighborhood shopping centers persists in modest volume and with substantial prudence.

Net absorption for the Broward County retail market was positive 322,306 square-foot in the second quarter 2017. That compares to positive 194,457 square-foot in the first quarter 2017 and 1,139,094 square-foot year-to-date.

Four community and neighborhood center projects with a combined total 353,500 square-foot were under construction in the second quarter of 2017. Led by the 280,000 square-foot first phase office and retail mixed use development Pembroke Pines City Center Pembroke Pines. It broke ground in April for a September 2018 finish. Also under way is 94,300 square-foot of retail in two large mixed-use projects—the 25-story Hollywood Circle development in Hollywood and the 105 N. Federal Highway development in Fort Lauderdale.

Vacancies dropped by 40 bpts to 3.8% during the second quarter of as demand was strong for retail space. However, vacancies are expected to increase slightly by the end of the year and will remain around 4.5% throughout 2018 as about 550,000 square-foot of new supply is going to enter the market.

Palm Beach

The Palm Beach retail market is comprised of 79 million square-foot ranging in size from the 10.9 million square-foot North Palm Beach submarket to the Palm Springs/Lake Worth submarket, which accounts for 2.6 million square-foot. In the last ten years, the Boca Raton submarket has experienced the greatest introduction of new inventory, 651,000 square-foot, amounting to 37.4% of all new competitive stock added to the market.

Asking rents climbed by 1.2% during the second quarter of 2017 to an average of $23.63. By the end of the year rents are expected to grow by 1.7%, which is above the 10-year average of 0.5% but slightly below 2016, when rents grew by 2.7%.

As across the country in the e-commerce era, retail development in Palm Beach County has been both sluggish and selective, strong demographic factors and high household incomes notwithstanding. Only 76,000 square feet of retail space completed construction all told in 2016 in two neighborhood centers preceded by 264,000 square feet in four projects the year before. No retail space had delivered year-to-date in 2017 as of mid-June, and only one project, a 50,900-square-foot freestanding Restoration Hardware store in West Palm Beach, was under construction in the second quarter of 2017. Meanwhile, two similar-sized neighborhood centers with a combined total of 129,500 square feet are expected to break ground in July and October in Delray Beach and Boca Raton.

Net absorption for the Palm Beach retail market was negative 19,968 square-foot in the second quarter 2017. That compares to positive 152,398 square-foot in the first quarter 2017 and 132,430 square-foot year-to-date.

Palm Beach County’s retail vacancy rate increased in the second quarter 2017, ending the quarter at 4.3%, but with little movement in the market vacancy rates should remain stable.