South Florida’s retail market showed signs of recovery in the second quarter, with positive net absorption in Miami-Dade, Broward and Palm Beach counties, and stabilizing vacancy rates throughout the region, according to a recently released report.
Population growth is fueling a steady return of consumers to physical stores, restaurants and gyms, according to Colliers International, which authored the report. New discount store openings by chains like Ross, Burlington, Marshalls, Five Below and Dollar General continued to drive new tenant occupancy. And Sprouts Farmers Market’s entry into Palm Beach helped boost leasing activity, as well.
The vacancy rate in Miami-Dade dipped slightly to 4.3 percent in the second quarter from 4.4 percent in the first quarter, and the county posted a positive net absorption of 352,000 square feet, while adding 166,000 square feet of new retail space. In the second quarter of last year, Miami-Dade had a negative absorption of 200,000 square feet. As a result, landlords are raising rents. In Q2, the asking rental rate was $36.70, a 2.8 percent increase, year-over-year, according to Colliers.
Investors are betting on boutique retail buildings with 166,737 square feet of new supply spread across six buildings, with only one totaling more than 21,000 square feet. The biggest sale of the quarter was Regal Acquisitions’ $34 million purchase of the CVS-anchored retail of the Boulan South Beach Hotel, with 35,482 square feet. Average asking rental rates in Miami Beach were the highest in Miami-Dade at $82 a square foot.
Leasing activity in Miami-Dade also improved, with the second quarter posting one the best quarters since the pandemic began, according to Colliers. All but one of the top five leases were new leases, including UFC Gym’s signing of 36,5000 square feet at Doral Square, the largest of the quarter.
In Broward, the vacancy rate improved slightly to 5.3 percent in the second quarter from 5.6 percent in the first quarter. A positive net absorption of 286,000 square feet marked the highest amount in three years, according to Colliers, as new supply more than doubled compared to the previous quarter. Another 342,000 square feet are under construction, which is expected to drive demand for existing space and push the rental rate up, Colliers said. The average asking rent was $22.71 per square foot in the second quarter, a one cent drop from the previous quarter, but still an increase of 3.5 percent compared to the same period of last year.
Positive absorption is a sign that Broward is faring well in its pandemic recovery as evidenced by consumer demand powered by a growing population, according to the report. Landlords for discount store spaces are reaping the benefits, as two of the five largest Broward leases in the second quarter were for discount stores. Additionally, two of the top five largest sales had a Dollar Tree and a Dollar General in their tenant mix.
“Investor interest was heavy in the Fort Lauderdale submarket in Q2 2021,” the report states. “All but one of the top five largest sales were in the Fort Lauderdale submarket.”
The top purchase was the acquisition of Oakland Park Festival Centre at 3400-3580 North Andrews Avenue. A joint venture between Hudson Capital Group and Barron Commercial Development bought the shopping center for $23.4 million. Hudson and Barron also partnered to buy the Primavera Plaza Oakland Park for $10 million, marking their second retail play in Oakland Park.
Palm Beach County
Palm Beach’s retail vacancy rate remained unchanged at 5.2 percent for the fourth consecutive quarter. But net absorption in the second quarter was the highest since 2019 at nearly 120,000 square feet, while adding nearly 132,000 square feet of new retail space, Colliers found. Growing demand pushed the average rental rate to $24.41 a square foot, representing a 6.1 percent increase compared to the same period of last year, the report states.
Sprouts Farmers Market entered the South Florida market by signing two of the three largest leases in the county during the second quarter. One lease is for a 23,632-square-foot store at Pine Trail Square at 1951 Military Trail in West Palm Beach. The grocer also signed a lease for a similarly sized location at Delray Commons at 5026 West Atlantic Avenue in Delray Beach.
Site Centers Corporation’s acquisition of the Shoppes at Addison Place for $40 million marked the largest Palm Beach transaction for the quarter. The suburban shopping center at 16800 Jog Road in Delray Beach performed well during the pandemic given its location in an affluent area, according to Colliers.